The Net Promoter Score (NPS) is a metric that is widely used among retailers to measure their level of customer satisfaction, determine approaches to improve that satisfaction, and measure their performance against competitors.
NPS, developed by Fred Reichheld, was introduced in a Harvard Business Review article in 2003 and received broad acceptance through his 2006 book, The Ultimate Question. NPS allows companies to evaluate customer satisfaction based on a single question: "On a 0 to 10 scale, how likely is it that you would recommend us to a friend or colleague?"
Mr. Reichheld divided customer responses into three categories: Promoters (those who respond with a nine or 10 score), Passives (customers with scores of seven or eight), and Detractors (customers with scores of six or below). The NPS is calculated as the percentage of promoters minus the percentage of detractors. Companies often do further research on detractors in order to improve the customer experience and increase overall NPS.
At the recent eMetrics conference in Boston, Foresee, a company that specializes in measuring online customer experience, introduced an alternative metric to NPS called the Word of Mouth Index (WOMI). WOMI specifically identifies customers who will go out of their way to promote a brand and compare those to customers who will go out of their way to discourage use of a brand.
ForeSee tested and refined WoMI over a two-year period with more than 300 companies and through nearly 1.5 million customer surveys. WoMI enhances the NPS "How likely are you to recommend?" approach with a second question: "How likely are you to discourage others from doing business with this company?" WoMI then subtracts the percentage of nine and 10 ratings from "likelihood to discourage" from the percentage of nine and 10 ratings from "likelihood to recommend" to arrive at the balanced and accurate WoMI score.
The WOMI formula is calculated below:
The word-of-mouth index presents an opportunity for retailers to improve the validity of NPS and at the same time challenges them to revisit an already accepted metric. If a company wishes to continue using NPS, it can improve on NPS simply by adding WoMI's second "How likely are you to discourage?" question to get a more direct measure of the presence of consumers who actively discourage the brand — those consumers who need direct attention and need it right away.
How useful will WOMI be to retailers seeking to understand customer satisfaction and take action to improve performance?