There are many papers on the mechanics of NPS (the Net Promoter Score) across various disciplines. In many ways they are easy to write. Fred Reichheld’s original claim was a bold one. Namely, that NPS was the one number you needed to know to grow. It was clearly a sales claim. It was pretty absurd on its face so it doesn’t take too much effort to suggest that the reality isn’t what it was claimed to be. One (relative) advantage NPS does genuinely have is its simplicity. How do we assess the benefits of simplicity?
Criticism of NPS
The article by Fisher and Kordupleski starts with a list of problems in NPS. These are designed to inform managers thinking about whether to use NPS. Most of this criticism seems reasonable. For example, they suggest that NPS isn’t useful for zeroing in on a problem. The challenge is that a low score could indicate a problem for the firm but won’t tell anyone what to try to do about it.
NPS is an indicator of how you are doing but provides no data to help you know what to do.
Fisher and Kordupleski, 2019, page 139
Much of this section is worth a read if you are a manager thinking about whether to use NPS.
Customer Value Approach
The authors have their own preferred method which they call the Customer Value Management (CVM) approach. (CVM and customer lifetime value, CLV, although they share terms are quite different). The CVM approach involves a series of questions to establish whether something was worth what was paid for it, i.e., whether it gave the customer good value. The advantages of such questions are that the researcher can drill down to understand what is driving the consumer’s perception of value. Did the consumer perceive the delivery process or the product itself as not being great? Having a large number of questions about different aspects of the purchase has great potential to allow managers to dig into the perceptions of the consumer.
The Benefits Of Simple
One of the main reasons that NPS took the business world by storm was that it was relatively easy. Much easier than other market research techniques in popular use. Do the benefits of simple outweigh the problems of NPS? Well in many ways this question is an illustration of ‘you get what you pay for’? If everyone is willing to invest more in the research you will get much better data. That said, many other market research techniques take much more time than NPS. A long list of questions can’t be tacked onto the end of a transaction. This means NPS, and not many other methods, can be retrieved from a large number of respondents really quickly.
The approach favored by Fisher and Kordupleski is much more time-consuming.
(a) Typically, a representative sample of at least 30 to 50 respondents is needed to obtain sufficiently precise results to be actionable.
Fisher and Kordupleski, 2019, page 145
(b) An online CVM survey takes some 10 to 12 minutes to complete, including providing comments. (By way of contrast, an NPS request might take just seconds to respond to, or perhaps a minute if a lengthy comment is being added. Actually, a CVM survey will typically include an NPS-type request as just one of its 25 to 30 rating requests.) etc…..
Of course, CVM is better at extracting information. It would be pretty shocking if a simple, single NPS question was better than the CVM for digging into the roots of what was going on with consumers.
How Big Are The Benefits Compared To The Costs
In many ways, we need a more complex assessment. How big are the benefits of simple? How big are the benefits of getting more information? Perhaps most pertinently, we need to know what the firm is trying to achieve. A simple, crude metric might be okay for big-picture tasks, and certainly will be more popular with respondents who don’t want to answer loads of questions. Sometimes simple won’t be enough though. Simple certainly won’t be enough if you want to dig into the causes of what is happening and develop a sophisticated new strategy. This is when you need something a bit more complex.
Is simple good? Yes. Is simple enough? That depends.
For more on NPS see here, here, here, here, here, here, and here.
Read: Nicholas I. Fisher and Raymond E. Kordupleski. “Good and bad market research: A critical review of Net Promoter Score.” Applied Stochastic Models in Business and Industry 35, no. 1 (2019): 138-151.
