Net Promoter Scores Net Nothing for Utilities

Customers Will Advocate for, but Not Recommend, Utilities

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Net Promoter Scores Net Nothing for Utilities 

As utilities continue to evaluate customer measurement scores, the most debated one I hear is regarding Net Promoter ScoresSM (NPS®). Promoters of the theory say that if a customer states he or she would recommend a company, then that company would benefit from a loyal customer base and third-party recommendations. For a retail company where customers can select a vendor, this makes perfect sense. Detractors of the measurement doubt NPS’s applicability to a monopoly where there is no choice but to use a utility for service. It is like recommending someone should use electricity.

How Accurate Is NPS in Predicting Actual Promoting Activity of a Utility?

The Utility Trusted Brand & Customer Engagement™: Residential study surveys 130 utilities and asks the NPS recommendation question. From that data you can calculate NPS in the normal manner (% of 9–10 ratings minus % of 0–6 ratings x 100). However, the following graph shows how NPS performance in no way predicts customers making positive comments about the utility. Continue reading

Beyond NPS: Multi-Measurement Approaches for Brand Health

Beyond NPS: Multi-Measurement Approaches for Brand Health

Market Strategies is often asked to recommend research approaches that guide decisions about marketing and product/brand management. A topic that’s been of keen interest lately is brand health. NPS has been the “go-to” measure for some time, but we were curious to compare it to other brand health measures so we used our quarterly consumer omnibus study as a research sandbox.

Specifically, we fielded various questions and used the results to test the efficacy of brand health approaches that would serve clients across industry sectors well. We surveyed more than 1,100 US consumers regarding brands in the social media space: Facebook, Flickr, Google, Instagram, LinkedIn, Pinterest, Reddit, Snapchat, Tumblr, Twitter, Vine and YouTube. We then used these data to run multiple brand health analyses, ultimately comparing NPS and several brand health measures and indices at how well they predict our dependent variables: frequent use of the brand and intention to increase use of the brand in the near future.

If your company uses NPS and nothing but NPS, you’ll want to download this free topline research report to see the results of our experiment. Here’s additional background for context, if you’re so inclined.

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A Common But Usually Hidden Cost of Net Promoter Score

We receive all sorts of questions about Net Promoter Score (NPS): Where did it come from? What are its major pros and cons? Is it the Holy Grail of marketing research or not?  I answered many of these three years ago in an article for the AMA’s Marketing Research Magazine.

This post addresses the surprising volatility of NPS and how this continues to be a big challenge for users. We frequently hear statements like: “_____ seemed a bit surprised again this quarter by some of the [large] swings in NPS scores.”  Our clients see differences that seem like they should be significant, yet turn out not to be.  Just how volatile is this NPS measure, and how can we quantify this?

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Remove Red Tape to Improve NPS, Retention at Telecoms

Working in market research, it sometimes feels like the metrics I use on a regular basis are not aligned with how the real world perceives them. Certainly research provides interesting, important and insightful measurements to clients, but how many average citizens are familiar with survey design or data analysis?

Recently a good friend of mine, Nicholas, expressed some strong feelings about a measurement tool I’ve run into often but taken for granted—Net Promoter Score (NPS), designed by Fred Reichheld, Bain & Company and Satmetrix to measure customer loyalty. NPS is based on a simple question: How likely are you to recommend the company/product/service to your friends and colleagues? A respondent rates this likelihood on a scale from 0 to 10 and, based on the rating, falls into one of three categories:

  • Promoters (score 9-10)
  • Passives (score 7-8)
  • Detractors (score 0-6)

To calculate a company’s NPS, one takes the percentage of customers who are promoters and subtracts the percentage who are detractors. NPS can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter). Nicholas cares about NPS not because he is particularly interested in market research or branding but because his employer uses it to measure employee performance. You see, Nicholas works in customer service for a multinational telecommunications company, and when customers run into trouble, he is one of many receiving inbound customer service calls.

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How Big Data Can Inoculate Social Networks Against Unhealthy Behaviors

2014-01-healthEditor’s Note: This post features an interview with Yale University’s Dr. Trace Kershaw

Big Data remains a big buzz word, yet professionals struggle to understand how it can add real value. Over the next few months, I will be sharing ways to combine Big Data with traditional qualitative and quantitative research to help brands answer questions and motivate target audiences.

