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Where Does NPS Work Best?

Posted by FredReichheld on May 30, 2006 4:05:13 PM

One of the questions I am asked most frequently is this: "In what kind of business does NPS have the greatest potential to improve results?" Perhaps because so many of the company examples that I use in my book and in speeches are consumer-oriented, some people wonder if NPS may be less relevant to business-to-business firms.  They may presume there is less potential in B2B because the complex decision-making process for a corporate purchase makes it difficult to gather good NPS data. (For more on this topic see Dr. Laura Brooks' blog Are Non-Respondents Truly Detractors?)

 

 

In fact, NPS is highly relevant to the business-to-business sector.  Many of the most enthusiastic adopters of NPS (GE, Thermo Electron, and SAP, for example) are using NPS in B2B applications--and are discovering that one of its greatest advantages is its ability to simplify complex relationships.  The clarity of one question cuts through the clutter of managing a relationship that may involve many different individuals. The adoption of NPS tools in the B2B sector has been so rapid that some observers are even concluding that the primary relevance of NPS is in the B2B space.

 

 

On the other hand, don't tell that to the CEO of one of the world's leading consumer packaged-goods manufacturers, who joined me for lunch last week. We had been discussing his conclusion that "NPS seems simple but it really represents disruptive technology." I had reminded him of the doubters who believe consumer packaged-goods firms already have plenty of customer feedback data, thus making NPS irrelevant. He pulled out a copy of a PowerPoint slide that his team had presented to him earlier in the week. He explained that his executive team (unaware that he had already discussed NPS with me and had read The Ultimate Question) had briefed him on the company's progress in China, utilizing what they described as "a cutting edge tool called net promoter scores to quantify the progress of their brand versus competitors."  In one slide, he said, they had used NPS to capture the competitive situation precisely--and by contacting promoters and detractors, they were able to determine priorities for improvements.

 

 

NPS is difficult to use in certain situations.  For example, in sectors where there are few alternatives (high speed internet in the town where I live) or in government services such as the IRS--or where a B2B customer might not want to recommend a key vendor for competitive reasons.  But in general, it appears that NPS applies equally well to consumer packaged goods, consumer services, and B2B.  Progressive leaders are even deploying NPS in education, healthcare, and non-profits. The real issue for determining the potential of NPS is not really the kind of business; it is the degree to which the leadership group is committed to holding themselves and their teams accountable for delivering good profits and true growth by ensuring their customers receive such a superior value and experience, they consistently come back for more and bring their friends and colleagues.



Jun 16, 2006 7:58 AM Guest Danny Touw  says:

 

In his blog Mr. Reichheld mentions a CPG company in China who are using the Net Promoter method for their Brand(s).  Would it be possible to discuss this in more detail?  Overall I like the approach of the Net Promoter and I'm very interested how CPG companies are applying this to a specific brand?

Thank you,

Danny Touw

 

Jun 19, 2006 4:20 PM Guest Net Promoter Community  says:

CPG firms are using NPS for managing their channel relationships, and for focusing innovation on their target customers. The Communispace tools are particularly effective in CPG.

 

 

Jul 6, 2006 12:57 PM Guest Tim  says:

So - do you find that for packaged goood, B2B, and B2B "commodity" type providers the NPS scores run lower than for customer-service/consumer focused businessess?

 

Curious if the ability of a "widget" to "factory" relationship could really hope to be as positive as that of Harley Davidson and it's riders...

 

Jul 12, 2006 11:00 AM Guest Clarke Ching  says:

Hi Fred,

 

Thanks for sharing your research.  Some of my colleagues are very happily using your work in our consulting practice, but I've only just discovered it today.  I've just finished reading your "One number" HBR article and I'm fascinated.  Based on my colleagues recommendations and the article, I'm about to buy the audio version of your book from audible.com (a company which, despite their hard to use website, I'm happy to recommend). 

 

I work in the (exciting) world of corporate IT.  Most IT departments are a monopoly supplier with many internal "customers".  It'd be great to have "one number" to measure the relationship between an IT department and its customers.  The IT department could use it to measure the relationships with customer and use it to focus on problem areas.  The customers could use the average score to compare their IT departments performance with industry averages. 

 

Do you think the question "How strongly do you agree that your IT department deserves your loyalty?" (from your HBR article) would be valid and useful in this situation?  Would it be too easy to "game"?

 

Could you discuss this in a seperate blog entry?

 

Clarke Ching

Edinburgh, Scotland