Net Promoting Index = No Pertinent Information!

March 14, 2012

Let me be straight - I am anti-Net Promoting Index (NPI) in the home building industry and this is why...

When I was a manager/leader/owner of a homebuilding company there was a recurring problem that I often saw (and personally committed).  Too often, we would manage our company by average numbers.  For example, let's say our Willingness to Refer (WTR) declined 5 points from 95% to 90%.  We would become upset and meet with the Sales Team and Builders to tell them "we are better than this!"  We were managing the company and staff by the average number.  In fact, in this example we had most of the Onsite Teams achieving 100% Willingness to Refer and others at only 80%.  By painting everyone with the same brush and talking to everyone the same way, we were actually demoralizing the 100% WTR Champions and the enabling the 80% Underperformers by making them feel it was a company-wide problem.  So, I was often on guard for the dreaded use of "averages" to manage our company and/or people.

So, if you agree that managing by an "average" number is bad, then you would also likely agree that managing by an "index" is even WORSE.  To me an index is meaningless.  The NPI sprang from the "ultimate question" philosophy, whereby customers are asked a single question, "Would you refer XYZ Homes" on a scale of 1 to 10.  Then, the powers that be subtract the low scores from the high scores and come up with an "index."  The theory was that this index would allow all industries to compare themselves on a consistent customer satisfaction scale.  While this may (but I doubt it) work for American Express, or GE - which are huge companies that do a lot of other market research, customer focus groups, customer surveys, etc., it doesn't work for a homebuilding company to rely on one number (NPI) to gauge Customer Satisfaction.  It is silly, ineffective, and for the life of me, I don’t know how it gets traction from intelligent people. 

NPI pro arguments are that it is simple; but simplicity doesn’t mean it is effective.  The other argument is that it allows cross industry comparisons.   Do you honestly care whether your home building business Customer Satisfaction is better or worse than a hardware store, an amusement park, or a coffee shop?  The purpose of customer feedback should be to make your specific product and services the best they can be!

NPI con argument is the same – it is simple. This simplicity, in my book, is ineffective as it gives NO direction as to WHY the number exists, or what to do about it if the number is not desirable.   Worse, its simplicity squanders one of the best opportunities to get effective, meaningful customer feedback. 

We think the one opportunity you have to gather meaningful customer feedback should be sincere, and match the nature of the transaction.  If you and your customer have just a transactional relationship, i.e. a credit card company, or fast food at Tasty Tacos, maybe an index can help you compare your customer satisfaction to other transactional businesses. 

On the other hand, building a home is an intense, relational event and your survey should measure up to the importance of that experience.  This customer-focused survey should get their rational feedback (ratings) and emotional feedback (open ended questions/comments).  The ratings are used for benchmarking and emotions/comments are used to give the ratings "volume" and meaning, and to measure the reasons for and consequences of customer dissatisfaction.  Haven’t your customers invested a lot of time, money and life into a major joint venture and don’t they deserve the full opportunity to voice/share/communicate their experience highs, lows and feelings?  A conscious, brand-oriented builder can then use these comprehensive customer feedback data points, comments, feelings to develop a better future experience and expose customer dissatisfaction sources.

A Medical Doctor would never take one health-related data point, average or index it, and then proclaim a persons’ overall health or illness based upon this index.  No, a Medical Doctor would do a thorough examination take many data points, ask "how do you feel?" questions, then use the data and patient comments to make a diagnosis before prescribing an improvement treatment.  In home building it's your customer satisfaction, reputation and brand equity's health at risk….are you willing to depend on just one data point?

How's that for an NPI explanation?

I apologize for being long winded - I am passionate about “Voice of the Customer” programs, because the customer, by virtue of making one of the largest purchases of their life - a home, has earned the right to be heard.  Customers are what makes our home building world go around and in that regard, NPI does more harm than good.  In fact, I want to write an article about it.  Oh, wait a minute…I think I just did. 

Charlie Scott has more than 30 years of first-hand home building experience, much of it in senior management positions with an award-winning, nationally recognized Midwest builder. Currently, he's director of Woodland, O’Brien & Scott for Constellation Homebuilder Systems. Scott helps North American home builders grow their own customer-centric cultures, pursue operational excellence, and increase referral sales. Write him at