News — For thousands of American businesses, including hundreds in the Fortune 1000, the Net Promoter Score (NPS) of customer loyalty is a magic number that some believe all but guarantees more customers and company growth if it’s high enough.
But a new study from University of Iowa researchers finds the number is not all that magical.
“There’s a belief that the NPS is the single metric you need to grow your business,” said Tom Gruca, professor of marketing in the Tippie College of Business. “The more customers you have who promote your business relative to the number who don’t recommend it, the more your business will grow.”
But while Gruca’s study found the NPS does have some value in helping businesses determine customer service strategies, it’s not the guarantee of future growth its advocates claim.
Nor is there anything special about it, as other metrics are just as useful.
The NPS is derived from a customer survey that most people have received in their emails at some time or another that asks you to say, on a scale of 1 to 10, how likely you are to recommend the business to others. Thousands of businesses use their NPS scores to develop customer service strategies, including better than two-thirds of the Fortune 1000. The NPS’ advocates say it’s the most important factor in determining future customer growth.
But Gruca and Tippie doctoral student Sang Hee Kim worked with a major multi-casino gaming company and analyzed data from thousands of consumer loyalty cards and survey responses. They found the NPS score is not useless, in that it does capture differences in individual consumer behavior that can help managers develop better customer service strategies.
However, he said that it was not helpful in predicting customer growth or whether it brought in new customers to the casinos, as is claimed.
He said the casino also asked its customers other questions to measure their satisfaction in addition to how likely they are to recommend the business to someone else. It turns out that those additional questions—“how satisfied are you with your experience” and “how likely are you to come back”—were just as good at predicting future consumer behavior.
Gruca’s and Kim’s study, “Net promoter score and future consumer behavior in the casino gaming industry,” was published in the International Journal of Market Research.
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