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Referral Performance Score: A New Metric for Banks and Credit Unions

Referral Performance Score: A New Metric for Banks and Credit Unions

The Referral Performance Score trumps the Net Promoter Score by measuring actual referral behavior and relationship growth.

Boston, June 26, 2012 – A new report from Aite Group introduces and defines a new metric for financial institutions seeking to understand drivers of customer loyalty. The Referral Performance Score overcomes the shortcomings of the Net Promoter Score, which has for years been the industry standard for measuring loyalty drivers.

In the past decade, the Net Promoter Score has been adopted by many companies across a range of industries, including financial services. The metric captures the intentions of a firm’s customers to refer the company to their friends and family, but poses a number of problems: intentions are not behaviors, intentions are temporal, surveys capture only a sample of customers, and employees can game the system. The Referral Performance Score, on the other hand, is computed by tracking the percentage of a financial institution’s customers who refer the firm to their family and friends and grow their relationship with the institution by increasing account balances or adding new accounts.

“By tracking referral behavior instead of intentions, the Referral Performance Score overcomes a number of the Net Promoter Score’s shortcomings,” says Ron Shevlin, senior analyst with Aite Group and author of this report. “By combining relationship growth and referral behavior, banks and credit unions can calculate a metric that more accurately captures customer loyalty, and, more importantly, helps make actionable management decisions."

This 19-page Impact Note contains 17 figures and three tables. Clients of Aite Group’s Retail Banking service can download the report.