Why you should be careful with the Net Promoter Score

The passives are not passive

Editor’s note: John Goodman is vice chairman and co-founder of TARP Worldwide, an Arlington, Va., research firm. Dennis Gonier is CEO of TARP Worldwide.

The Net Promoter Score (NPS) was introduced in 2003 by Fredrick Reichheld as “the one number you need to grow” to enhance profitability.¹  Since then there has been an ongoing debate about the utility of NPS, with Bob Hayes providing a good summary of the overall debate in his 2008 Quirk’s article (“Customer loyalty 2.0”).² TARP does not quibble with a willingness-to-recommend question as a strong indicator of customer loyalty and future repurchase intention. In fact, TARP first recommended using a willingness-to-recommend question in place of or as a supplement to a plain satisfaction or repurchase question in Quality Progress in 1992.³

There are, however, three difficulties with how the NPS treats those respondents who assign a score of 7 or 8 - a group Reichheld terms passive or benign. First, they are not benign - they spread negative word of mouth and are less loyal. Further, they are much more price-sensitive than customers who assign a 9 or 10 rating. Secondly, they often constitute a large part of the overall customer base and should not be ignored. If you have a strong brand with less than 10 percent detractors, your biggest opportunity is the passive segment, and NPS, by implication, is not very actionable. Third, the passives present a huge opportunity in that there are easy ways to move them up the scale to become advocates. For these three reasons they should not be ignored or even called passive.

Significantly less loyal

Passives are both significantly less loyal and very likely to spread negative word of mouth. In comparing the word-of-mouth behaviors of those assigning a 7 or 8 on a 10-point scale (or generally a 4 on a five-point scale, which also constitutes a major part of TARP’s research)⁴, the authors find that passives do indicate they tell several friends and associates about their experience. The numbers are usually 30-50 percent of the magnitude of those told about very good or very bad experiences but they are still significant contributors to the overall volume of word of mouth being spread about the customer experience.

The ambivalent experience related in passive word of mouth does the company no good and is usually at best faint praise or actually negative. Think about how you would react if someone came to you and said, “I just went to this restaurant and I’d definitely give it a 7.” What you hear is them saying, “It was barely adequate,” or “They didn’t do a bad job.” Would you rush right out to that restaurant? We think not.

Second, customers who give passive ratings, e.g., 7s and 8s or a 4 on a five-point scale, are generally significantly less loyal than those giving a top-box rating. In comparing willingness to repurchase against willingness to recommend, we find that passives are usually 10-20 percent less likely to remain loyal or intend to repurchase. In his example of T-Mobile’s market in 2008, Hayes indicated that 7s and 8s constituted 37 percent of the total market. Interestingly enough, he also shows that their disloyalty (those highly likely to switch) was exactly the same for 7s and 6s and 5s.⁵ We usually find that those customers who assign passive ratings have either had some sort of minor question or problem that was not even reported or they have had a completely uneventful transaction with no interaction with employees. As noted below, these situations can provide a significant opportunity.

Finally, passives tend to be much more price-sensitive. TARP has correlated ratings of satisfaction with price and value for price paid with willingness to recommend and found that customers who assign passive scores are significantly more sensitive to price and perceive significantly lower value for price paid. See Figure 1 for an example of a major appliance manufacturer (N = 1,300) where passives show a 40 percent drop in satisfaction with value for price paid vs. advocates who give a top-box 9 or 10 score. While this might seem tautological, it reinforces the point that passives are NOT passive.

Market leaders live and succeed in a top-box world. This correlation of mediocre recommend scores with ambivalence toward repurchase, value and price sensitivity was best characterized by the senior vice president of a major agricultural equipment company that charges a premium for its products. He said, “When someone gives you a 4 on a five-point scale, he’s saying, ‘I’ll keep buying your product until someone else offers me a better deal.’” He then went on to say, “We don’t want to compete on price, so a 4 or a 7 [on a 10-point scale] is not acceptable!” Similar views have been expressed by executives in leading retail, auto and insurance companies, all of whom live in a top-box world.

