Research suggests that companies should ask more than just 'would you recommend this product?' (2/18/2008)

A Vanderbilt Owen Graduate School of Management professor is co-author of two award-winning papers that call into question a concept that has become central to marketing efforts in recent years: A customer's intention to recommend a product or service is the single most important predictor of future loyalty to the company.

The concept, called net promoter, is put forward in "The Ultimate Question" by Fred Reichheld, director emeritus of Bain & Co.'s market research firm, Satmetrix Systems Inc. Professor Bruce Cooil and his colleagues suggest that while measuring a customer's intention to recommend a product is important, that measure is one of many factors to consider and not the single most important piece of data.

"The point of our research is that there is no evidence that net promoter is better than other satisfaction or loyalty scores," Cooil says. "You probably want to use all the available information from a customer about attitudes toward the product or service, their satisfaction and their buying behavior - all the available information on their attitudes, intentions and behavior - rather than just one score."

In the most recent study, Cooil and his colleagues examine data from a two-year study of more than 8,000 customers in the fields of retail banking, mass-merchant retail and Internet service providers. The authors dispute Reichheld's assertion that a customer's intention to recommend is the key indicator of future success. Instead, they say companies should not rely on a single predictor model but on multiple indicators.

The consequences to a company relying solely on the single predictor model are potentially damaging, the authors say in the paper, because a company could be tempted to misallocate resources due to a "myopic focus" on that one factor.

The authors were notified this week of their recognition for best paper of 2007, given by the journal Managing Service Quality, for "The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Customer Retention, Recommendation and Share-of Wallet." The first author is Tim Keiningham, a 1989 Owen graduate, and chief strategy officer and executive vice president of IPSOS Loyalty. Co-authors, in addition to Cooil, are Lerzan Aksoy, of the College of Administrative Sciences and Economics, Koc University, Instanbul, Turkey, Tor Wallin Andreassen of the Norwegian School of Management in Oslo, Norway, and Jay Weiner of IPSOS Insight.

This is the second of two scientific papers examining net promoter, a trademarked concept, which have won best paper awards. The other was from the Journal of Marketing.

Note: This story has been adapted from a news release issued by Vanderbilt University

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