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Net Promoter Score® or NPS® is a major research tool that companies use to gauge customer experience by correlating it to the likelihood of a customer to promote or recommend a company to their connections. It’s a simple method of assessing customer happiness that requires less effort and is widespread that is actively adopted by many companies
And it’s true , NPS® has proved successful for many companies. But recently, there has been a lot of debate around whether the concise nature of questioning in NPS® acts as a curtain to it’s drawbacks.
As Christina Stahlkopf, the associate director of research and analytics at C space pointed out :
I don’t think it’s actually measuring what it says it’s measuring.
There’s a lot of noise generated in the metric. The fundamental premise is that a person is either a recommender or a detractor and that they can’t be both. But that’s just not true.
My 7 might not be the same as your 7. So even though we’re both rating it 7, I might think it’s great and you think it’s terrible. And the company just takes it as this number.
So, maybe it’s not as effective as experts say it is. Further , it needs to be coupled with certain practices to make it more relevant.
Net Promoter Score® is a simple tool that asks your customers to rate the chances of them recommending a brand or a company based on type of experience they’ve had. It asks questions like : Based on your interactions with XYZ brand, how likely are you to refer the brand to a friend.
Basically what it does is that it puts an unpaid promotional channel into questioning. Obviously, not all your customers will be delighted to receive the kind of services offered to them. Disagreements arise about the brand not meeting expectations , being over- priced , not meeting the customer’s needs and wants or being weaker as against what their competitors are offering . And this is completely natural for any brand that is in a tug of war for market share . In fact , it’s the reason why brands have to adopt techniques like NPS® , so that they can identify and work upon improving the areas where they lack.
NPS® collects ratings (usually on a scale of 1-10) from a set sample of respondents and use the results of the study to bifurcate customers into three broad categories namely:
This division is then used to make a quantitative analysis of the promotional capabilities among the customers of a brand. This is done using the formula:
% of Promoters – % of Detractors
Being simple and numerically assessable can be great attractions for any marketer to go for NPS® instead of using complex set of variables and spending hours in conducting data analysis to correlate those variables.
The yardstick behind introducing NPS® as defined by its developer Fred Reichheld ( Consultant at Bain and Company ) was the complexity of existing methodologies that lacked practicality for managers as well as the results that were ultimately derived , being flawed.
To this extent, NPS® has been able to eliminate the need for elongated surveys and multiple questions designed for the pure reason of finding out customer happiness. By eliminating unnecessary variables which do not have any value addition, NPS® gets right to the point by asking if they would like a friend or a relative to enjoy the same quality of service by basing it on the kind of experience that the customers have enjoyed themselves. This makes it easy to answer, prevents customers from suffering from survey fatigue and makes the analysis effortless.
The quantitative nature of the study also makes it precise to draw percentages that assist accurate demarcation between customers. Moreover, this separation avoids leading answers ( or grade inflation , as mentioned by Reichheld) by limiting the promoter ratings to only the highest two ratings on the scale (9 and 10).
NPS® is also a good criteria to establish comparability. The NPS® scores of your company versus your competitors reflect the amount of enthusiasm that customers possess for different companies as against you is a metric that shows how well your competitors have performed in terms of keeping the customers content. If this score is higher for competitors , that just means that other companies are doing something better that may nudge customers to refer it more than your company. Further, the highest NPS® serves as a benchmark for that industry that every company must strive to achieve in order to stay ahead.
Moreover, NPS® can be a good information tool to be used as input for directing the company decision making. The three divisions can be targeted separately in terms of follow up actions that are required. Promotional and marketing plans can be altered to modify messaging according to the current classification that a customer falls in.
As effective a method as NPS® is , it suffers from some major drawbacks that deteriorate the overall quality of research.
As Fred Reichheld himself stated in hi article in the Harvard Business Review :
other factors besides customer loyalty play a role in driving a company’s growth—economic or industry expansion, innovation, and so on.
This leads us to the first shortfall: As simple and easy it is to collect data and calculate NPS®, it fails to provide a holistic overview of other factors that can have a big influence on judging customer growth , which was the main reason behind the development of the methodology in the first place. Lack of such metrics can lead to inaccurate results which may not allow actionable strategizing. So , while NPS® may appear to be simple, it is not actually optimizing effort. It may look less tedious, but the ignorance of other variables can misdirect the companies into making incorrect decisions.
Being quantitative may be an advantage when it comes to segmenting your customers. However , NPS® does not uncover the reasons behind the ratings provided by the customer. While the structured nature of the study is useful , the absence of the opportunity for customers to provide open ended comments leaves the company bereft of any insight that might help in identifying pain points. So although a customer can be categorized as a detractor , the mindset behind why they’re least likely to refer this brand to their connections can never be uncovered using NPS®. Putting it simply, no matter how good or bad a customer’s is , it will never come to light using an NPS® type survey.
