What The MSI Award Says About Net Promoter Score

I got an email from Tim Keiningham, an SVP and head of consulting with Ipsos Loyalty. Tim let me know that a paper he co-authored, called A Longitudinal Examination of Net Promoter and Firm Revenue Growth (which I wrote about here) won the 2007 Marketing Science Institute/H. Paul Root Award given to the Journal of Marketing paper that had “the most significant contribution to the advancement of the practice of marketing.”

To quote from the paper:

We find no support for the claim that Net Promoter is the single most reliable indicator of a company’s ability to grow. We found that when making ‘apples-to-apples’ comparisons, Net Promoter does not perform better than the ACSI (American Customer Satisfaction Index). Managers have adopted the Net Promoter metric on the basis that is superior to other metrics. Our research suggests that such presumptions are erroneous.”

My take: If the Marketing Science Institute says that the “most significant contribution to the advancement of the practice of marketing” is a study that refutes one of today’s most popular marketing fads, namely the Net Promoter Score, what does this say for the credibility and long-term success of NPS?

It says that the beginning of the end has begun.

Management fads go through a predictable cycle of four stages. They:

  1. Begin to show up in the management press with articles (or books) from early proponents;
  2. Gain acceptance when credible case studies highlight the [allegedly] superior performance firms realize from deploying the concept;
  3. Come under more rigorous scrutiny which produces studies and examples that refute and challenge the claims of success; and then
  4. Begin a decline in popularity (but can become part of the fabric of management if — and only if — they’re truly a worthwhile concept).

In addition to the Keiningham study, comes stories like the one from Paul Schwartz who wrote:

I’ve been using NPS with clients for a couple of years, and I’m not convinced yet that it is the best indicator of a company’s ability to grow. The real work is figuring out what drives the likelihood to recommend for each business, and then measuring the actual recommendation and purchase behavior of customers.”

Not convinced yet, Paul? You may never be. More studies like Keiningham’s will be done, and more stories like yours will be told in 2008. 2008 will be the year that NPS moves into stage 3.

Dr. Seuss once wrote:

The storm starts
When the drops start dropping
When the drops stop dropping
Then the storm starts stopping.”

The NPS storm is starting to stop.

Congrats to Tim and his colleagues on their award, and Tim — if you need help carrying your bags when you go to Austin, TX to pick up the award, just let me know.

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