The rise in companies bragging about their Net Promoter Score (NPS) is being called into question by industry observers. A Wall Street Journal article found that NPS was cited over 150 times in earnings conference calls by S&P 500 companies in 2018, with no company reporting a decline in their score. The self-reporting of scores has helped to popularize the metric, but has also led to confusion and diminished credibility. The question of how “likely” someone is to refer doesn’t make sense, as referrals are binary and not based on likelihood.
Despite the inconsistencies in how NPS scores are captured, companies continue to boast about their scores. Some firms, such as a struggling bank tech firm, have touted market-leading NPS scores without providing any context or proof of their claims. Others, like Talroo and Vymo, have gone through statistical gyrations to show that their NPS scores are higher than industry benchmarks, but fail to provide any evidence to support these claims. The validity of these comparisons and the representativeness of the respondent sample are also called into question.
The question of who the NPS braggarts are trying to influence is raised, as it is unlikely that equity analysts or decision makers in companies are swayed by these pronouncements. Real references and actual customer experiences are considered more important than the intention to refer. The use of NPS as a metric is criticized as being misleading and based on self-reported data that may not accurately reflect customer sentiment. The overemphasis on NPS scores is seen as a distraction from more meaningful business metrics.
Critics of the NPS metric argue that it is fundamentally flawed and does not provide valuable insights into customer satisfaction or loyalty. The question of how likely someone is to refer a company does not take into account the complexities of human behavior and decision-making. The way in which NPS scores are calculated and reported varies greatly among companies, making cross-company comparisons difficult and potentially misleading. The focus on NPS scores as a measure of success may be leading companies to prioritize the wrong metrics and detracting from more meaningful indicators of customer satisfaction and loyalty.
Overall, the rise in companies bragging about their NPS scores is seen as a concerning trend that may be misleading investors and decision makers. The self-reported nature of NPS scores, as well as the lack of consistency and transparency in reporting, raises questions about their accuracy and validity. Industry observers caution against putting too much stock in NPS scores as a measure of success, and advise companies to focus on more meaningful and reliable indicators of customer satisfaction and loyalty.
