Over the past few years, there has been a lot of debate about the best approach to measure customer satisfaction and loyalty, with considerable interest in the Net Promoter Score developed by loyalty consultant Fred Reichheld. Rockbridge implements a satisfaction measurement approach we call the Path to Excellence. This is a best practice approach that is based on the principles and methods used in the research conducted by the authors of SERVQUAL (Parasuraman, Zeithaml, & Berry). Compared to more simplistic methods like the Net Promoter Score (discussed below), the Path to Excellence helps companies succeed for a number of reasons:
- First, a measurement system is developed through a 5-stage process that ensures input comes from internal stakeholders as well as the voice of customer, while applying sound science to create a concise but actionable survey scorecard for tracking.
- Second, the Path to Excellence focuses on gaps to identify areas for improvement. This includes gaps between customers’ perceptions of a company’s performance and their expectations for how an excellent company should perform. It also allows a company to see gaps between what customers experience versus what management and employees think customers experience, thereby uncovering areas where resources may be improperly aligned.
- Third, the Path to Excellence goes beyond single-measure approaches like Net Promoter to provide indices that are more stable and actionable. For example, an index built upon multiple components that are important to customers tells management exactly where to focus resources. Further, a loyalty index made up of items such as willingness to recommend, satisfaction, and future intent provides a stable indicator of the long-term health of a customer relationship.
The Net Promoter methodology mentioned above relies on a single survey measure derived from a customer’s willingness to recommend. Reichheld says the Net Promoter Score is “the best predictor of growth” and “the one number you need to grow,” but should companies follow his advice? The basis for using Net Promoter is Reichheld’s claim, based on his own proprietary research, that it is the single best predictor of company growth (i.e., better than other survey measures such as satisfaction and future intention, and better than multi-item indices such as the American Customer Satisfaction Index.) However, independent, peer-reviewed research finds that the Net Promoter Score is at best equal, and often inferior, to other measures in predicting company growth (see “A Longitudinal Examination of Net Promoter and Firm Revenue Growth,” Keiningham, Cooil, Andreassen & Aksoy, Journal of Marketing, July 2007). Rockbridge’s own research, in which we track customer purchase behavior 6 months to a year after we ask about satisfaction, corroborates the fact that the Net Promoter Score is not the overall best predictor of business performance.
Given the lack of independent validation of the predictive superiority of the Net Promoter Score, its proponents have started to emphasize its simplicity and ease of use as the major benefits. Do these traits justify its use? What the Net Promoter Score offers in simplicity, it lacks in stability, due to its reliance on a single measurement for tracking. A single question, compared to an index made of multiple questions, is less stable (or as researchers would say, less reliable). Reliability and stability are important when a number is used to set goals for managers and employees. Furthermore, the Net Promoter Score is based on willingness to recommend: a measure that can be influenced by context. For example, a customer of a bank may avoid recommendations as a matter of personal policy, even if they are happy with the service and are using its products.
In the end, an organization must decide what works best in helping it reap the rewards of a customer-focused strategy driven by sound metrics. The Path to Excellence drives success by ensuring internal buy-in, providing actionable metrics, and producing stable measures for monitoring performance and setting goals.