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MOUTH INDEX:
TOP 100 BRAND
EDITION
SUMMER 2013
By:
Larry Freed, President and CEO, ForeSee
2013 ForeSee
EXECUTIVE SUMMARY
Measuring customer word-of-mouth recommendations functions as a critical part of understanding business
success, and Net Promoter Score (NPS) has served a valuable purpose in doing so throughout the years. When
NPS first became popular a decade ago, it launched a vital new area of business measurement at precisely the
right time. Consumers had gained unprecedented power when it came to making purchasing decisions and
influencing other customers.
NPS quickly became the most popular and widely adopted customer experience metric for U.S. businesses.
Research from the Temkin Group in 2012 shows that 83% of companies asked their customers the Net
Promoter question (On a zero-to-10 scale, how likely is it that you would recommend us (or this product/
service/brand) to a friend or colleague?) and that from 2011 to 2012, NPS was the fastest growing customer
experience metric. Forrester Research calls Net Promoter wildly popular, and a 2011 article in Inc. Magazine
declared that Fortune 500 companies around the globe latch[ed] on to [NPS]. Today, companies such as
Intuit and Southwest Airlines use the NPS methodology as a way to quantify their customer experience.
Is the widely used metric popular just because it is well known? Is it popular because of its ease of use, or is
it popular because there are few alternatives? Many organizations are asking: Does the one-question metric
hold value 10 years after its inception?
ForeSee explored the value and accuracy of NPS with research spanning almost two years. ForeSee looked at
more than 1.5 million survey responses for the broadest and deepest NPS research to date.
Using a relatively simple calculation, ForeSee discovered serious issues with NPS. Primarily, NPS measures
only the likelihood to recommend because it inaccurately assumes that if people are not recommending a
brand, they are detracting from it. Companies spend millions of dollars chasing after supposed detractors,
who are, in some cases, neutral toward a brand or, in many cases, active advocates of the brand.
ForeSee is not affiliated with Net Promoter or Satmetrix Systems (and/or Fred Reichheld or Bain & Company) or any of its subsidiaries or affiliates. Furthermore
ForeSee is not associated with, licensed by, endorsed by, or funded by Satmetrix Systems (and/or Fred Reichheld or Bain & Company), and no effort has been
made to falsely suggest a connection with any of those entities or the products/services offered by Satmetrix Systems (and/or Fred Reichheld or Bain & Company).
The study being released today shows that NPS overstates brand detractors by 299% on average (see
part 2 on page 11). This assumption of detractors causes the majority of the Fortune 500 companiesas
well as smaller businesses, many of whom use NPS as a key performance indicator (KPI )to make bad
business decisions. They invest significant resources and engage in chasing after customers whom they
erroneously assume are detractors.
ForeSees research made it clear that NPS needed to evolve, just as word-of-mouth communications have
evolved over the past decade. Thus, we conceived the Word-of-Mouth IndexSM (WoMISM) as the next
generation of Net Promoter. ForeSees WoMI evolves NPS by measuring both likelihood to recommend and
likelihood to detract from a specific brand by adding a second question: How likely are you to discourage
others from doing business with this company? This additional question helps to deliver on the promise of
NPS by creating a more precise, accurate, and actionable measurement that evaluates satisfaction and allows
organizations to foster the type of changes that affect the customer experience.
WoMI significantly advances the measurement of the customer experience because its scores offer
four primary benefits for businesses operating in todays high-speed, word-of-mouth-driven culture.
WoMI provides:
1. A single score Any measurement with one simple value can be used to rally stakeholders
(executives, employees, Wall Street, board members, etc.) around the customer experience and
across an organization;
2. Valuable insight Understanding the difference between true detractors and true promoters helps
organizations avoid wasting resources trying to convert passives into promoters and eliminates the
risk of alienating customers who arent legitimate detractors; and
3. Proactive data Adding a second question to understand what drives negative word of mouth as
well as positive word of mouth allows companies to take proactive measures to fix issues causing
problems for customers by gaining greater insight into what drives sentiment.
4. Improvement to NPS For the legions of companies already relying on NPS, WoMI services as a
simple upgrade that will provide more accuracy, precision, and actionability.
Part 1 (Page 4) of the following report evaluates the strengths and weaknesses of NPS, the origins of the
WoMI, and the scientific evidence driving WoMIs rapidly growing popularity as the next-generation NPS. It
also highlights examples of how NPSs overstatement of detractors can send companies chasing detractors
that dont exist , as well as the value of adding WoMI to the customer-experience strategy.
