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The Little-Known Number That Is Driving Corporate Bonuses And CEO Pay




A Net Promoter Score Graphic
A Net Promoter Score Graphic

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Corporate America relies on a single score, gathered from a single consumer survey question, to arrive at their net promoter score, or NPS.

The score, used by the likes of Best Buy and American Express, was introduced in a Harvard Business Review by the inventor of the score, Frederick F. Reichheld, in an article titled “The One Number You Need to Grow.”

To determine the score, companies typically ask consumers how likely they are to recommend the company’s product or service to a friend.

Based on the rating they give, customers fall in to one of three categories that determines how likely they are to promote the company, which in turn informs the final calculation of the NPS.

Since its invention in 2003, NPS has gained a great deal of traction in Corporate America, and is being used to demonstrate correlations with revenue growth and to help make decisions, including decisions about employee bonuses and company investments.

We have a conversation about the rise of NPS since its invention, uses of the score, and how accurately it depicts a company’s growth.

Guests:

Khadeeja Safdar, reporter for the Wall Street Journal who covers the retail industry and consumer issues; she reported on net promoter scores for the Journal; she tweets @khadeeja_safdar

Timothy Keiningham, professor of marketing at St. John’s University in New York, and one of the co-authors of several studies that examine net promoter scores; he tweets @TKeiningham