I think I’ve seen a handful of post reference Net Promoter score in terms of evaluating stocks. This a summary I saw early on NY Times arguing against it.
Companies across America are increasingly talking about their “net promoter scores” — which tracks customer satisfaction — and using it as an important business yardstick. But that may be a bad idea, Khadeeja Safdar and Inti Pacheco of the WSJ report. • The NPS is calculated from a single question: “On a scale of 0 to 10, how likely are you to recommend the company’s product or service to a friend?” • Companies increasingly use the scores to make big decisions: Best Buy relies on them to determine employee bonuses; Target cites them to justify investments. • “Last year, ‘net promoter’ or ‘NPS’ was cited more than 150 times in earnings conference calls by 50 S&P 500 companies,” according to a WSJ analysis of transcripts. • But experts say there’s no proof that the net promoter score is a reliable metric. “The science behind NPS is bad,” Timothy Keiningham, a marketing professor at St. John’s University, told the WSJ. • Even the score’s inventor, Fred Reichheld, thinks companies shouldn’t use it to gauge business performance. “That’s completely bogus,” he told the WSJ.
Correct. The research suggests the score has zero basis or predictive value in how profitable/successful a company is.
Even the score’s inventor, Fred Reichheld, thinks companies shouldn’t use it to gauge business performance. “That’s completely bogus,” he told the WSJ.</I.
Exactly! The original intention was to help the company understand their customers and to help them improve their product or precisely determine who their market was. What demograph to target, because these are the people who love our product. Or, these people don’t like our product but we want to sell to them, let’s ask them how we can improve it.
NTNX’ style boasting of NPS every conference call means that they placed too much emphasis on getting a high number, rather than being informed and directed by their customers. So they probably gamed the surveys.
Net retention value, dollar-based retention, customer retention rate, customer life… or the other variations. This is the real-life NPS. Your product is so good that not only are you not losing any customers, each one is spending more every year because they just love what you do. They’re voting with their wallet - you can’t argue with that.
I never used NPS as it seemed kind of irrelevant when you can see real results in the financial statements but since it has become a topic for discussion, this is what Google dug up:
Exactly! The original intention was to help the company understand their customers and to help them improve their product or precisely determine who their market was. What demograph to target, because these are the people who love our product. Or, these people don’t like our product but we want to sell to them, let’s ask them how we can improve it.
Steve Jobs was of the opinion that users don’t know what they like until you give it to them. He did OK!
I’ve been in the CX Measurement space for the past decade+. I would consider NPS as a gauge in your car. It tells some of the story (like fuel, temperature, speed, RPM). It doesn’t tell the whole story.
As a tool to make an investment? Maybe as a consideration. Like you would use Yelp reviews, or your own personal experience with a product. Certainly not as important as anything on the balance sheet or income statement.
