What Drives Net Promoter Scores (NPS) in IT?
July 17, 2012 5 Comments
A previous post examined Net Promoter Scores (NPS) for tech vendors and the relationship between NPS and market share based on feedback from IT decision makers within large firms. Since I’ve had questions about that post, I decided to examine a common question: What’s driving those NPS scores? It turns out that the answer (no surprise) is customer experience.
We examined a number of metrics and their relationship with NPS in two areas:
- Correlation (R). This looks at how connected one metric is to another, ranging from -1.0 to 1.0. A correlation above 0.5 is strongly positive and above 0.7 is very strongly positive.
- Slope. This looks at the change in NPS that relates to a one-point change in the metric. A higher slope means a change in the metric has a higher change in NPS.
Our first analysis examined NPS scores versus the Temkin Experience Ratings for Tech Vendors. It turns out that there was a very strong correlation (R= 0.77) and the slope is 1.13.
We then examined the correlation and slope between NPS and components of the Temkin Experience Ratings as well as with product and relationship satisfaction scores.
Here are some observations from the analysis:
- Customer experience is critical. Temkin Experience Ratings has the highest impact on NPS, with the highest overall correlation and slope.
- You have to be easy to do business with. The highest individual correlation (.75) and slope (1.11) is with the accessible element of the Temkin Experience Ratings, which looks at how easy the company is to work with.
- Relationship trumps product. It turns out that the correlations are about the same for relationship satisfaction and product satisfaction, but the slope is much higher for relationship satisfaction.
- Cost of ownership stands out. When it comes to the slopes, cost of ownership (.99) stands out amongst the satisfaction items. Support of account team (.86) is also relatively high.
The bottom line: To improve NPS, improve customer experience.
You can purchase this data for $295. The Excel spreadsheet contains NPS, Temkin Experience Ratings, relationship satisfaction, and product satisfaction data for 60 tech vendors in the analysis as well as for 28 others with sample sizes of less than 60 respondents.
About Bruce Temkin
So NPS is highly correlate to other customer reported metrics – BUT did you find ANY evidence that it drives profits or even revenue?
Debra: Very insightful question. This particular research was based on a customer study (IT professionals) and did not examine “actual” revenues and profits, just customer behaviors, attitudes, and purchase plans. In the post “Net Promoter Score and Market Share For 60 Tech Vendors“, we examine the connection between NPS and purchase plans. If you’re asking the “bigger question” about whether or not NPS, in general, drives business results then I urge you to read one of my earlier posts about NPS: My Closing Thoughts On Net Promoter
Debra,
Yours is “the question” isn’t it?
There have been some studies that show that engaged employees improve profitability. It doesn’t seem a huge leap to say that the sequence goes something like this:
1. The right employees,
2. In the right roles/jobs leads to
3. Engaged employees who
4. Serve customers with passion so that customers
5. Buy more and tell their colleagues to do the same which leads to
6. Improved profitability (lower cost of customer acquisition).
Some other links here: Employee Engagement and Profit – Which Comes First? |http://bit.ly/aykG8L
Andy: Thanks for joining the conversation and I totally agree with your comments. Check out the Temkin Group Employee Engagement Benchmark Study that shows the link between Employee Engagement and productivity as well as customer experience. The study is based on our Employee Engagement Virtuous Cycle.
Not everybody gets NPS…
I did this Blog post a while back.
http://douglasstvnsn.blogspot.com/2010/03/nps-enterprise-management-and-situation.html