Limitations of NPS and Alternative Metrics

Net Promoter Score (NPS) has been a crucial part of the business world for nearly two decades. It was initially presented as the ultimate metric, the one to rule them all. Its simplicity and focus on customer satisfaction made it a darling of the industry.

However, with the evolution of customer research and feedback analysis, the idea of NPS as the singular, all-encompassing metric is being questioned. Even though two-thirds of Fortune 500 companies still employ NPS, it is no longer considered the only measure of customer satisfaction.

In this episode, we are joined by John Dawes, a professor at the Erenburg-Bass Institute, who will share his research on NPS. This episode will likely challenge what you know about NPS and shed light on some of its flaws.

Our Guest

Webpage: https://johndawes.info/

LinkedIn: https://www.linkedin.com/in/john-dawes-059bab10/

Our Hosts:

Follow our updates here: ⁠⁠https://www.linkedin.com/company/sleeping-barber/⁠⁠

Get in touch with our hosts:

Marc Binkley: ⁠⁠https://www.linkedin.com/in/marcbinkley/

Vassilis Douros: ⁠⁠https://www.linkedin.com/in/vassilisdouros/⁠

Links & Research:

HBR - The One Number You Need to Grow

https://hbr.org/2003/12/the-one-number-you-need-to-grow

HBR - Where NPS Goes Wrong

https://hbr.org/2019/10/where-net-promoter-score-goes-wrong

Qualtrics - THe Ultimate Guide to NPS

https://www.qualtrics.com/experience-management/customer/net-promoter-score/

Int. Journal of Market Research: NPS - What Should Managers Know?

https://journals.sagepub.com/doi/10.1177/14707853231195003

A longitudinal Examination of NPS and Firm Revenue Growth

https://www.researchgate.net/publication/228660597_A_Longitudinal_Examination_of_Net_Promoter_and_Firm_Revenue_Growth

Byron Sharp - NPS does not predict growth

https://byronsharp.wordpress.com/2008/08/08/net-promoter-score-nps-does-not-predict-growth-its-fake-science/

Fred Reichheld - The Ultimate Question 2.0

https://www.amazon.ca/Ultimate-Question-Revised-Expanded-Customer-Driven-ebook/dp/B005E8AKVM/ref=sr_1_1

Why NPS is a bad tool and what to use instead

https://archive.researchworld.com/why-net-promoter-score-is-actually-a-bad-tool-and-what-to-use-instead/

Brand Growth Potential

https://link.springer.com/article/10.1007/s11002-023-09682-7

How Brands Grow

https://www.amazon.ca/How-Brands-Grow-What-Marketers/dp/0195573560

Timestamps

0:44 - Intro to John Dawes

2:24 - What NPS is and how it’s measured.

3:50 - Why NPS benefits from extreme scoring

5:48 - The downside of the NPS scoring method

8:38 - Why 66% of Fortune 500 companies use NPS

10:40 - The false promise of high NPS scores

13:44 - The trouble with NPS-based incentives

16:46 - The disconnect between NPS scores and business performance

19:30 - The challenges of NPS with growing vs established brands

21:28 - The effectiveness of NPS vs. past sales as a predictor of future growth

26:02 - Are NPS detractors actually bad?

29:50 - Is NPS a superior metric to CSAT scores for predicting growth?

33:17 - What is NPS good for & what to ask instead

37:56 - Can Google Reviews replace NPS?

39:25 - Metrics better than NPS for predicting growth

42:53 - Can we put the NPS genie back into the bottle?

46:47 - If not NPS for growth, then what?

49:32 - 50 years of brand performance disproves loyalty as a growth driver

52:19 - How to find out more about John

54:01 - Post-pod with V and Marc

Where to Listen:

Apple Podcasts: https://podcasts.apple.com/ca/podcast/the-sleeping-barber-a-business-and-marketing-podcast/id1609811324

Spotify: https://open.spotify.com/show/4v0kaM350zEY7X2VBuyfrF?si=7083317d5afd488b ⁠⁠

Google Podcasts: https://podcasts.google.com/feed/aHR0cHM6Ly9hbmNob3IuZm0vcy84MWVjYWJhNC9wb2RjYXN0L3Jzcw?sa=X&ved=2ahUKEwji_oSOopP-AhXnlo4IHTZKBgYQ9sEGegQIARAC

Youtube: https://www.youtube.com/@sleepingbarberpodcast

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