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Net Promoter: the ultimate debate on customer loyalty

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17th Sep 2007
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The Net Promoter Score (NPS) has come under criticism lately, and in a recent article on MyCustomer.com experts outlined their concerns. In this exclusive article, Dr Paul Marsden of the London School of Economics team that validated the NPS in the UK hits back at the "anti-Net Promoter" camp and presents his case for the defence.

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By Dr Paul Marsden, ClickAdvisor.com

There has recently been some debate about the validity of the Net Promoter Score (NPS), mostly fueled by market research companies. A number of folks out there think it’s too simple and too good to be true. Fred Reichheld, author of The Ultimate Question, and Satmetrix co-developers of the original research behind Net Promoter, purport that there is only one number you need to measure the correlation between customer loyalty and profitable growth.

As a member of the team that validated the Net Promoter® Score at the London School of Economics, I’d like to shed some light on the debate. Our research confirmed that measuring how many of your customers would recommend your products or services to others on a zero to 10 scale is, in fact, a valid method for linking customer loyalty to growth.

photo of Dr Paul Marsden"The value of Net Promoter is that its simplicity drives adoption across the business to develop a customer-centric culture." Dr Paul Marsden, director, ClickAdvisor.com

However, there is a legitimate problem that I think both Reichheld and the folks at Satmetrix would agree with: simply having a number or set of results from research — whether it is a single Net Promoter Score based on open standards or a complex, proprietary number - is only the beginning of the story.

As far as the current debate goes, anyone who has read the information being disseminated from the “anti-Net Promoter” camp quickly comes to the realisation that the one Net Promoter question is, at the very least, just as good as more complex proprietary measures, that are tough to translate to the average executive and employee. But that leaves me questioning: why are we hung up on the measurement? The real conversation needs to be about how to get an organisation to be customer-centric and what that can mean for a company’s future.

The value of Net Promoter is that its simplicity drives adoption across the business to develop a customer-centric culture. At a recent Net Promoter conference in London, the discussion quickly moved away from focusing solely on the NPS metric. The most valuable information shared was from companies who have been doing this for a few years now and have created a programme not just to measure Net Promoter, but to drive customer-centric behaviour throughout the organisation.

Net positive

Businesses including GE Real Estate, Aggreko, Philips, IBM, Groupe Neuf Cegetel, Lego and other prominent firms are using Net Promoter to drive customer-centric transformation in their businesses and increase corporate growth. These companies are not bogged down by what the ultimate measurement of customer loyalty is, but they all credit Net Promoter for managing and improving customer experiences that improve loyalty and drive growth.

"Businesses including GE Real Estate, Aggreko, Philips, IBM, Groupe Neuf Cegetel, Lego and other prominent firms are using Net Promoter to drive customer-centric transformation in their businesses and increase corporate growth."

Their employees understand the value of building a network of promoters. They know that having “net-positive” promoters is good in the same way as net profits: it’s a currency that drives growth. They measure success not only in monetary terms, but in the goodwill of their customers.

I’ll give you a few examples. GE Real Estate has nearly doubled its revenue since implementing its Net Promoter programme. The loan-processing giant attributes 25 percent of these organic revenue gains to Net Promoter — to the tune of close to $3.4 billion.

Meanwhile, Net Promoter is helping broadband supplier Groupe Neuf Cegetel become a leader in member satisfaction by monitoring customer activity in its call centres. FileNet (now IBM Enterprise Content Management) reported a 26 percent improvement in its Net Promoter score, accompanied by an increase in revenue from its existing customers and a 10 percent improvement in profitability.

And perhaps most interesting in light of the recent debate about linking Net Promoter to growth, Philips revealed how it is out-growing competitors in segments where Philips is the Net Promoter leader.

I was inspired by what I heard at the conference and I challenge you not only to measure, but to act and respond to your customers’ feedback to become a truly customer-centric organisation. Just because Net Promoter is simple does not mean that it is easy. It requires discipline to make it happen. It requires methodology. It requires commitment. It requires technology. And it requires the whole company.

Dr Paul Marsden is a market researcher specialising in the Net Promoter Score and is director of digital insight agency ClickAdvisor.com. Previously with Enterprise LSE, the commercial arm of the London School of Economics, Dr Marsden led the team that validated the link between the Net Promoter Score and business performance in the UK.

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