Thursday, July 9, 2015

What Good Are Net Promoter Scores? Carlisle Scrapbook
by David P. Carlisle

Various online publication sources provide NPS scores for top-of-mind brands. Clustered close together are Acer, Audi, BMW, Amazon, and Apple.

What do all these brands have in common? A Net Promoter Score (NPS)1 , which is a measurement of the loyalty that exists between a provider and a customer. It is based on a simple question:

How likely is it that you would recommend our company/ product/ service to a friend or colleague?

The scoring is based on a 0-10 scale, where the 0-6 respondents are considered “detractors”, 7-8 respondents are considered “neutrals”, and 9-10 respondents are “promoters”. The Net Promoter Score is the percentage of promoters minus the percentage of detractors.

So, you are at a barbecue and you ask, “Hey, what do you think of Amazon?” Your friend replies, “I think you should try it …” Your friend is an Amazon promoter. Next you ask, “What do you think of your BMW?” He responds, “I love it, you should get one.” Now, he’s a BMW promoter. The answer to the question assumes some sort of familiarity with the product.

OK, now you ask, “What do you think of McDonald’s?” The friend replies, “Not a fan, I do not recommend it … you should try Five Guys.” He is a McDonald’s “detractor.” We have jumped from the web market, to cars, to quarter pounders. Can there possibly be a linkage between these three?

I think so.

Specifically, the linkage is all about word of mouth reputation. The friend recommends (stands behind) Amazon and BMW, but not McDonald’s.

I, for one, am convinced that this linkage is relevant.

The next question is how relevant are the NPS scores? The gray chart shows some NPS scores that are easy to get from the internet – Here we see the lineup of some familiar automakers … and Amazon, McDonald’s, and Facebook.

The naive read of this chart is:
  1. Tesla has more promoters than Amazon; an inference that is easy for me to accept.
  2. Harley and Honda have more promoters than mainstream automotive brands. Again, easy to accept.
  3. McDonald’s has fewer promoters than Amazon and the auto companies. Makes sense to me.
  4. Facebook has even fewer promoters than McDonald’s. Interesting.
So, I can accept the simple inference of the numbers and how various brands line up. But, what do they mean in an absolute sense? We need to go to the ultimate spaghetti western for this – The Good, the Bad, and the Ugly. Amazon is a “good” benchmark for NPS – it sits at around 64%. McDonald’s is at negative 8% (-8%) and that’s pretty “bad.” Facebook is the poster child for “ugly” at a NPS of negative 21% (-21%).

Using these benchmarks, we see that the auto brand NPS scores are neither “bad” nor “ugly.” Facebook and McDonald’s are doing pretty well and neither seems to be on the brink of disaster. So, what do bad and ugly NPS scores mean?
Time Out: For established brands, I think of a bad/ugly NPS as a form of corrosion. Something’s bothering customers. If left unremedied, they will ultimately flee. This is easy to imagine with both McDonald’s and Facebook.
Bottom line: Net Promoter Scores are here to stay – they make sense … and it makes abundant sense to compare one brand with another and have a common, transcendent, measure of word of mouth. Yes, we need NPS benchmarks so that we can take the pulse of brands, products, and services and determine if they are healthy or in cardiac arrest. We need to be able to look at NPS scores and get some idea of “corrosion” that may be present. We need to look at different slices of the market that have different levels of corrosion so that we know where the problems are.

Let me leave you with a vivid example. Budweiser’s NPS taken from the same web source in the bar chart is 29%. Not great, but not bad or ugly yet. I encourage you to visit a large store that sells beer in the United States. Go to any one of them. You will find the aisles jammed with hundreds of different craft beer products – squeezing Bud’s shelf space. I suspect that if you could find a NPS survey that asked respondents if they would recommend craft beer, you’d find a NPS score much higher than 29%. The score, possibly, could be as high as Tesla’s.

From burgers, to beers, to Tesla. Hmmm. They might not be all that different. In the next blog we’ll take a look at NPS scores for dealers and OEMs in relation to the customer maintenance/repair experience.


1Net Promoter Score is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix

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