Back in 2003, Harvard Business Review published the seminal article by Frederick Reichheld, ‘The One Number You need to Grow’. The Net Promoter Score was the culmination of extensive consultancy work into the importance of customer loyalty. NPS was based on a simple calculation. First, ask your customers if they would recommend your product or service to a friend or associate and then take away the number of Detractors (those who give you a score of 6 or less from a total of 10) from the number of Promoters (those that rate you 9 or 10). The resultant Net Promoter Score was a critical measure of your customers’ loyalty and their propensity to buy more from you.
The promise was that by focusing on what was needed to increase word of mouth recommendation then your business would grow.
Over the years NPS has been a de facto standard measure for many companies, despite many commentators who have questioned its efficacy and its ability to predict behavior. Having said that, 2003 is 15 years ago, and no doubt the actual research predates the publication, as such a question arises around NPS’s relevance and currency after the disruptive changes we have seen over the last decade or so;
Is NPS a good predictor of future behavior in the digital, cloud-based world we live in?
Rootsquared has been investigating some key trends in the technology space and part of this was looking at the drivers of technology adoption. We decided to run some tests to answer this question. In order to get a measure of customers’ likely future behaviour, we asked them about their buying intention over the next 18 months.
The result was pretty convincing!
We took the data and put in into a simple line regression model shown in the above chart.
If you’re ready to take an innovative approach to business development, get in touch to see how we could assist you.