ANN ARBOR (WWJ) — In today’s business environment, accurately measuring both positive and negative word of mouth is a crucial element in gauging customer loyalty and recommendations. But according to Larry Freed, author of the new book Innovating Analytics, “The most popular tool for obtaining this measurement, the Net Promoter Score, has outlived its usefulness as a metric.”
In Innovating Analytics, Freed — president and CEO of ForeSee, the Ann Arbor-based customer experience analytics firm — introduces a new alternative, the Word of Mouth Index, which builds on the decade-old NPS to create a modern metric that business leaders can use improve business results.
Extensive research by ForeSee, with more than two million customers from hundreds of companies across industries over the past two years, found that NPS was in need of an overhaul. Freed explains why NPS is often inaccurate and shows how to implement WoMI to obtain results that truly measure both positive and negative word of mouth.
With NPS, customers answer a single question: “On a zero-to-10 scale, how likely would you be to recommend this company?” Responses are categorized as follows: brand promoters (9-10), passive customers (7-8) and brand detractors (6 or lower). ForeSee’s data shows that this method of classifying detractors is often inaccurate and often vastly overstates detractor behavior. Many people that NPS would label detractors are actually neutral toward or even advocates for a brand, so allocating budget to win them over represents wasted spending. Also, many companies base executive bonuses on NPS milestones, which are proven to be off by as much as 270 percent.
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