For companies looking to calculate their brand's overall loyalty score, most turn to Net Promoter Score (NPS), as this metric has become standard over the past decade. NPS enables businesses to measure their biggest promoters or fans as compared to their greatest detractors by asking one simple question: On a zero-to-10 scale, how likely would you be to recommend this company? However, as ForeSee highlights in its latest research, one question may not be enough to accurately gauge where marketing should invest its budget.
According to "The Word of Mouth Index: Top 100 Brand Edition" report, ForeSee's Word of Mouth Index (WoMI) benchmark study that explores the customer loyalty scores for the top 100 U.S. Brands, NPS typically overestimates detractor behavior. In many instances, those who qualify as detractors under NPS-those who rate their likelihood to recommend between one and six-are actually neutral toward the brand itself. Many, in fact, are even advocates for the company, but simply do not rank themselves as fervent recommenders. In lieu of this discovery, ForeSee suggests asking one more question to assess both ends of the customer spectrum: How likely are you to discourage others from doing business with this company?
Traditionally, NPS only subtracts detractors (scores 1-6) from promoters (9s and 10s). However, using the WoMI, brands calculate their loyalty score by subtracting those who would discourage others from doing business with the company (9s and 10s) from those who would recommend the brand (9s and 10s). To calculate the NPS overstatement of detractors, researchers subtracted discouragers from promoters then divided by those who qualified as top detractors. The following statistics highlight some significant discrepancies between NPS and WoMI scores:
- On average, NPS overstates detractors by 299 percent among the top 100 brands.
- Financial services companies saw one of the largest discrepancies in NPS calculations, as Visa's scores overstated detractors by 1,450 percent and Goldman Sachs' scores overstated detractors by 53 percent, resulting in an average overstatement of 527 percent throughout the industry.
- The consumer packaged goods industry saw an average NPS overstatement of 399 percent, with Heinz (1,700 percent) and Danone (-8 percent) representing the two extremes.
- Computers and electronics also saw a high overstatement average of 264 percent, ranging from Samsung (1,050 percent) to IBM (64 percent).
- Retail's average overstatement came in at 222 percent, with H&M (533 percent) and Burberry (-8 percent bookending the extremes within the industry.
- For Apple, NPS overstates detractors by 57 percent at the store level-225 percent at the brand level-meaning the company is likely to invest money in contacting 11 percent of its supposed detractors, while only 7 percent are true detractors according to the WoMI. Ultimately, this results in the potential loss of millions of dollars spent on reconnecting with those who were never a threat to the bottom line in the first place.
Key takeaway: When looking at loyalty, companies must recognize that there's no such thing as black and white. While there're certainly those customers who strongly advocate or discourage particular brands, there're many indifferent consumers who don't quite fit one extreme or the other. They may have had a wonderful brand experience, but not all are eager to share every little detail of their day-to-day lives (no matter how social media may make us think otherwise). Companies must look to both those who strongly support the brand and those who adamantly discourage others, and then use this data to assess their overall performance. If the results are not up to par with the brand's standards or goals, these statistics will help guide further research to assess what they're doing right, what they're doing wrong, and how they can go about improving the customer experience in the future. Scoring systems act as a learning tool, and brands must simply use the information generated to fuel their understanding of the customer experience to help boost overall satisfaction.