By Andrew Dalglish - 12th July 2016
Net Promoter Score (NPS). It’s the one number that almost every organisation seems to include in their management metrics and it’s easy to see why.
In the original Harvard Business Review paper where NPS was revealed to the world, its ‘inventor’, Frederick Reichheld, made some bold claims. Discussing his analysis of the link between a company’s NPS score and their commercial performance, Reichheld said: “The results were striking…a strong correlation existed between net promoter figures and a company’s average growth rate over the three-year period from 1999 to 2002”. This link has become received wisdom in the business world with many believing that a focus on improving NPS is a sure fire path to commercial success.
Three further features of NPS have secured its position as the must-have KPI:
But hold on. There’s a problem. You see, the theory of NPS might be compelling, but it doesn’t always hold true in reality, especially in B2B environments.
Here at Circle we like to challenge the received wisdom, so we put NPS under the microscope and questioned its very basis. Does NPS, we asked ourselves, reliably predict commercial performance in B2B environments? If not, then the concept is fundamentally undermined and NPS should be used with care, if at all.
To explore this question we took several years of NPS data gathered for multiple B2B clients. Using these NPS scores and the corresponding commercial performance data for each client, we ran a correlation analysis to establish if an improvement in NPS was indeed linked to improved financial performance. The result was mixed. In some cases, the correlation was strong, but in an equal number of cases it was weak. Remarkably, as the example below illustrates sometimes the correlation was actually negative with a decrease in NPS being linked to an improvement in financial performance.
In other words, it seems that NPS doesn’t always work in B2B environments and should be used with caution, if at all.
So take a look at your own data to see if there really is a link between NPS and financial performance. If it works as the theory predicts, that’s great and you’ll reap all of the benefits that NPS can bring. But if you’re like many B2B organisations and find that NPS turns out to be a poor predictor of commercial performance, then think again. There’s no need to ditch NPS altogether as it’s still a useful measure of brand health, but it shouldn’t be the focal point for running your business.
Read more about our approach to business-to-business (B2B) customer satisfaction surveys.
Andrew has specialised in B2B research for over a decade and co-founded Circle Research in 2006. He is a columnist for B2B Marketing Magazine, a regular contributor to Research Live and frequent speaker at leading events such as the B2B Leaders Forum, Customer Experience Live and the Social Media World Forum. Andrew is a Chartered Member of the MRS, teaches the MRS B2B research course and holds an MA in Psychology from Aberdeen University alongside an MSc in Marketing from Strathclyde University.