Part 2 (Page 11), a historic and comprehensive benchmark, shows the pitfalls of Net Promoter and allows the
hundreds of companies already using WoMI to compare their scores against those of their peers and competitors. This section includes satisfaction scores, NPS scores, and WoMI scores, as well as a calculation of how
much NPS overestimates detractors for the top 100 US brands.
PART 1:
THE ORIGINS OF NPS AND THE EVOLUTION OF THE
WORD-OF-MOUTH INDEX (WOMI)
After Fred Reichheld of Bain & Company developed NPS, he introduced it to the world in a 2003 Harvard
Business Review article titled, One Number You Need to Grow. He designed NPS to serve as a simple way
to categorize customers based on a single question:On a zero-to-10 scale, how likely is it that you would
recommend us (or this product/service/brand) to a friend or colleague?
Neutral
Detractors
% Promoters
Extremely Likely
Promoters
% Detractors
Today, organizations such as American Express, Charles Schwab, and General Electric rely on NPS as a
strategic KPI. They use it to measure the pulse of customer satisfaction, and it acts as the catalyst for a
wide variety of business activities and investments. For example, following Reichhelds recommendations,
companies invest significant sums of money into turning passives into promoters, and identifying and
mitigating detractor problems. These initiatives range from low-risk and simple price promotions and
proactive interactions to expensive undertakings like website overhauls, customer service process redesigns,
and major branding campaigns.
NPS, as this study will show, faces a problem in that it may never have been a true and accurate
measure of the customer experience; in other words, many NPS-driven business decisions have been based
on a false rationale.
Because consumers hold so much power, customer experience represents a critical business performance
metric. Research data proves that customer satisfaction rates predict future business performance, and
organizations today must boast strong customer satisfaction simply to survive. Many companies have
adopted NPS because they believe it accurately assigns a value to the state of customer satisfaction.
The logic is simple: Raise your NPS and youve raised customer satisfaction, which will lead to stronger
business performance. These reasons caused NPS to become a common KPI on executive dashboards.
Yet NPS does not distinguish between positive and negative word of mouth, nor between passive and
active word of mouth. In the real world, people labeled detractors by the NPS methodology do not
always discourage someone from doing business with a company. NPS misses this nuance, resulting in an
overstatement of the effect of detractors. As a result, business leaders cannot make sound, intelligent,
and well-informed decisions when their keyand in some cases, onlymetric is inaccurate by such a
large margin.
WoMI
SM
True
Promoters
True
Detractors
Recommend %
of 9s and 10s
Discourage %
of 9s and 10s
NPS
Promoters
Detractors
Recommend %
of 9s and 10s
Recommend %
of 1s - 6s
In other words, by asking questions that are focused on both the positive and negative word-of-mouth
reviews, WoMI more accurately represents the difference between the proportions of consumers who report
being highly likely to promote and those who are highly likely to detract via word of mouth.
In the process of conducting these studies, ForeSee used its likelihood to discourage data to evaluate
the NPS scores of the companies participating in its analysis and found that NPS overstates the effect of
detractors, often by a significant amount.
What the Data Shows: NPS vs. WoMI Business Cases
In practical terms, suppose a company possesses 30% detractors as defined by NPS (the percentage of 1-6
ratings to the recommend question) and 10% detractors as defined by WoMI (the percentage of 9-10 ratings
to the discourage question). That companys NPS score overstates the number of detractors by 200%.
Many executives use NPS as a KPI for evaluating investments and other business decisions. If an executive
believes 30% of his or her customer base is made up of active detractors, but really only 10% of customers
are active detractors, then the executive may very well invest significant resources into trying to convert
detractors who simply do not exist.
Consider Apple, one of the top 100 brands ForeSee studied in its WoMI research, as an example.
Apple has publically stated that it uses NPS to address customer feedback taken from surveys. According to a
June 2013 article in the Business Standard, negative responses are followed up by store managers.
However, ForeSee research shows that NPS overstates detractors for Apple specifically at the store level by
57% (detractors are overstated at the brand level by 225%, see page 13). For Apple stores, this means that
instead of contacting the 7% of individuals who are actually likely to discourage others from doing business
with Apple, (i.e. True Detractors), they will contact 11% of their NPS-defined detractor store customers. By
using an inaccurate metric, Apple chases customers who are not true brand detractors. Thus, it squanders
employee productivity and resources.
