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January 08, 2008

Comments

Amy Madsen

If you're interest in thoughts from Fred related to his latest book, "The Ultimate Question," here is a link to his "Net Promoter" blog:

http://netpromoter.typepad.com/fred_reichheld/

Stephen Hampshire

Thanks Amy. It's always interesting to see what Fred has to say.

The Ultimate Question was an excellent book in many respects, and we would agree with most of what Fred says in it. Our reservations mainly concern his blanket dismissal of customer satisfaction surveys, tarring them all with the same brush.

While it is true that many customer satisfaction surveys are deeply flawed, effective customer satisfaction measurement is essential if an organisation wants to know how to improve customer satisfaction and loyalty. It's interesting to see that, on his blog, Fred is reacting to some of the concerns that have been raised about the NPS, specifically the idea of using a single question and the lack of operational information this allows you.

We believe the Net Promoter Score is an attractive idea, but is fatally flawed as a single measure because of its volatility. The NPS has been shown(1) to correlate no better with desirable outcomes than other measures of customer satisfaction and loyalty. A composite index reporting a mean score will give you a much more robust tracking measure of real changes in customer opinion. The NPS, by contrast, will be much more prone to moving up and down on its own due to random survey error, unless you invest in enormous sample sizes(2).

Our recommendation? By all means calculate a NPS for yourself, but don't discard your existing tracking index and don't stop gathering the detailed customer satisfaction scores you need to take action. And don't be surprised if you find your NPS moving around on its own!


References:
1) A Longitudinal Examination of Net Promoter and Firm Revenue Growth, Keiningham et al, Journal of Marketing
2) The Single-Question Trap, Pingitore et al, Marketing Research

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