It has appeal because it is simple and because Mr. Reichheld claims it is the by far the most effective metric for predicting future growth. The method has been written up in an article in the Harvard Business Review and in a book, and has been applied at leading companies, including General Electric. All of this is positive; it gets top managers thinking about customer loyalty.
But what if top management has already realized that customer loyalty is important? Does Net Promoter really live up to its claims? No.
Researchers have rigorously evaluated the measure's ability to predict future growth. One study, published by Neil Morgan and Lopo Leotto Rego in Marketing Science, compared a Net Promoter-like metric to other metrics and found no advantage for Net Promoter. Timothy Keiningham and his colleagues, in an article in the Journal of Marketing, followed up with an even more rigorous multi-industry test of the Net Promoter metric and came to a similar conclusion -- Net Promoter was no better than customer satisfaction in predicting future growth.
Mr. Reichheld has done all of us a service by helping to make the C-suite aware of customer loyalty. But just as there are no "five secrets of getting rich" or "three keys to a healthy love life," there is also not just one number you need to know about loyalty. The most sophisticated companies may start out with a metric such as Net Promoter that gets top management thinking about loyalty, but eventually they will move on to methods and metrics with more powerful capabilities -- such as the customer-equity approach discussed here.