Amongst many reasons why people hate Net Promoter Score (NPS), the biggest one is – why does it have such a weird scale where only 18% of points (2 of 11 points) are promoters and rest are passives and detractors. It is important to understand few terms before we make a conclusion, why NPS has such an scale..

We develop attitudes and perceptions basis our experiences and perception and basis these perceptions, consumers become loyal towards particular product / brand. Positive perceptions enable retained customers till such time they do not have better alternatives. But loyalty is bigger, people stay with brands / products they love and advocate to their friends. That is the reason, why CEOs drive loyalty. However till NPS came there was no easy way to understand loyalty.

Walker Loyalty Model

We develop attitudes and perceptions basis our experiences and perception and basis these perceptions, consumers become loyal towards particular product / brand. Positive perceptions enable retained customers till such time they do not have better alternatives. But loyalty is bigger, people stay with brands / products they love and advocate to their friends. Repeated great experience drives loyalty and loyalty drives revenue.

That is the reason, why CEOs drive loyalty. However till NPS came there was no easy way to measure loyalty.

In pre-NPS days, consultants like IMRB, AC Neilson, Milward Brown etc ran complex statistical models to segment customers in 4 quadrants (the pic is Walker’s Loyalty Matrix) and then calculate % of customers who are “Truly Loyal”. But this was a long drawn process of months and lot of $$$ !

In early 2000’s, Fred Reichheld along with Satmetrix did an 4 year long extensive study where they asked some 20 questions from 4000 customers in 6 different industries tracking their repurchases. They got sufficient results for 14 of them out of which they created case studies, correlating the questions and companies financial growth. Our current question had the highest correlation (How likely is it that you would recommend [company X] to a friend or colleague). With a scale which reflected the word of mouth phenomenon (Dissatisfied customers spoke about the experience to multiple times more than the satisfied customers) they did more data collection to validate the initial findings. NPS question had good correlation to revenue growth.

The question has been chosen to be the best one amongst 14 different questions giving best reflection of loyalty. This precisely is the reason why the core question can not be changed.

NPS is easy to administer, simple to understand, free of cost reliable tool to measure loyalty and is highly actionable. In the next one, lets see some examples of implementing NPS in different setups, some more issues with NPS and see if the correlation with financial growth still exists.