In the Apple example, a store manager making $60,000 a year who spends one hour a day following up on
detractors (at $29/hr) costs Apple $7,500 annually. With more than 400 stores worldwide, this adds up
to $3 million per year, $2.1 million of which is lost productivity because it is being spent following up
with detractors that are not true detractors.and this is just one initiative based on NPS. Moreover,
contacting potentially loyal customers and asking them why they are not satisfied can lead to alienation of
those customers.
Apple should try to figure out why these customers are labeled detractors. Do they possess common
attributes, common personas, or common customer experience issues? It is difficult, if not impossible, to
determine why these customers are detractors if such a large percentage have been misidentified and
overstated. That margin of error introduces a sizeable amount of noise into the analysis and makes proactive
customer experience improvement efforts almost impossible.
Looking at ForeSees research (see page 15), another example, Nike, may think it is a good idea to take the
Reichheld-recommended leave-no-detractor-unanswered approach when its NPS-defined detractors are
measured at 17%. Consequently, Nike may invest in the personnel and technology required to identify and
respond to those who are creating negative word of mouth about the brand in an attempt to convert them
to promoters. This could take the form of anything from a website overhaul to reallocating resources to hire
more in-store personnel to assist customers. However, Nike would likely choose not to invest so heavily in
these activities (so as not to alienate loyal customers) if they knew that true detractors only represented 3%
of their customersa much smaller percentage than what NPS indicated. In this case, Nike overstates
detractors by 467%. This relatively simple example showcases how NPS can drive misguided investments
and cause a top brand like Nike to invest resources unnecessarily.
Hyundai, a leading automotive brand, is overstating detractors by 217% if they are relying on Net Promoter,
according to ForeSees data (see page 12). NPS says that 19% of Hyundais customers are detractors, but
according to WoMI scores, true detractors are measured at only 6%. In considering the value WoMI scores
bring to an organization, using a more precise metric of consumer evaluation could prevent Hyundai from
devising a strategy based on assumed detractors. For a company like Hyundai, this could mean undertaking a
new branding initiative to try to appeal to a different type of audience, or adjusting its pricing structure.
By adding the second question to better understand what drives negative word of mouth, Hyundai could
better position itself to focus on customer experience improvement efforts to enhance positive word of
mouthrather than spending resources trying to minimize negative word of mouth. In this case, true
negative word of mouth is not as dramatic as it appears.
Companies using NPS would benefit from incorporating the WoMI approach into their surveys. The research
results show that asking How likely are you to promote? alone does not accurately identify detractors.
Adding the question of How likely are you to discourage? provides accurate identification.
WoMI incorporates both of these questions to deliver a far more accurate word-of-mouth index that evolves
NPS to something that is more relevant to modern business conditions. However, even if a company wishes to
continue using NPS, it can improve on NPS simply by adding WoMIs second question. Business decisions are
made every day based on NPS detractor data that is off by an average of 200% but often more than 1000%.
10
11
PART 2:
THE RESEARCH AND FINDINGS
SATISFACTION, WOMI, NET PROMOTER, AND OVERSTATEMENT
OF DETRACTORS FOR TOP COMPANIES
In April of 2013, ForeSee measured satisfaction, WoMI, and NPS scores for Interbrands 2012 list of the
top 100 brands (the actual list below reflects 89 companies, as we were not able to collect a sample size
sufficient to calculate statistically significant scores for the remaining 11 brands). More than 21,000 consumer
surveys were collected for this study via panel.
This study contains tables with satisfaction, WoMI scores, and NPS scores, along with overstatement of
detractors for the 100 U.S. brands.
The research is illuminating. On average, NPS overstates detractors for the biggest brands by 299%.
