In their November 2021 Harvard Business Review article, “Net Promoter 3.0”, Reichheld, Darnell and Burns acknowledge several Net Promoter Score (NPS) weaknesses and misuses, many of which I have noted in books and articles in the last decade. [1] 

For instance, they note it is totally inappropriate to use NPS to evaluate individual service staff because of the risk of “pleading… bribery… and manipulation”.

To help, they introduce the “earned growth (EG) metric.”  Briefly, EG requires estimating the sum of revenue retained from existing customers and new revenue from new customers using internal accounting data.  Reichheld attempts to measure customers from positive word of mouth (WOM) by new customers, not by the events that led to the WOM. 

While this approach will provide insights into aggregate impact, it leaves businesses in the dark about the specific CX that may have led to new customers. 

As such, the EG metric does not really address some of the most severe barriers to practical application of NPS scores.

There are three critical intermediate steps that CCMC has found important to getting both buy-in AND action:

1. Granular issue identification with rigorous analysis of strategic solutions.
   After significant study, I continue to believe that businesses understand the potential value and impact of CX actions.  Their inaction on data results from an inability to justify investment of X dollars in a specific CX action vs. in advertising, or a new distribution center, or something else altogether. 
   
   Decision-making is facilitated when the leadership team is presented with investment opportunities in something specific where payoff can be demonstrated, such as in a new customer onboarding process or modifying the invoice adjustment process.  In each case, you can estimate the number of customers currently having a bad experience due to the issue.
   
   Further, you can work with Quality or Lean Process professionals to define several possible approaches to fixing the issue and how to pilot test alternative solutions it in a rigorous manner. 
   
   Analysis tied to the granular issue level, not the overall CX level, presents action opportunities and can prompt action.  NPS 3.0 does not add to granular analysis at all. 
   
   Finally, you can measure whether the needle moved if the number of problems decline after your fix.  Problems are often identifiable from internal operations data, e.g., delayed shipments, or invoice adjustments as well as complaints. 
   
2. Business case by granular issue
   NPS 3.0 does mention using the lifetime value of the customer, (CLV), but then uses it to calculate the overall increase in revenue from all CX activities. 
   
   Investment is usually made by defining critical projects and adding to a total investment, rather than in a blanket fashion.  A cost – benefit calculation at the project level is almost universally required before an overall strategy is allocated millions of dollars.
   
   CCMC’s Market Damage and Market-At-Risk Models have provided that specificity for three decades.[2]  Our calculation estimates the number of customers, and it allows the CFO to attribute as much revenue per customer as is comfortable.  For each type of problem, you can then estimate the revenue damage by seeing how many problem occurrences take place.
3. Word-of-mouth and margin impact by granular issue
   
   The key to winning new customers is word-of-mouth (WOM) referrals.  Successful B2C companies like Harley Davidson, Chick-fil-A and USAA get more than seventy percent of their new customers from WOM.  Our surveys of B2B put the percentage as high as ninety percent, especially for small and medium businesses. 
   
   Resolution of specific issues as well as different kinds of delighters create different magnitudes of WOM.  This impact can be quantified by issue.  Likewise, a customer’s willingness to pay more for a product or service is affected by problem and delight experiences – again this varies by CX issue.[3]

In summary, while a broad estimate of the overall revenue retained from existing customers and added from new customers in aggregate is somewhat helpful – it will fail to help answer the critical question of the gain from addressing specific problems, which is where most decisions are made. 

NPS 3.0 still does not assist with this question, making the case for specific CX investments more difficult and returns on CX investments impossible.

I welcome your comments and complaints! 😊

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[1] John Goodman, “How the Net Promoter Score is like Global Warming”

[2] See model details in Goodman, Strategic Customer Service, Harper Collins, 2019 as well as Customer Experience 3.0, Harper Collins, 2015

[3] Learn more about CCMC’s recent findings in its new Delight Study here.