Word of Mouth index takes on NPS
Analytics vendor ForeSee has introduced the ‘Word-of-Mouth Index (WoMI): The Next Generation Net Promoter Score (NPS)’. Foresee contends that while NPS was designed to provide a metric to measure customer loyalty, it falls short by only measuring “likelihood to recommend” – inaccurately assuming that if someone is not recommending, they are detracting.
The vendor claims WoMI evolves NPS by measuring both likelihood to recommend and likelihood to detract from a specific brand. It delivers on the promise of NPS by creating a more precise, accurate and actionable measurement.
The vendor says this allows organisations 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 – taking NPS to the next level of usefulness by providing actionable data.
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 organisations 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, chief executive officer 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 percent 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.”