NPS
Overstatement
of Detractors
Recommend %
of 1s6s
Discourage %
of 9s and 10s
Discourage %
of 9s and 10s
12
Industry
Top 100 Brands
(Based on
InterBrand list)
Satisfaction (on a
100-point scale)
WoMI
Score
NPS Score
NPS-Defined
Detractors1
WOMI-Defined
Detractors2
Average
Overstatement
of Detractors3
Average Across
Top 100 Brands
77
42
28
21%
7%
299%
Top Automotive
Brands
Satisfaction
WoMI Score
NPS Score
NPS-Defined
Detractors1
WOMI-Defined
Detractors2
Average
Overstatement
of Detractors3
Automotive
Brands: Average
79
44
38
17%
11%
85%
Audi
79
30
37
16%
23%
-30%
BMW
78
37
40
14%
17%
-18%
Ford
77
43
28
22%
7%
214%
Harley Davidson
81
54
52
10%
8%
25%
Honda
82
52
49
11%
8%
38%
Hyundai
79
52
39
19%
6%
217%
Kia
80
46
39
16%
9%
78%
Mercedes-Benz
80
43
39
18%
14%
29%
Nissan
77
44
35
16%
7%
129%
Toyota
78
42
33
18%
9%
100%
Volkswagen
78
42
28
23%
9%
156%
13
Sat
WoMI Score
NPS Score
NPS-Defined
Detractors1
WOMI-Defined
Detractors2
Average
Overstatement
of Detractors3
79
43
36
17%
11%
96%
3M
82
55
46
13%
4%
225%
Caterpillar
80
39
41
15%
17%
-12%
Cisco
80
39
38
16%
15%
7%
General Electric
75
36
20
24%
8%
200%
John Deere
83
56
54
11%
9%
22%
Nokia
75
37
22
22%
7%
214%
Oracle
74
36
25
23%
12%
92%
Xerox
80
43
41
14%
12%
17%
Computer/Electronics
Manufacturers
Sat
WoMI Score
NPS Score
NPS-Defined
Detractors1
WOMI-Defined
Detractors2
Average
Overstatement
of Detractors3
Computer/Electronics
Manufacturers: Category
Average
78
45
33
18%
6%
264%
Adobe
75
39
25
20%
6%
233%
Apple
83
56
47
13%
4%
225%
Blackberry (RIM)
74
36
21
25%
10%
150%
Canon
80
50
41
15%
6%
150%
Dell
77
42
28
21%
7%
200%
HP
76
43
29
18%
4%
350%
IBM
78
34
27
18%
11%
64%
Intel
79
42
35
17%
10%
70%
Microsoft
75
42
29
20%
7%
186%
Nintendo
80
51
43
12%
4%
200%
Panasonic
80
46
39
12%
5%
140%
Philips
78
48
33
19%
4%
375%
Samsung
77
44
23
23%
2%
1050%
Sony
80
55
43
16%
4%
300%
14
Consumer Packaged
Goods (CPG)
Sat
WoMI Score
NPS Score
NPS-Defined
Detractors1
WOMI-Defined
Detractors2
Average
Overstatement
of Detractors3
Consumer Packaged
Goods (CPG): Category
Average
78
44
31
19%
5%
399%
Avon
81
58
52
11%
5%
120%
Budweiser
77
41
29
18%
6%
200%
Coca-Cola
77
41
20
25%
4%
525%
Colgate
77
37
18
23%
4%
475%
Corona
77
39
18
25%
4%
525%
Danone
78
30
31
12%
13%
-8%
Gillette
78
44
28
20%
4%
400%
Heineken
78
43
34
16%
7%
129%
Heinz
80
48
31
18%
1%
1700%
Jack Daniels
81
55
45
15%
5%
200%
Johnnie Walker
80
45
38
17%
10%
70%
80
48
40
12%
4%
200%
Kellogg
77
43
27
19%
3%
533%
Kleenex
79
50
31
21%
2%
950%
L'Oreal
78
52
40
20%
8%
150%
78
45
37
16%
8%
100%
Nescafe
79
47
33
18%
4%
350%
Nestle
78
43
28
20%
5%
300%
Pampers
79
47
37
17%
7%
143%
Pepsi
78
41
20
26%
5%
420%
Smirnoff
78
41
24
20%
3%
567%
Sprite
75
39
17
25%
3%
733%
15
Sat
WoMI Score
NPS Score
NPS-Defined
Detractors1
WOMI-Defined
Detractors2
Average
Overstatement
of Detractors3
Financial Services:
Category Average
70
28
35%
8%
527%
American Express
78
44
29
21%
6%
250%
Citi
69
24
-13
45%
8%
463%
Goldman Sachs
69
15
29%
19%
53%
HSBC
64
14
-24
49%
11%
345%
J.P. Morgan
73
33
33%
8%
313%
Mastercard
72
30
29%
4%
625%
Morgan Stanley
74
41
16
28%
3%
833%
Santander
61
16
-25
51%
10%
410%
Visa
74
37
31%
2%
1450%
Sat
WoMI Score
NPS Score
NPS-Defined
Detractors1
WOMI-Defined
Detractors2
Average
Overstatement
of Detractors3
80
47
39
15%
6%
222%
Adidas
77
40
28
18%
6%
200%
Amazon
85
61
53
11%
3%
267%
Burberry
82
44
45
11%
12%
-8%
eBay
80
52
39
17%
4%
325%
Gap
75
36
21
21%
6%
250%
Gucci
83
45
45
12%
12%
0%
H&M
73
37
21
19%
3%
533%
Ikea
80
53
46
10%
3%
233%
Louis Vuitton
79
46
40
15%
9%
67%
Nike
78
44
30
17%
3%
467%
Ralph Lauren
79
42
33
16%
7%
129%
83
57
51
11%
5%
120%
Walt Disney
83
59
50
12%
3%
300%
16
Sat
WoMI Score
NPS Score
NPS-Defined
Detractors1
WOMI-Defined
Detractors2
Average
Overstatement
of Detractors3
73
33
10
30%
6%
499%
Allianz
