The Net Promoter Score/System (NPS) remains an outlier in marketing metrics. NPS is undoubtedly focused on ‘marketing’ issues but is very widely used across business. Senior managers often know NPS, indeed, they are often the ones promoting it. Is it any good though? The evidence for such a widely used metric is far from overwhelming. At best, we might often say it isn’t worse than other metrics but it isn’t magical. Sven Baehre and colleagues looked at how effective NPS was at predicting future sales growth. Most interestingly, they look at a connection between NPS and potential customers.
The Problem With NPS Examinations
As I have mentioned elsewhere testing NPS is surprisingly challenging. Its proponents talk about it quite broadly, more a philosophy than just a metric. Testing a system/way of management is really hard. Testing the connections between two metrics, as Baehre and colleagues do, is easier but it is still pretty hard to get the right data.
A challenge is that getting perfectly created NPS metrics is not trivial. Only managers firmly in the NPS camp are likely to ensure that they collect near-perfect NPS data and they, by their nature, tend not to think about NPS critically.
The authors look at how NPS can predict future sales growth. Reichheld’s original research had a bit of confusion between past and future sales growth so it is important to be clear. Without clarity about terms, we can’t really get to a causal story. For example, ‘increasing NPS is what causes an increase in sales growth.’ Still, even if investigations are not perfect, if NPS is to be as useful as it is claimed we’d want to see a link between NPS and sales growth. (Fred Reichheld, who invented NPS, famously said it was the one number you needed to grow).
Changes In NPS Rather Than NPS Itself Matter
The authors dig into the data and say that it is changes in NPS, rather than the raw number that have the best connection to sales growth. Basically, an improving NPS is associated with growth, yet having a consistently high level doesn’t have the same association with growth. If there is a causal story then presumably any benefits have already been gained getting to the high NPS level and so a flat but high NPS is not associated with further growth.
NPS And Potential Customers
Perhaps the most interesting finding is that the effects are not found when surveying current customers. Asking current customers would be classed as a customer loyalty measure. These are, after all, the people who you might expect to recommend the firm — which is what NPS basically captures.
Instead, the authors note that NPS can measure brand ‘health’. This approach asks all who are familiar with the brand — not just current customers — whether they would recommend it. All potential customers are asked.
…only the more recently developed brand health measure of NPS (using an all potential customer sample) is effective at predicting future sales growth.
Baehre, O’Dwyer, O’Malley, and Lee, 2022, Abstract
This is pretty odd. Only when we ask all who are familiar, not just current customers, whether they would recommend do we find support for NPS. Whether someone who is not buying themselves would recommend it to someone else seems to matter. It is pretty odd. I guess data is a funny thing.
For more on NPS see here.
Read: Sven Baehre, Michele O’Dwyer, Lisa O’Malley, Nick Lee (2022) The use of Net Promoter Score (NPS) to predict sales growth: insights from an empirical investigation, Journal of the Academy Of Marketing Science, 50, pages 67–84