Net Promoter Score—the Ultimate Question?

Graham Hill

Commitment-driven Business

Jodie

Your response to John's blog is an interesting one. It goes to the heart of Customer Portfolio Management; the idea that a business has a portfolio of customers segments with different values and different associated risks, rather like a financial portfolio of stocks & shares.

A business should look to manage the portfolio not only at the individual segment level, but also across the portfolio as a whole. Contrary to popular opinion, a customer of high value but high risk (they bought a single big-ticket item from you but only because it was in the sales) may not be any more valuable to you than one with low value but low risk (the senior citizen who has bought your budget line regularly for the last 20 years).

Research in supermarkets has shown that it may be easier and more profitable to try and get medium-value, promiscuously loyal shoppers to add a few complementary items to their basket, than to get high value, highly-loyal shoppers who are already giving you 90% of their shop to add more items. Without the benefits of a portfolio view of customers, most companies still focus on the maxxed-out high value customers irrespective of how much more value there is to be squeezed out of them.

And it goes without saying that customers use a portfolio of businesses to provide them with products & services too. This is the other side of the portfolio management coin.

It remains to be seen how commitment-driven measures like Reicheld's NPS or Rice & Hofmeier's superior Conversion Model can be used to inform customer portfolio management approaches to business.

Graham Hill
Independent CRM Consultant
Interim CRM Manager

Graham Hill

Agent-based Modelling to te Rescue

Michael

An erudite correction. Thank you.

I note that TNS (who bought out the rights to the Conversion Model) are now using agent-based modelling to simulate the power of customer advocacy. I am trying to get some more information about it from TNS, although they are not very responsive.

I agree with you entirely about the complicated and complex way in which customer perceptions influence their attitudes, intentions and behaviours, and ultimately their profitability. In my continuous review of academic papers on all things to do with customer-business, I see literally hundreds of papers on the subject, many of them contradictory.

I am torn between seeing Reicheld's NPS as a valuable awareness raiser for the power of customer advocacy, or as a damaging dumming-down of the measurement of customer advocacy in the pursuit of an unatainable measurement silver bullet. This is going to be work-in-progress for a long-time.

Graham Hill
Independent CRM Consultant
Interim CRM Manager

Bob Kaden

One number can never be the answer

What's the point of having one measure that is high or low if you don't know the relevant factors that will push the needle. While customer advocacy may be an interesting and worthwhile market research metric, what's the point of having that singular measure if you don't know the actions you should take to increase your score?

Say you have an advocacy score of 6.5 on a 10.0 pt scale. Say you are third from the top with two competitors that have higher scores and two that have lower scores? What do you do with that? Will say increasing customer service, lowering prices, increasing product variety or increasing the quality of products you sell be most influential in moving that score to 7.5, 8.5 or higher. The point is having one score might give you a general idea of where you sit vis a vis competition, it doesn't give you a clue as to where to focus your efforts to get better.

One score may be a harbinger to your position in the marketplace but without further metrics that explain the factors that are most important
to increasing your business, that number of mostly impotent.