Today, we’re going to focus on how Big Data is helping researchers understand influence in social networks, leading to the design and testing of interventions that drive healthy behaviors. We’ll also talk about how this work can be extended to help brands that benefit from word of mouth and social media.

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The City of Unsolicited Advice

Editor’s note: This post originally appeared here.

Like most American cities, Portland, Oregon has its fair share of nicknames: PDX, Beervana or Brewvana, Rose City, Bridgetown, Rip City, etc. So you’ll have to forgive me for suggesting one more: the “City of Unsolicited Advice.” It’s not quite as good as Bellingham’s “City of Subdued Excitement,” but it’s catchy, right? Okay, maybe not, but at least it’s accurate. Portlanders are not shy about sharing their opinions. And it’s more than just politics and poppycock; it’s anything from bike maintenance to outerwear to organic chicken feed.

“Hey, man, you should really think about feeding your chickens something that’s corn free and soy free with a lot of high-quality fish protein.” (Did I mention there are a relatively large number of backyard chicken farmers here?)

Anyway… I don’t mean this as a rant or a dig at my city. Nor do I believe Portlanders would take much offense. I’m sure when George H.W. Bush staffers referred to Portland as “Little Beirut” they didn’t expect the city to embrace the title with pride. But, we did. And, we do.

So why bring this up if not to take a swipe at Stumptown?

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Going for Customer Experience Gold: A Summer Olympics Analogy

As I watch the Summer Olympics, I am in awe of the athletes’ physical and mental strength.  The difference between medaling and going home empty handed often comes down to hundredths of a second or tenths of a point.  It struck me that these competitors are always being measured against a benchmark that is either an ideal score or challenging their own personal best.

Setting Goals for Improvement vs. the Competition
Olympic competition is an appropriate analogy for the metrics that our clients use to measure the customer experience.  Oftentimes, we are asked to help clients set appropriate corporate goals for improvements in Net Promoter Score (NPS), satisfaction, loyalty, etc.  Invariably, that conversation includes a discussion around what is the best in class (gold medal performance), the industry norm and what would be meaningful improvement for their company.

If no swimmer ever completed the 100M freestyle in less than 46 seconds, and the winning time in the Olympic finals is 47.1 seconds, then that could be considered the industry “best in class,” with the norm probably being closer to 48 seconds.  Similarly, if no company in a particular industry ever scored higher than a 75 on the American Customer Satisfaction Index (ACSI) standardized customer sat metric, then that sets a standard that will be difficult to exceed since industry competitors typically operate with similar business models.  Expecting to exceed “best in class” is probably unrealistic unless there is a disruptive business model in the works.

For a swimmer or a company that is already operating near the “best in class” threshold, further improvements will be measured by hundredths of a second rather than whole seconds.  But for a swimmer or company falling well short of “best in class” or even the industry norm, then setting more aggressive improvement goals is realistic because there is more upside potential for change.

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Casting the Net (Promoter Score)

In the eight years since Fred Reichheld’s Net Promoter Score (NPS) methodology burst onto the scene, it scaled the heights of fame only to be beset with accusations around its usefulness and authenticity.

In a recent issue of Marketing Research, I review the polarizing nature of NPS and suggest some new thinking to benefit those dealing with NPS today.  Like many new ideas, NPS had flaws in practice that were not immediately evident.  However, NPS provided benefits—like simplicity—too.  In the article, I explore NPS as we understand it now to uncover what about it works, and why, and for whom…and what about it doesn’t work, and why, and for whom.

I hope that you’ll see the value in this exploration, and find the article to be not only an overview of NPS’ virtues and shortcomings, but also an objective appraisal of what NPS really brings to the table.  In the article, I propose five steps that can help in deciding if NPS is right for you: Harnessing the very best of what NPS has to offer while providing practical direction and an approach which companies can use as a “reality check” throughout their own processes.

NPS still raises the ire of some and bolsters the faith of others.  My article does neither; it merely asks, “What next?” and proposes several answers that I hope you will find thought-provoking.