Net Promoter Scores Suggest That Most Companies Employ a Failed Business Strategy
In 2003, The Harvard Business Review published The One Number You Need To Grow, by Fred Reichheld, a senior management consultant at Bain and Company. It delved into Enterprise Rent-A-Car’s monthly survey questions—only two questions were asked. In essence, what was the quality of a customer’s rental experience and would that customer rent again. This evolved into whether a customer would be likely to recommend a company, product, service or brand to others. This was the beginnings of the Net Promoter Score, a widely used metric worldwide.
It’s an 11 point “recommend” scale from zero—definitely would not—to 10—definitely would “recommend this company to a friend or colleague.”
Reichheld’s objective was (and is) to elevate customer metrics to the same level of rigor and importance as financial metrics like revenue growth or return on equity.
People who score 9 or 10 for a particular company or brand are labeled “Promoters.” People who score 0-6 are, in turn, labeled “detractors.” The 7’s and 8’s are ignored.
Subtract the % of detractors from the % promoters and you have the “net promoter score.” According to Reichheld and published in the book The Ultimate Question: Driving Good Profits and True Growth, it’s the single best predictor of future business performance.
True or not, correct or incorrect, it’s a metric that many CEOs and CFOs look at to gauge how their companies and their brands are performing.
Okay, so what is a good score? If 90% of prospects and clients like us a lot (9’s or 10’s) while only 10% rate us poorly, a 0 to 6, then our “new promoter” score is 80 (90-10). That’s a great score!
Trader Joes has among the top scores in America. It earns an 82. Wegman’s gets a 78. Apple enjoys a 72. These are all very good scores.
But what is the average net promoter score in America? How well is the typical company or brand doing? With all the emphasis in the past decade on corporate and brand equity and management consulting firms preaching the joys of 100% customer satisfaction, how is the average company, product, service or brand doing?
Would you believe a 7! That’s right—7. You could get that by having 30% promoters and 23% detractors or 53% promoters and 46% detractors or, and this would be really crazy, you could have only 10% promoters and 3% detractors with 87% of customers and prospects giving you a pass.
Any way you look at it, a 7 is a disaster and a sad commentary on American business.
If your company or brand gets a 7 or anything less, you need a new strategy. You need to read Your Gut Is Still Not Smarter Than Your Head, and then start working hard to develop and implement a new strategy. The old one isn’t working.