KEN ROBERTS, KAREN HANSEN PH.D., FORETHOUGHT
Business leaders frequently seek the advice of Forethought about the statistical efficacy of NPS as a measure of business growth. Executives are not asking if customer-centricity is a reasonable pursuit; they are asking if the likelihood to recommend is the right, non-financial leading indicator for the organisation’s prosperity.
Having conducted a longitudinal study of over 30 data sets spanning six categories, our analysis revealed that there is an expansive disconnect between setting out to improve NPS and hoping that a tangible business outcome follows suit. Astute executives should demand to see the in-market evidence of the relationship between NPS and in-market performance (e.g. sales). Executives who make such a demand, will only receive correlations with NPS and in-survey attitudinal questions which do not translate to in-market behaviour.
Forethought advises many global CEOs including those who led transformations in the aviation, banking, retail and supermarket industries – each of these leaders challenged NPS as ‘the one score to rule them all’. In its place has been executive knowledge of the drivers of acquisition and churn, a focus on authentic leadership, brutal singularity, and enduring tenacity.
JUST THE FACTS: BRINGING SCIENCE TO THE QUESTION OF ACQUISITION
The Forethought Marketing Science team collated consumer market research data from 2012 to 2019, examining 30 data sets across six categories these include (aviation, banking, superannuation funds, FMCG (cereal), quick service restaurants, and supermarkets). In each instance, corresponding independent, third-party market share and/or sales data was available. What we found was striking, but not surprising.
NPS showed a weak relationship with current and future market share.
The average correlation with current market share across all categories was .38. This was even weaker where NPS was used as a lead indicator of future changes in market share, three-month lagged correlations averaged .22
The best indicator of in-market performance and change in market share was, by far, Brand Health.
That is, the weighted performance of a brand on the rational and emotional drivers of brand choice. For Forethought clients, Brand Health is achieved by applying our Prophecy Thoughts & Feelings® methodology. Brand Health achieved a .79 average correlation with current market share, while as a lead indicator of share changes, the average correlation was .76.
SIMPLICITY IS NOT A SUBSTITUTE FOR SCIENCE
The strong linkage between Brand Health and acquisition demonstrates that the brand performance variables that drive NPS are not the same brand performance variables that actually result in the acquisition of new customers.
Furthermore, NPS as a dependent variable will result in identifying spurious drivers and wasting scarce resources in improving the wrong thing. Using NPS as a leading or even coincidental non-financial indicator for the organisation’s relative prosperity will leave management confounded by the lack of relationship with validated market performance data.
OUR RECOMMENDATIONS TO THE EXECUTIVE
Our recommendations to C-suite Executives, customer experience, marketing and brand leaders is therefore:
Ensure your organisation’s key brand metric is meaningfully valid. Brand Health should be the integral performance metric in your organisation’s acquisition and CeX programs. Our evidence proves it is a superior indicator of in-market performance and change in market share.
Understand the hierarchy of drivers of Brand Health to enable the prioritisation of investment into the most important factors that impact customer experience but more meaningfully, acquisition and retention.
Measure the efforts and evaluating initiatives to improve performance on the key acquisition and retention drivers over time.
How likely would we be to recommend NPS? Certainly, Forethought is a detractor. Instead, Forethought is a promoter of Brand Health. Objectively, NPS has never been the one number organisations need to help them measure growth.
So, what do you think? … Forethought welcomes the conversation.
Ken Roberts, Founder & Group CEO, Forethought
Karen Hansen Ph.D., GM Marketing Science, Forethought
We thank our colleague Paul Scutti, Forethought who provided insight and analytical expertise that greatly assisted the research.