In 2003, a marketing consultant named Fred Reichheld lit the business world on fire with the Harvard Business Review article The One Number You Need To Grow. He asserted that by asking a single question — a question aimed at determining the organization’s customer’s loyalty — management could take the pulse of their customers’ feelings towards their business. He ended the article with “This number is the one number you need to grow. It’s that simple and that profound.”
It turns out, it’s neither simple nor profound. It doesn’t help businesses grow. It doesn’t even tell the management how loyal the customer is.
Yet, Net Promoter Score (also known as NPS) meets all the common requirements of a “useful” business metric:
- It’s easy to measure.
- It produces a number you can track.
- It feels legitimate.
Even though NPS has been solidly debunked in many smart research papers, it’s still solidly embedded into many businesses. We hear about companies rolling out new NPS measurement programs every day.
Industry leaders continue to sing NPS’s praises. For example, Stephen Bennett when he was CEO of Intuit: “Every business line now addresses [NPS] as part of their strategic plan; it’s a component of every operating budget; it’s part of every executive’s bonus. We talk about progress on Net Promoter at every monthly operating review.”
Companies like Intuit base their critical decisions on this metric, but the metric isn’t measuring what they think it is. In fact, NPS measures nothing in particular. Let’s unpack how it works to see just how vacuous NPS truly is.
The wacky science behind the NPS formula
One of the crazier things about the Net Promoter Score is how it’s calculated. The inputs come from a simple survey. Respondents are asked a single question: How likely are you to recommend [COMPANY] to a friend or colleague? On an eleven-point scale, with zero marked as Not At All Likely and 10 marked as Extremely Likely, respondents pick a number. (In later versions of the survey, Fred Reichheld suggested people ask a subsequent question about why…