Author

Umer Asif

Degree

Master of Business Administration Executive

Faculty / School

Faculty of Business Administration (FBA)

Year of Award

2016

Project Type

MBA Executive Research Project

Access Type

Restricted Access

Executive Summary

The Net Promoter Score is a revolutionary measure of loyalty and business growth that has become the buzzword of the measurement industry over the last decade. The measure provides a view on the promoters of a product, service or brand, thereby giving a reality check on the loyal customer. Like every other measure of customer behaviour, the NPS is not a perfect science and has its strength and many pitfalls. This report examines how the NPS works, its pros and cons, and the ability of the number to predict growth in the business.

The NPS is based on a simple question that asks customers to “recommend” a brand, product or service, to a friend, based on the service interaction. On a scale of0 - 10, customers respond to the recommend question which is then clubbed into three buckets of promoters (9-10 rating), passives (7-8) and directors gives the NPS, w'hich can range from negative 100 (all detractors) to positive 100 (all promoters). Promoters are loyal customers and promote the brand. The higher the number of promoters, compared to the detractors, the more loyal customers a business has and the more the propensity to attract profitable customers, The creators of NPS claim that this is the single golden nugget that businesses should go after. to drive loyalty and growth in the business. There are numerous challengers of the philosophy, primarily in the area of NPS linkage to growth. The key concerns range from challenging the definition of promoters and detractors, due to cultural different in the fact that promoters do not necessarily lead to a higher share of wallet. Correlation studies show that there is no significant relationship between the recommend score and business growth and why other indicators like Customer Effort Score,

are better indicators of loyalty. There is more criticism ol'the system than praise, the praise is from the developers themselves. However, some cases of successful implementation in large organisations do suggest that do suggest that all is not wrong about NPS. The primary research examines data from a large global organisation and assesses the impact of changing NPS against its sales volumes. This research qualifies that while there is indication in several cases that a higher NPS is linked to higher growth in the business, there are a few stark examples that totally negate the theory of NPS. These differences too indicate that while NPS is a oood and simple indictor of customer satisfaction, it is far from being a perfect indicator of growth. Interviews of relevant stakeholders was also conducted, which showed that the understanding of managers about NPS is average and their belief in the NPS is low. Managers need to bettei understand how the NPS impacts the business and businesses need to quantify the correlation of NPS through their own analysis and research. It can be concluded that NPS is a simple metric that gives a good indication of how customers feel about the brand after their interaction and how likely they are to be positive or negative about their experience to their friends. It is however not a sufficient measure to be used independent of other measures of customer satisfaction and without doing a deeper sense check on the data and results. It alone is not an accurate measure of growth in the business. The research also found that a Net Promoter System compared to just the Score, would serve as a better measurement for companies to drive tangible results in the business.

Pages

93

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