Detractors are vocal

We usually find that 20-35 percent of all respondents usually end up in the passive category. In most organizations, the detractors are vocal and submit many more complaints. Further, their problems are obvious and judged to be serious, placing the company’s reputation and treasure at risk. On the other hand, the passives are often viewed as somewhat satisfied or even satisfied (as opposed to very satisfied). Their situation is not viewed as dire and is seen as a lower priority. If, in executing the NPS calculation, you drop out passives, you are ignoring a significant part of your market.

Further, the passives can be more easily affected. They have not had any serious problems with your product or service though many of them have experienced a minor problem or question. They are the group you are most likely to move to top-box advocacy. This means that provision of a low-effort value add can potentially move their ratings up to top-box. In many cases such a low-effort action is a much more feasible approach to improving scores than assuring that serious problems that result in 6s and below will never occur.

TARP Worldwide has found that a range of “cheap delighters” can both enhance ratings and foster positive word of mouth rather than ambivalent or negative word of mouth.⁶ These delighters can range from transactional convenience and financial discounts to proactive communication and emotional connection.⁷

The following examples will illustrate some ways to move passives to raving fans.

Example 1: At a major catalog company, when the phone queue is not excessive, customer service reps are instructed to pick a few customers they feel comfortable talking to and talk to them about something other than the transaction. This building of rapport and emotional connection can lead to a 20-25 percent increase in top-box ratings, all for a 90-second investment of talk time.

Example 2: Recently, at the O’Hare Airport Starbucks, one of the authors asked for a cup of regular coffee and the counter person said with a smile, “I’m just making a new pot so there will be a three-minute wait. But of course it will then be free. Do you mind waiting?” The cost of a cup of regular coffee was minor compared to the increase in this customer’s satisfaction. Both of these transactions moved the rating to top-box via frontline flexibility and exemplary interaction skills.

Example 3: A leading quick-service restaurant chain has taken to hiring grandmotherly types to cruise the dining room topping off sweet teas and interacting with customers. It has found that these ladies can create “micro-bursts of emotional connection” that convert unremarkable transactions into top-box experiences.

Example 4: If you can anticipate the customer’s next question or need and proactively deliver it, you move the transaction from uneventful and adequate to dazzling, meriting positive word of mouth. This anticipation and delivery is what we call “psychic pizza” - that is, ringing your doorbell and saying, “Here is the pizza you were about to order.” The Auto Club of Southern California has achieved significant increases in service ratings by moving 4s to 5s in its road service offering. It has partially achieved this by assuring that the tow truck operator, upon arrival at the broken-down car, always offers a cold bottle of water and apologizes for the wait, even when they are early. Again, the cost is minimal and the impact is huge.

Recommend four actions

We recommend four actions to address the pitfall and opportunity of passives identified above.

First, change the organization’s attitude toward the passives - they are not benign and should not be ignored. Stress that they are the biggest single opportunity, usually one-third of your total market.

Second, create the economic imperative for action by quantifying the size of the opportunity; the monthly incremental revenue value if passives were moved up to top-box, the word-of-mouth magnitude and direction and the customers’ current sensitivity to price and value for price paid all contribute to this economic imperative.

Third, enhance the interaction skills and flexibility of your frontline staff to deal with the top five minor challenges they encounter so that they can be uniformly successful in handling them and creating “micro-bursts of emotional connection.”

Finally, experiment with “cheap delighters” and “psychic pizza” actions that convert the colorless transaction into a remarkable event. These can be simple emotional connections or minor value-adds as described above. 

References

¹ Reichheld, F.F. “The One Number You Need To Grow.” Harvard Business Review, 81, December 46-54.

² Hayes, B.E. “Customer loyalty 2.0.” Quirk’s Marketing Research Review. Oct. 2008: 54-57.

³ Goodman, J.A., Broetzmann, S.M. “Ineffective – that’s the problem with customer satisfaction surveys.” Quality Progress. May 1992, pp. 35-38.

⁴ TARP is aware that there is a significant debate on the validity of direct translation of 7s and 8s on a 10-point scale to 4s on a five-point scale. Space does not allow addressing that issue in this article.

⁵ Hayes, B.E. “Customer loyalty 2.0.” Quirk’s Marketing Research Review. Oct. 2008: 57.

⁶ Goodman, John. “Treat your customers as prime media reps.” Brandweek, September 12, 2005: 16.

⁷ Goodman, John. Strategic Customer Service. New York: AMACOM: 180-181.