Last week I read an article in the Wall Street Journal, The Dubious Management Fad Sweeping Corporate America, which said that American companies were irrationally obsessed with their net promoter scores, NPS. Last year 155 S&P 500 companies cited their NPS during earnings conference calls, none of whom said their score was declining. All of the companies believed their scores were predictors of growth ahead. The WSJ article was skeptical, and I am too. In my opinion, NPS is like Average Selling Price (ASP) and Gross Margin – interesting, but insufficient as stand-alone metrics. The devil is in the details.
Two weeks ago I wrote a post Dynamic Pricing Made Simple, in which I explained the concepts underlying dynamic pricing. Stated simply, the demand for a product or service can vary depending on the situation, and the amount customers will pay in those situations also varies. Significant profit improvement is available for the companies that can identify those different situations, quantify the potential change in customer value, and set prices accordingly. Conversely, companies that are not prepared to manage a more complex pricing structure can cause long-term damage by implementing it poorly. I recommend taking a logical incremental approach to pricing improvement (do it in steps over time).