Recommendation Rates Revisited
In some ways it came as a big relief to hear one of WOMMA’s founders talk about the use of Reicheld's Net Promoter Score (NPS) to actually predict business growth by measuring customer recommendation rates, particularly as WOMMA's WOM Unit metric was a little weak on the ROI front.
However, as Walker Information's Chief Research Methodologist Doug Grisaffe points out "there are several critical logical, conceptual and statistical problems with Reichheld's proposition" (read more)
Not sure Adland is the best place to bore you with the methodological criticism relating to what Grisaffe calls the “classic statistical mistake”, i.e. “interpreting correlation as if it implies causation”.
What’s important, however, is Grisaffe criticism about the NPS offering “No Specific Guidance for Enterprise Actions”:
“Reichheld's one number may be a sign of business health, but it provides no direction about what to do. If you have a 104-degree fever it calls for improvement. But merely having the number doesn't diagnose the specific health problem or tell how to treat the situation.”
Maybe Pete should get out more before becoming Fred’s cheerleader because this criticism has been echoed by many marketing head honchos that I have spoken to recently particularly those working in new and emerging technologies.
Sure the NPS is a useful indicator, but recommendation rates are by no means the only key performance indicator you need to grow.
As Gfk's VP Ken Powaga pointed out in his paper “One Number” Appealing But Dangerous back in 2004:
In summary, managing businesses that meet ever-expanding customer expectations and build strong customer relations and long-term loyalty is a complex business. Relying on one number to help you do this is like trying to fly a plane with only the altimeter.
Justin Kirby, MD, DMC
Co-editor and author, Connected Marketing – the viral, buzz and word of mouth revolution
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