The Net Promoter Score (NPS)—the biggest example of management snake oil ever created—has finally run its course.

An article titled Net Promoter Score 3.0 in the Harvard Business Review asserts:

“Self-reported scores and misinterpretations of the NPS framework have sown confusion and diminished its credibility.”

Try not to laugh too hard at that joke of a statement. The self-reporting of scores helped create the metric’s popularity, and the weaknesses inherent in the score’s methodology rightfully diminished the metric’s credibility.

In a May 2019 Fintech Snark Tank article, I outlined some of those weaknesses, explaining that the Net Promoter Score:

While the points above should have been enough to banish NPS from the slate of management metrics, there’s another important reason for retiring the score:

What should companies measure, then, if the not intention to refer?

In 2012, I proposed the Referral Performance Score, calculated by measuring the actual percentage of a firm’s customers that provide referrals and the percentage of customers that grow their relationship with the company.

The folks at Bain have finally capitulated:

“We realized that the only way to make the system work better was to develop a complementary metric that drew on accounting results, not on surveys.”

Duh. Actually, the only way to make the system work better is to throwaway the existing NPS score and start all over. Which is what they did:

“We needed [a metric] that would illuminate the quality (and the likely profitability) of a firm’s growth. It had to be based on audited revenues from all customers, not just on a potentially biased sample of survey responses, so that it would be far more resistant to gaming, coaching, pleading, and the response biases that plague the results of non-anonymized surveys.”

Oh, you mean, like the Referral Performance Score?

The Bain brains have come up with a “new” metric they call the Earned Growth Rate, which, according to the article, “measures the revenue growth generated by returning customers and their referrals.”

Bain goes on to recommend the calculation of two additional metrics:

The inspiration for this metric was an investor presentation slide from First Republic Bank which had “quantified how much of its growth resulted from customers’ coming back for more—and bringing their friends.”

According to the HBR article:

“The bank has data on referrals because it asks each new customer about the primary reason for selecting the bank and records the answer in the customer’s file.”

And therein lies the rub.

With either the RPS or Earned Growth Rate, a company must track referrals, which is not an easy task, nor is it expense-free. Just as providers rushed into the market to provide a Net Promoter survey capability for brands, expect a flurry of providers offering new “referral tracking” services to help calculate Earned Growth.

Overall, there are four conclusions to draw here: