Management consultant Perter Drucker once said: “If you can’t measure it, you can’t manage it”. That quote lead to a business revolution that took us through the era of Kaplan and Norton’s Balanced Scorecard through to the world today where every interaction is measured, evaluated and optimised. Unlike other complex measurement systems, the Net Promoter Score is all about answering one simple question: How likely is it that you would recommend our company/product/service to a friend or colleague?
Customer retention is a big deal. Ask anyone in business and they will tell the most efficient method of acquiring new customers is through recommendations. What Net Promoter does is quantify customer recommendations in such a way that it’s possible to compare companies against each other.
At a number of events I’ve attended recently, company CEOs have often boasted about their score, comparing it to their competitors and peers – it happened a few hours ago during the VeeamON opening keynote when Co-CEO and President Peter McKay noted his company’s Net Promoter score was in the 70s – far exceeding that of his previous employer Vmware and about double his competitor’s score.
McKay also revealed that maintaining a high Net Promoter score was part of the incentive plan attached to his salary.
When a customer is asked how likely is it they would recommend our company, product or service to a friend or colleague, they give a graded score that is generally on a scale f 0 zero to ten. People who give a score of nine or ten are called “promoters”. Those who give scores between zero and six are called “detractors” with the remainder called “passives”.
The Net promoter score, which can range from -100 to 100 is calculated by subtracting the percentage of responses from detractors from the percentage that are promoters.
The problem with Net Promoter, in my view, is that it is a very superficial measure. While it might be interesting, it doesn’t answer the question of why people don’t recommend you. However, the Net promoter question could be included in a broader customer satisfaction survey where you can delve into what makes your customers happy and what is important to them.
Making the Net Promoter a Key Performance Indicator (KPI) is an interesting decision. My experience with poorly set KPIs is that they can drive negative behaviour or influence people into doing what’s best for them personally rather than what’s best for the business. For example, you might be able to convince more customers to be promoters but it might come at the cost of employee satisfaction as you drive people to work longer hours.
Net Promoter, like any other performance measurement tool, can be useful. But beware looking at in isolation.