Why Net Promoter Scores should be used with caution
Net Promoter Score (NPS) is widely used by businesses as an indicator of customer relationships. The score measures how likely users are to recommend a product or service on an 11 point scale which is then converted into a score. The final score is heavily influenced by the proportion of customers who are Promoters (and give a score of 9 or above) and those deemed Detractors (who give a score of 6 or below). NPS is quick and easy to measure and sometimes applied as a proxy to measure customer loyalty.
Claims that NPS can predict business growth however have been criticised and even the inventor Fred Reicheld admits that ‘there is no proof of a causal connection between NPS and growth’. So we thought we do our own test to see how reliable NPS is as a measure for customer loyalty and growth.
Emotional Logic has monitored the NPS (alongside more than 30 other variables) for over 60 retail destinations since 2007 and our data shows that whilst NPS can add information about the buzz a destination is likely to receive, this does not necessarily translate into footfall numbers and business growth.
Our advanced statistical analysis showed that NPS has an almost negligible correlation with how often shoppers visit a centre or much money they spend there. Other measures such as ratings of overall experience are a much better predictor of visit frequency and spend.
When we consider the way the NPS question is phrased it is clear it measures first and foremost word of mouth. How likely someone is to recommend a destination may be less influenced by how often they visit themselves and more by how a recommendation will reflect on them. Therefore large, well-known destinations may receive high NPS ratings even from people who have never been or visit very infrequently whilst smaller, more specialist destinations may receive lower NPS scores as they may be loyally used by the respondent but not deemed as suitable for everyone.
So when interpreting NPS scores it is worthwhile to consider this is much more about public perception than actual loyalty and although the two can concur they don’t always do.
We have found when it comes to predicting business performance that there is no magic one question solution and a composite index of several performance variables is a less volatile and more reliable predictor than any single measure.