Customer analytics company ForeSee says retailers may spend too much time and money worrying about the results of their Net Promoter Score (NPS)—and might even be alienating some customers as a result, Internet Retailer reported on Tuesday (July 16).
The problem is in how NPS is calculated. The metric, which was developed in 2003 by consultant Fred Reichheld of Bain & Company, asks groups of customers how likely they would be to recommend a retailer or other company on a scale of zero to 10. The percentage of "promoters" (scoring the company at 9 or 10) minus the percentage of "detractors" (a score of 6 or less) is the NPS, which can range from -100 to 100.
ForeSee argues that some of those "detractors" are really neutral, and won't actually badmouth the chain or brand. Its "Word-of-Mouth Index" (WOMI), which ForeSee says it spent the past two years developing, adds a second question, asking customers how likely they are to discourage others from doing business with the company, then subtracts the percentage of "true detractors" (a score of 9 or 10 on the "discourage" question) from the "promoters."
As a result, ForeSee's WOMI score tends to be higher than the widely used NPS because NPS typically calculates more than three times as many "detractors" as WOMI does. And because those "detractor" scores are sometimes used by store managers to follow up with less-than-wildly-delighted customers to ask why they're dissatisfied, retailers may be wasting follow-up time on satisfied customers who just aren't the recommending kind—or even irritating previously happy customers.
NPS has been criticized before; it was designed to predict how fast a company will grow, and several studies have claimed to show NPS isn't as good at that prediction as other metrics. Whether WOMI is actually better than NPS—and whether it will take hold—will only be clear in time.
But for the record, in an April survey of customers ForeSee found that Amazon's (NASDAQ:AMZN) NPS is 53 while its WOMI scored at 61; Apple (NASDAQ:AAPL) has an NPS of 47 and a WOMI of 56; eBay's (NASDAQ:EBAY) NPS is 39 and WOMI is 52; Nike's (NYSE:NKE) NPS is 30 and WOMI is 44; and Gap (NYSE:GPS) has an NPS of only 21 but a WOMI of 36.
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