74
27
30%
11%
173%
AXA
73
27
12
28%
13%
115%
64
19
-21
46%
6%
667%
75
40
19
25%
4%
525%
KFC
74
36
14
27%
5%
440%
McDonald's
68
26
-8
38%
4%
850%
MTV
73
28
12
28%
12%
133%
Pizza Hut
75
39
22
22%
5%
340%
Shell
71
25
-15
44%
4%
1000%
Starbucks
77
45
23
24%
2%
1100%
UPS
79
51
39
18%
6%
200%
Yahoo!
73
31
27%
5%
440%
NPS defines detractors as anyone who rates their likelihood to recommend a company at 0-6 on a 10-point scale.
WoMI defines detractors as anyone who rates their likelihood to detract from a company with a 9 or 10 on a 10-point scale.
3
Overstatement of detractors is calculated using the following formula: (% of NPS-defined detractors-% of WoMI-defined detractors)/% of WoMI-defined
detractors. The average overstatement at the category level is an average of the company-level overstatements of detractors. The overall average
overstatement is the average of the overstatements of each underlying category.
1
2
CONCLUSION
The science of measurement may seem static and exact, but in reality it is continually evolving. For many
organizations, NPS acts as a modern-day gauge of customer satisfaction, one that enjoys widespread
adoption because it provides simple, readily understandable measurement data to internal and external
stakeholders. However, NPS has not evolved since its inception a decade ago, and in todays world a
decade-old metric is quickly outdated.
How should NPS evolve? The answer to this question relates back to organizations use of NPS as a KPI of the
customer experience. NPS does not measure a customers experience; it measures the outcome of his or her
experience via word-of-mouth. To truly measure the customers experience, organizations need to supplement
word-of-mouth measurement with a comprehensive set of metrics that measure the root causes of customer
satisfaction in order to better understand what drives the customers experience.
NPS has served a valuable purpose since its initial introduction in 2003 by helping organizations focus on
the customer experience. However, NPS needs to evolve into a more sophisticated and precise approach for
measuring word of mouth.
Today, word of mouth should be considered a part, not the entirety, of customer experience measurement.
While word-of-mouth metrics can provide a high-level directional indicator of customer satisfaction, they
cannot provide insight into the root drivers of customer satisfaction, simply because word-of-mouth is an
outcome, not a cause.
Still, organizations will continue to use word-of-mouth measurement as a standard satisfaction metric
because of its ease of implementation, sharing, and understanding. Given this reality, organizations need
to adopt measurement methodologies that provide accurate pictures of the business world. WoMI, the first
measurement of its kind, combines the simplicity of NPS with the accuracy executives need to make sound
business decisions, making WoMI the first word-of-mouth measurement truly worthy of functioning as a
standard KPI on executive dashboards.
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ABOUT FORESEE
As a pioneer in customer experience analytics, ForeSee continuously measures the customer experience
across customer touch points and delivers critical insights on where to prioritize improvements for maximum
impact. Because ForeSees superior technology and proven methodology connect the customer experience
to the bottom line, executives and managers are able to drive future success by confidently optimizing the
efforts that will achieve business and brand objectives. The result is better business for companies and a
better experience for consumers. Visit www.foresee.com for customer experience solutions and
original research.
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