Promotion as a criteria in itself may be faulty in certain cases. It’s basic psychology that the type of recommendations that a customer makes is reflective of of their image as well. In this regard, customers may be apprehensive of recommending certain brands unless voluntarily asked. Such customers may give a low rating to the brand , without having any problems with the brand and its services.
NPS® is also a little weak when it comes to practical application of the ratings given by customers. For example: A customer may rate the brand 9/10 which implies that he or she is a promoter, but there is no way of guaranteeing that they actually go ahead to make the effort of recommending it. In this sense, NPS® may not be an accurate predictor of future business growth.
It also does not suit monopolistic markets where their isn’t much choice to begin with and so the absence of recommendations and referrals will not have any impact in influencing engagement decisions of prospective customers.
Lastly , recent customer experience have a major sway over the rating that a customer provides. Evaluating entire customer journeys may be hard if the customer uses their latest interactions with the brand to decide their rating. In such cases , no matter how seamless or horrible past customer experiences have been , the customer is bound to rate the brand according to recent services.
Chris Hicken , co-founder and CEO of ‘nuffsaid describes it clearly:
NPS® tends to be just a brief snapshot in time. So you might get a lot of negative feedback from people who had a recent bad experience — maybe you had a recent product glitch or the website was down — and so your NPS® score is hurt dramatically. So you might see big dips or swings upwards and you don’t know what happened.
Given all the negatives of NPS® , there is still room for improvement. By employing certain additional steps, a researcher can make NPS® results actionable.
A major con of NPS® can be removed if the brand adds another question that asks the customer to elaborate on their reasoning behind their choice of rating. This open ended follow up question can pin-point exactly where a customer was lost or converted into a promoter. This can direct the flow of actions in a company highlighting where exactly does the management need to work in order too register themselves in the good books of their customers.
Open ended comments in this sense, delimits the respondent by allowing them to express and elaborate freely. The respondent gets to explain why they answered the way they did and the researcher gets to see if the respondent understood the question and answered it using the right context in mind.
By making one simple addition: What is the reason behind the rating provided by you ? , brands can conduct thematic analysis , generate word clouds and carry out other qualitative evaluation to gather key takeaways without making the survey long for the respondent.
Your respondents might not be able to recall everything about the brand. Simple practices like surveying employees and user testing can cover this grey area. Your employees know the problems the customers face during their interactions. Surveying them can not only shed light upon these problems but also make your employees feel valuable and respected. Further mapping customer journeys and putting short questions at each touchpoint is beneficial . Your customers can rate their experience of the touchpoint they just used to interact with the brand and the brand gets quick customer response. This is not limited to only the passives and detractors but can also be extended to promoters , who although are happy with the brand , may find certain aspects a hindrance to seamless customer journeys.
At the point where you conduct your NPS® surveys, your promoters are the biggest assets. It becomes imperative for the brand to make promoters channelize their positive reinforcement towards the brand to increase promotional activities. Promoters can be asked to write review , share brand information and product content, share their views regarding new products and services , make videos narrating their experiences among others. This is because every new customer that browses through your brand needs to hear how other customers felt about the quality of your services. Reading such positive feedback from your promoters provides assurance and persuades people to try out your products and services. In this way , a brand’s happy customers become advocates and ambassadors of brand image .
Such advocacy brings in organic promotions for the brand that are believable and authentic with respect to the people who have provided them . Brands need not direct these promoters to sugar coat their reviews in certain ways that makes it look made-up . Promoters just need to be allowed to narrate their journey to the point where the brand became a preferred choice for them.
All the research goes in vain if the brands do not act upon it. Understand that your detractors have a lot to say about what they dislike. They just need someone to listen. These detractors represent an opportunity to look for flaws in the brand functioning and performance.
Brands need to immediately act upon the problems of detractors or else they may opt to defect to other alternatives and voice negative opinions that can damage brand image. Brands need to identify patterns such as was it a singular experience that the customer had the lead them to resonate negatively or was it a series of problems that weren’t acted upon. In the latter case, brand need to increase the promptness of their customer service to prevent damage to reputation.
Brands can hold focus groups , interviews , calls , surveys or any other method that allow detractors to vent their issues in addition to helping the brand identify aspects that need to be improved upon . Finding optimum solutions in a quick and effective way can turn these detractors into promoters in the long run and can serve as a ready made tool to tackle future repeated issues.
NPS® has it backdrops and positives . Although a good research method , it is not a comprehensive metric that can serve a brand’s needs as a stand alone metric. Complementary variables need to be added to NPS® for it to more applicable. There are many tools that add value to the entire research leading to a nuanced understanding.
NPS® , however , runs with the general backdrop of assessing the need for growth that comes with understanding current satisfaction levels . It’s simple , if you want your customers to act as free promotional agents, you need to step up to the task of keeping them happy in every way possible .
Robert Thompson describes it best :
Customer-centricity should be about delivering value for customers that will eventually create value for the company.
Net Promoter®, NPS®, NPS Prism®, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld. Net Promoter Score℠ and Net Promoter System℠ are service marks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.