ForeSee Modernizes Customer Loyalty Yardstick
ANN ARBOR -- The customer satisfaction analytics firm ForeSee Monday announced the Word of Mouth Index, intended as a successor to the Net Promoter Score as the de facto standard for measuring customer loyalty.
ForeSee officials say the Net Promoter Score misses the boat when it comes to measuring brand detractors, overstating them by an average of 270 percent.
While NPS was an innovative method for measuring word-of-mouth for its time, a lot has changed since then – especially the rise of social media, which has amplified the voices of consumers sharing their brand experiences.
ForeSee says the new WoMI accurately captures the voices of brand detractors as well as passive and active promoters to give organizations a complete picture of what customers are saying.
ForeSee says the NPS falls short by only measuring "likelihood to recommend"-- inaccurately assuming that if someone is not recommending, they are detracting. WoMI evolves NPS by measuring both likelihood to recommend and likelihood to detract from a specific brand. WoMI delivers on the promise of NPS by creating a more precise, accurate and actionable measurement. This allows organizations to take action to foster more positive word-of-mouth and decrease negative word-of-mouth by increasing customer satisfaction and improving the overall customer experience.
ForeSee spent 18 months testing the WoMI methodology with nearly 300 companies, including more than 50 clients across multiple industries, the top 100 worldwide brands, the top 100 retailers and the top 10 financial services companies. ForeSee's extensive research found that NPS overstates detractors by 270 percent on average because it doesn't distinguish between positive and negative word-of-mouth. This overstatement can be a costly and misleading mistake for businesses that are either spending resources pursuing detractors in an attempt to convert them to promoters or compensating their executives based on what can now be seen as a flawed measure.
"More than a decade ago, NPS was introduced as a metric that has been used to focus organizations around the customer and help executives track customer loyalty with a single number. Yet, it doesn't accurately represent negative word-of-mouth, and it's not an actionable metric or a predictor of growth," said Larry Freed, CEO of ForeSee. "As customer metrics evolved along with social media and methods for spreading word-of-mouth, NPS hasn't kept pace with today's ecosystem that includes customer megaphones such as Facebook, Twitter and Yelp. WoMI is the evolution of NPS, offering a more precise analytic measure to address the sophistication of customers and provide today's businesses with an accurate number that works within a system of metrics to improve bottom-line results."
In addition, ForeSee's research found that NPS is not an accurate measure because it does not distinguish between passive and active word-of-mouth. Demonstrating satisfaction with a brand and actively promoting it are two different things. There are brands that customers love and will recommend to a friend, but there are certain products and services that do not inspire enthusiastic and proactive word-of-mouth recommendations, and people with certain personality types who never recommend anything.
"One of my many frustrations with the Net Promoter Score is the assumption that people who aren't likely to recommend must be actively detracting from the brand," said Kevin Ertell, vice president, e-Commerce at Sur La Table. "I like that WoMI actually asks customers if they're detracting, so we can get an accurate read on promoters vs. detractors. For us this metric is still only one part of a more comprehensive voice of customer measurement system that truly helps us understand our customers' wants and needs."
"In the past, we used to track and promote our NPS scores pretty heavily internally and loved the simplicity of a single metric to demonstrate whether our dealer customers were likely to be promoters or detractors of Cars.com," said Josh Chapman, vice president of operations at Cars.com. "Since implementing the Word of Mouth Index, it's helped us gain a more accurate picture of our Net Promoter Score – which was overstating detractors by more than 120% on average – for the customer service experience we provide our dealers. Measuring WoMI as part of a comprehensive system of customer experience analytics is giving us much better insight into the difference between positive and negative word-of-mouth and how both are ultimately influenced by satisfaction."
WoMI builds on what companies are already doing with NPS to measure word-of-mouth recommendations, but is designed to address today's more complex word-of-mouth measurement challenges. It offers more sophisticated analytics to understand what consumers want, and to allocate resources, using a simple, yet thorough metric – still reporting a single number to business leaders – enabling executives to manage the customer experience across the organization as part of a comprehensive measurement system.
ForeSee's technology and methodology provide a system of metrics that continuously measure the customer experience and deliver powerful insights to help organizations prioritize improvements for maximum impact on customer satisfaction, including word-of-mouth. For organizations who aim to prioritize improvements and better understand the impact of customer behavior, ForeSee's predictive analytics provide a model that measures the customer experience across Web, store, contact center, social media and mobile channels – identifying which elements have the greatest impact on overall customer satisfaction. The ForeSee methodology quantifies the impact of improving the customer experience on critical outcomes like loyalty, word-of-mouth, sales and more, to ultimately improve financial performance.
