The Net-Promoter Score (NPS) is a loyalty metric developed* by Fred Reichheld, a Fellow of Bain & Co and a board member of Satmetrics. In Reichheld’s bestselling book The Ultimate Question, NPS is touted as the most important metric for business, an assertion that has been actively debated since its debut.

Why the Net-Promoter Score?

The Net-Promoter Score tracks how customers represent a company to their friends, associates, etc. Reichheld argues that this consumer representation is free marketing that greatly influences business growth. Supporters of the method cite Apple as the company with the greatest NPS, and draw correlations to its recent growth.

How do you Calculate the Net-Promoter Score?

Reichheld advocates asking customers, “How likely are you to recommend (our company) to a colleague or friend?” His recommendation is for a 0-10 scale where respondents are reclassified as:

• 0-6 = “Detractors”
• 7-8 = “Passives”
• 9-10 = “Promoters”

Reichheld calculates the Net-Promoter Score by subtracting the percentage of respondents that are labeled “Detractors” from the percentage of respondents that are labeled “Promoters” like this:

% of Promoters – % of Detractors = NPS

Success of the Net-Promoter Score

The Net-Promoter Score has received significant attention and use since its introduction in the 2003 Harvard Business Review article The One Number You Need to Grow by Reichheld. It has been used by recognizable businesses like GE, Phillips, Procter & Gamble, and American Express, as well as by small organizations.

Criticisms of the Net-Promoter Score

Net Promoter has been critiqued as a measure of little value because it misses the predictors of future sales or growth, such as the company’s product line, product innovations, accuracy of pricing, or operating efficiency. NPS is simply a surrogate measure for quality and satisfaction, and not brand recognition, equity or market power.

The Net Promoter score is an attitudinal measure of intention to recommend, rather than actual behavior. Because recommendations are made when discussing interesting products, and interest varies by industries and product categories, NPS does not report actual product “Buzz”. Some products are not interesting, discussed, or recommended (e.g., toilet paper, toothpaste, laundry detergent, copy paper, etc.), while other highly interesting products and brands can easily generate passionate fans (e.g., fashion, restaurants, music, etc.).

Next, NPS values are not numerically unique in meaning. For example, an NPS of 20 can be derived in many different ways. A company with a 20 NPS could have 20 percent promoters, 80 percent passives, and 0 percent detractors, while another company with a 20 NPS could have 60, 0, and 40. A company with 20 percent promoters and 0 percent detractors is very different than the one with a polarized customer base with 60 percent promoters versus 40 percent detractors, but the NPS is the same.

Finally, NPS is not actionable. What if you had a good or bad NPS? A bad NPS could reflect poor product performance, overstated advertising promises, poor customer service or many other issues, none of which are identified by the NPS.

Good metrics should offer attribute and benefit specific information sufficient to direct a product or brand. It should be based on consumer actions and be actionable. At a minimum, “Considering all competing brands, how likely are you to purchase Brand X on a continuing basis?” should be evaluated along with an understanding of “What is it that makes you so likely to purchase Brand X?” and “What can we do to improve Brand X?”

Recommended Uses of the Net-Promoter Score

Many businesses have implemented the Net-Promoter Score as a solution to improve their customer relationships. What businesses often overlook, however, is that this feedback is only useful if a company can act on it.

That’s why the Qualtrics Research Suite enables users to act on the feedback they collect. Qualtrics allows users to:

• Ask users if they can be contacted in the future
• Automatically sort these users into lists (panels) of “detractors”, “passives” and “promoters”
• Repeatedly survey these groups, each with surveys tailored to their group
• Determine why respondents feel the way they do
• Track changes over time
• Correct problems and capitalize on successes
• Build meaningful relationships with customers in all 3 groups and improve perceptions

The Qualtrics Research Suite is the best tool to track and improve your NPS, revolutionize your customer relationships and grow your business.

* Net Promoter Score is a registered trademark of Fred Reichheld, Satmetrix, and Bain & Co.

Put simply, conjoint analysis is a method explaining how much people value certain attributes and features of a new product or service.

Conjoint Solves Product Problems

• What can I do if I am designing a new product and want to know what configuration will be met with the most success in a desired market?
• Is there a marketing technique capable of helping me understand the affect that a change in price will have on my company’s sales?
• If I am putting together a benefits package for my employees, is there a way to find out the trade-offs they are willing to make?

The answer to all these questions is conjoint analysis, a marketing strategy used to discern the value people attribute to different features that compose an individual product or service. It is the perfect approach to establishing the most appealing assemblage of features for a new product or to gauge how customers prefer the make-up of a service. This type of analysis is all the rage in the marketing world as it allows for actual interpretation of customer’s feelings with the backing of sound statistical theory.

Conjoint is a Type of AnalysisConjoint analysis is a sophisticated analytical technique used to determine the joint influence that feature and level combinations of a product or service have on the purchase decisions. For example, a company could identify the most profitable combinations of pricing, quality, and quantity for a certain product or service. A properly designed conjoint analysis study allows any combination of features and levels to be profiled in order to estimate market or choice share. The goal is to reveal the underlying value that respondents would consciously or subconsciously place on profiles that represent full product configurations.

Qualtrics Powers Conjoint Analysis

Conjoint Software
The Qualtrics survey software is equipped with a conjoint creation wizard. Using the self-explicated conjoint model, the wizard can set up a conjoint survey easily and quickly.

Conjoint Project Contracting
Led by Ph.D. researchers, the Qualtrics specialists have the expertise to ensure relevant, intelligible, and actionable conjoint results. The Qualtrics specialists can be contracted to consult for or perform conjoint studies.

Be sure to contact us at research@qualtrics.com or 800-340-9194 if you have any questions about conjoint analysis or for a free consultation.

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