Fred Reichheld in Seven

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1. What business need led you to create the Net Promoter Score (NPS) and how long did it take you to determine the measurement?

The goal was to help firms improve customer loyalty – to create an operational tool that every employee could understand and use. It took several years of research and development; we asked thousands of customers, across a dozen industries, to score a variety of survey questions. We then examined the subsequent loyalty behaviours for each customer. It revealed the power of ‘likelihood to recommend’ (LTR) and the best way to categorise responses – promoters, passives, detractors. 

2. Since you launched NPS, do you think companies have become more, or less, focused on the link between customer loyalty and profits generated?

I see quite a bit of progress. Once companies have identified promoters in a key segment of their customer base, they can compare factors like revenue growth and margins, for those promoters, compared with other customers in that segment – passives and detractors. For example, in retail banking our clients have seen that, for their high-net-worth customers, promoters are worth five to 10 times the value of passives.  

3. Has the advent of digital media – and, in particular, social networks – changed NPS?

NPS fits the needs of this new world nicely. The increasing power of recommendation and referral in social media and consumer ratings is one of the factors making the Net Promoter model increasingly relevant, as firms recognise and track the impact of recommendations and five-star reviews – as well as of one-star reviews.  

4. NPS requires a business to be compared against the competition – but, today, competitors often move in from outside your category. How does that affect the measure?

Customer recommendation is always based on the relevant set of alternatives, not just traditional ones. One of the best ways to spot a new competitor – within or outside your category – is to observe their track record in delighting your target customers. Net Promoter scores are a way to x-ray an industry to spot trends.  

5. Byron Sharp, professor of marketing science at the University of South Australia, criticises NPS as “fake science”; do you acknowledge there are limitations to the measurement?

Of course there are criticisms of NPS, just as there are for any model. Models are limited because they simplify reality, but a few are useful. Most of the criticism of NPS has been targeted at one supposed claim, namely that NPS, a summary statistic based on a customer’s response to one question – typically: How likely, on a scale from 0-10, would you be to recommend X to a friend? – can forecast the customer’s behaviour better than a complex index based on multiple questions. This isn’t accurate, as NPS was never intended as a forecasting tool; it was designed to be an operational tool that could drive the daily decision and priority-setting within an organisation. 

6. What research do you think best complements NPS to get to the ‘why’ of that score?

We use longer surveys and customer panels – but also, increasingly, big data tools that track customer behaviours. We believe every detractor deserves follow-up – an apology probing for root cause, and a solution to that problem. We always follow the LTR question with an open, verbatim question asking the customer to explain their score and how we could improve. This rarely gets deep enough to identify root causes, but it advances that conversation and ensures the right person in the organisation is engaged. The challenge for researchers is to have the technologies to ‘listen in’ and to gather relevant insights from these decentralised employee conversations.

7. Why do you think NPS has been so popular with the C-suite?

I believe front-line employees like NPS even more than the C-suite does. There is nothing better than hearing the standing ovation (a score of 10 ) from the customer you just served – and there is no better way to improve than hearing feedback from unhappy customers right away – and engaging with them to understand why. The C-suite likes NPS because they see it as having a positive and energising impact on the front line. They trust these direct conversations with customers more than they trust statistical aggregates.