Morning Report

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Are Net Promoter Scores Bogus?

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Often used to measure customer satisfaction, Net Promoter Scores have developed a cult-like following—but several studies suggest they may be bogus: “The score was introduced in 2003 in a Harvard Business Review article titled ‘The One Number You Need to Grow.’ The Bain & Co. consultant who wrote the article called NPS the ‘simplest, most intuitive and best predictor of customer behavior’ and a ‘useful predictor of growth.’

“Since then, the metric has taken on a life of its own, so much so that the inventor, Fred Reichheld, said he is astonished companies are using NPS to determine bonuses and as a performance indicator. ‘That’s completely bogus,’ Mr. Reichheld, who still consults for Bain, said in an interview. ‘I had no idea how people would mess with the score to bend it, to make it serve their selfish objectives.’ …

“‘The science behind NPS is bad,’ said Timothy Keiningham, a marketing professor at St. John’s University in New York, and one of the co-authors of the three studies. He said the creators of NPS haven’t provided peer-reviewed research to support their original claims of a strong correlation to growth: ‘When people change their net promoter score, that has almost no relationship to how they divide their spending.’”


Voice assistants are changing the way people shop: The Mars Agency is “trialing an in-store voice assistant called SmartAisle with retailer BluMO, which helps customers decide which whisky to buy. Here’s how it works: An Amazon Echo is installed on an illuminated shelving unit in the whiskey aisle in-store. Customers stand in front of the Echo and talk out loud to the SmartAisle skill. In turn, the Echo responds with information about certain types of whiskey and guides the customer through a decision-making process. The shelving unit has lights under each bottle and, as the conversation progresses and the assistant begins whittling down the selection, the lights under the ruled-out whiskeys dim. At the end of the experience, the customer is left with one whiskey bottle illuminated on the shelf.”


On April 30, Oxford Center member Tony Watt bought Marcadis Plastic Surgery, another Oxford Center member, for 1.2x revenue.

Founded and led by Dr. Abraham Marcadis, Marcadis Plastic Surgery has been a brand leader in Tampa, Florida for the past 31 years. Another Oxford member, Wayne Lazarus of SBA Funding Depot, was instrumental in getting the deal done. He made the introduction to First Home Bank, which financed the transaction. Dr. Marcadis is the second Oxford member to exit with Oxford Strategic Advisory since December.

American Express has acquired Resy, a CRM and reservation platform, which “will allow American Express to offer to its cardmembers further benefits and experiences that aren’t your standard points and rewards.”


Advanced Energy Industries Inc., a developer of power and control technologies has agreed to acquire Artesyn Embedded Technologies, a designer and manufacturer of power conversions and computing solutions for $400 million.


Aleph Farms, an Israeli biotech startup, could give vegans back the option to eat meat without the ethical dilemmas: “The company used a proprietary technology developed in partnership with Israel Institute of Technology that allows it to grow three-dimensional meat from a painlessly extracted sample of animal cells in a laboratory setting. … While mass availability of slaughter-free meat is likely several years in the future, approximately 30 companies around the world are working to bring their flagship clean-meat products to market—with Aleph aiming for a limited launch of its products between 2021 and 2022.”

With its new $1,600 premium scooter, Boosted is betting that the problem with scooter shares is the sharing: “E-scooters are dangerous if the rider lacks experience, which many of them do. They’re also prone to theft and vandalism. … Scooter shares are also mostly unregulated, so cities where they operate sometimes have little control over how the vehicles are distributed or used. According to Boosted CEO Jeff Russakow, ‘If you’re riding your own scooter, you’ll gain experience and confidence more quickly, and you’re more likely to own and wear a helmet. You’re also far more likely to store that scooter in your home or workplace, rather than on the sidewalk (or in the river). If it’s a gorgeous scooter, you’ll take care of it, and the vehicle’s lifespan will stretch into the years, not just weeks.’”

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Industrial production fell in April mainly because of auto’s decline. A “big drop in factory output as production of autos and auto parts continued to slide. … Manufacturing output fell 0.5 percent, led by a 2.6 percent decline in motor vehicles and parts, which has fallen in three of the past four months. Production at the nation’s utilities fell a sharp 3.5 percent. Production at mines, a sector that also covers oil and gas drilling, rose 1.6 percent. Manufacturing has struggled over the past year, reflecting weakness in auto sales and the global economy.”

President Trump is preparing to send farmers another $20 billion to compensate for the trade war: “The Trump administration could make as much as $20 billion available to farmers in a second round of assistance designed to help offset losses from China’s latest retaliatory tariffs, Agriculture Secretary Sonny Perdue said late Wednesday.

“The second installment of trade aid is being modeled after the one last year. USDA pledged up to $12 billion in assistance for 2018 production, mostly in the form of direct payments to farmers stung by retaliatory duties, as well as commodity purchases. … The escalation also presaged another setback for US farmers, whose products last year were hit with tariffs by major trading partners like Mexico, Canada and the European Union, in addition to the levies imposed by Beijing. The fallout on US farms and ranches deepened what had already been a multi-year downturn in commodity prices that has helped fuel a sharp decline in net farm income since 2013.”


Erika Cheung, a Theranos whistleblower, recently launched a new ethics non-profit called Ethics in Entrepreneurship and learned some lessons she wants to pass down advice for founders. “As her former boss and onetime idol awaits trial, Cheung has found new purpose in culling practical lessons from the ordeal. She now works full-time on the nonprofit alongside fellow Theranos whistleblower and close friend Tyler Shultz. Their goal: Preparing young entrepreneurs for ethical challenges they might face in starting their own tech company, or even working for one. ‘When you focus on profitability or just building the next unicorn, you have these issues where you stop paying attention to the ethical consequences,’ she said.”


Nextdoor is a social network with a $2 billion valuation that wants to be the hyper-local version of Facebook: “Nextdoor is specifically designed to let neighbors keep tabs on everything that’s going on in their locale—from helping someone source an electrician or babysitter to just chewing the fat. … It’s worth noting that Amazon also branched out into local networking with the launch last year of its Neighbors app, powered by security camera maker Ring, which it had bought not long before. But Neighbors is more about reporting crimes and sharing the footage captured by Ring’s cameras, while Nextdoor has a much broader focus.”


The fracking boom is pulling entrepreneurs to West Texas’s “Death Highway”: “There’s so much money gushing out of West Texas these days that even a deadly highway doesn’t keep people away. The fracking boom is shredding a key stretch of asphalt that runs from Pecos—site of the world’s first rodeo—through a former ghost town and into New Mexico. But even as the carnage piles up, businesses are blossoming like cactus along US Highway 285.

“John Cantu, a gray haired 63-year-old born in Northern Mexico, is one of these entrepreneurs. One look at me and he knew my sizes exactly: 32-inch waist, 32-inch inseam, medium shirt. I didn’t expect that kind of sartorial expertise from a guy selling clothes by the side of the road on the edge of the Chihuahuan Desert. While Cantu showed me the thousands of pieces of fire-resistant clothes in his trailer, trucks carrying sand, water, and hulking fracking equipment rumbled by on US 285.”


Loren’s guest on SiriusXM 132’s Mind Your Business today at 1:00 p.m. ET will be Nick Bayer founder of the Saxbys chain of regional coffee shops. We’ll talk about his early struggles with franchising, how he competes with Starbucks, and how he helps train future entrepreneurs by letting college students run his shops.

And that’s what’s ahead.

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