Announcing A New NPS Metric

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Sufferers from Net Promoter Syndrome share a common symptom with those afflicted with another marketing malady called Simplificosis, the tendency to believe that just because a marketing or management metric is simpler to understand or measure than other metrics, then it must be better.

I understand that companies often make things more difficult than they need to be and that simplification has its benefits.

Example: Applying for a mortgage. The complex way: Filling out a 15 page form and waiting three weeks for an answer. The simple way: Answering three questions (what’s your name, what’s the address of the home you’re looking to buy, and how much money do you make) and getting your answer immediately.

But sometimes, simplification isn’t an improvement.

Example: Getting directions from Boston to New York. The complex way: Take the Mass Pike to the Rte 84 exit, merge onto Rte 15 south towards I-91, go east on …. and so on. The simple way: Go southwest. Correct, simpler, but not exactly an improvement.

This is the trap that Net Promoter Syndrome sufferers fall into. Paul Marsden, writing on his Viral Culture blog, wrote “the simplicity of the model…has made research intelligible at the board level.”

It’s intelligible, however, not because it’s right, but because Reichheld knows how to communicate with senior management. I hate to say it, but many market researchers don’t. Citing margins of error, R-squared scores, etc. doesn’t resonate with a lot of senior execs.

But the reality of the Net Promoter Score is that it’s really not that simple. The common practice is to only consider customers as promoters if they give a 9 or 10 on the 10-point scale. But in comparing NPS between time periods, it’s quite possible that the net score could increase while a significant number of customers shift from 7s and 8s to 1s and 2s. Not so simple, after all.

Bottom line: Simpler doesn’t mean better, nor does it make it “more right” than complex.

But hey, if it’s simpler you want, it’s simpler I’ll give you. Here’s a new metric for you. And since it might be too complex for some people to remember a new acronym, my new metric will keep the NPS moniker. Announcing the new NPS:

Net Purchaser Score — The net difference between the number of people who bought your product and the number of people who returned it.

I haven’t done the “research” yet, but I just know that my NPS will correlate with revenue and profitability growth. And the beauty of my metric is that it:

  1. Measures behavior (not intention)
  2. Encompasses all customers (not just a sample)
  3. Directly impacts the bottom line (not indirectly)
  4. Can be measured in real-time (or at least more often than surveys)
  5. Is simple!

As soon as I finish the “research”, I’ll publish the book (and I’ll even send you a signed copy if you leave a comment here). And I’ll expect all the Net Promoter promoters to drop their support of their metric, since something better — and simpler — will have come along.

Technorati Tags: Net Promoter Score, NPS, Marketing measurement

p.s. Check out Adelino’s take on this

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