Many of our clients are adopting the Net Promoter Score (NPS) as their key measure of satisfaction and loyalty. They are changing their rating scales to allow for an 11-point advocacy question because they believe it will give them better data. There is a lot to like about NPS – it is a very dynamic measure that some research indicates is a reliable gauge of business growth.
However, there are contradictory studies that conclude NPS is no better than other loyalty metrics based on continuous rather than ‘net' scores. Also, because it is a ‘net' score NPS ignores lots of customer data. And finally, some of our own guest satisfaction data point to a ‘social risk' factor that may cause inconsistencies across hospitality segments. Our conclusion is that NPS can be a valuable and predictive measure, but it isn't necessarily better than other measures, and it comes with some unique problems.
Plenty of research out there concludes that Net Promoter Score is no better a predictor of business success than other measures. For some scholarly reading you can have a look at a recent blog post on the topic with links to research by Gina Pingitore at JD Power, and an earlier longitudinal study by TL Keiningham. Thanks to Lynd Bacon for bringing these studies to my attention, and sharing his own thoughts on the topic.
Lynd points to another peculiarity of NPS. It ignores lots of customer data when it's computed. As most of you probably already know, NPS is calculated from an 11-point ‘willingness to recommend' score. Detractors (the percentage of people responding with 0-6) are subtracted from Promoters (the percentage of people responding with a 9 or 10). The remaining responders, referred to as Passives, are ignored. So an NPS score can, and often does, reflect just a small minority of the respondents.
Finally, we believe there is a social risk component with NPS that distorts results. NPS is based on the question, "How likely are you to recommend BRAND to your friend/colleague?" For some people, that means they are more likely to recommend brands they believe promote their status or reputation. So luxury brands tend to receive higher Net Promoter Scores than downscale brands. A quick look at results in our Market Metrix Hospitality Index supports this conclusion. Considerably more Luxury and Upper Upscale brands appeared in the top 25 when ranked by NPS than when ranked by customer satisfaction (13 vs. 9).
Although we are fans of NPS, we think it has limits. It may not be any more accurate at predicting future business success, it ignores large portions of guest feedback, and comes with a social risk factor that may distort results across hospitality segments.
Mike Waite is VP marketing with Market Metrix.
Source: Market Metrix Blog
