Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
The Pros and Cons of Net Promoter
Is one number from one system good enough to measure customer satisfaction? Here's a roundup of the pros and cons that have industry experts buzzing.
If you're at all interested in marketing, you likely have heard about Net Promoter, the company that uses a score by the same name to calculate a business' customer satisfaction. Compared to the amount of data that comes with typical customer satisfaction analyses, the Net Promoter Score is as straightforward as it gets: your customers rate you on a scale of 1 to 10 on their likeliness to recommend you to a friend or colleague. Customers giving you a 9 or 10 are called promoters, and anyone rating you 6 or below are detractors — the rest are considered neutral. Subtract the detractors from the promoters, and you've got your Net Promoter Score.
It sounds simple, and it is. But is one number from one system good enough to measure customer satisfaction? Here's a roundup of the pros and cons that have industry experts buzzing:
Pro: It's simple. Fans and critics alike praise the benefits of understanding one number that's derived from an easy-to-understand formula. Fred Reichheld, one of the co-founders of the score who made it famous with his book "The Ultimate Question," argues that research among thousands of customers in different industries tied the New Promoter question to the most referrals and repeat purchases — and that the "ultimate question" can be the key metric for measuring success. And for busy executives who often get confused by market researchers' analysis, claims are that it can be a Godsend.
Con: It's too simple. The Net Promoter site will say that measuring one number alone will not lead to success and will supply customers with an operational model, white papers, online forums, Webinars and even conferences to get you to a successful score. But one number isn't enough, critics argue. "It doesn't identify problems; it doesn't offer solutions," says Charlie Scott of Woodland, O'Brien & Scott, a customer satisfaction and management consultancy. "Home building is much more personal and relational, and one number does not capture that."
Pro: It's good for comparison's sake. A clear piece of data to compare against other firms' findings provides a more stable measure over time, Jeffrey Henning writes on software company Vovici's blog.
Con: It's "management by averages." The Net Promoter Score is a an average, which is a poor way to manage, says Scott. If you have a room of 100 people and one has a problem, would you assume half have that problem, asks Scott? "It's so far away from what's happening at a relational level of a community, the number isn't going to help you understand what's going on. ... Does the score mean the same thing to salesperson Sally Smith at Happy Acres as it does to Bill Brown somewhere else? No. It's too general."
Pro and Con: It works best for large companies with thousands of customers — but remodelers' businesses aren't that large, Scott says, with a reminder that Net promoter's clients typically handle a large number of transactions.
Pro: It gets people talking about customer satisfaction. "Anything that brings customer satisfaction to the forefront is a good thing, regardless of how ill-conceived the methodology might be," says Scott. "This gets people talking, and dialogue is good."