What is the Net Promoter Score?
You’ve heard of it, you may have even used it, but what is it really? Is it your saving grace, or is it just the devil you know?
For most people, NPS is a survey question that measure customer loyalty. It goes something like this: it’s a score generated from the responses to a question about customer loyalty: “On a scale of 0-10, how likely are you to recommend Brand X to your friends and family?”
The score is calculated from the proportion of Promoters (people who select a 9 or 10 rating) minus Detractors (people who select a 6 or lower) in your responding population. This calculation results in a possible score between -100 and 100. For example, telecommunications companies, as an industry, average 32, while healthcare companies average 71 (source: NPS Benchmarks by CustomerGage, 2019).
Why do Companies use the Net Promoter Score?
Way back in 2003, Harvard Business Review (The One Number You Need To Grow by Fredrick Reichheld) published the finding that NPS had a higher correlation with customer loyalty (repurchase, referrals, and retention) than other metrics, in a variety of mature, competitive industries. What seemed to matter in this original research was the relative position of a brand’s score with its competitors, not the raw score itself, in predicting overall brand growth and success.
The case for prioritizing NPS, therefore, is a strong one, and its popularity over the last two decades reflect that. However, just like any useful tool, it’s not always the best choice to drive the type of growth you need. I have an amazing food processor, it can turn almonds to butter in under a minute, but I’m not using it to make puff pastry any time soon.
Why is the Net Promoter Score Controversial?
In some cases, NPS has become so ingrained in a business process that people are afraid to question it, afraid they’ll have to throw out the good with the bad if it’s not proven to be the wonder drug that cures all customer experience problems with a single question. But brands and products have complex relationships with their customers and, as a result, a network of interactions deserving their own assessment.
When Should Companies Use the Net Promoter Score?
Let’s take a good, hard look at when we should or should not employ NPS as a guiding star.
Use NPS to...
DO NOT use NPS to…
If NPS isn’t the best metric for your situation, there are plenty of well-researched options to replace it. We can look to product testing and user experience research for their expertise on assessing transactional experiences. For example, Customer Effort Score (CES) has taken the place of NPS in may transactional situations. Instead of asking if a customer would recommend a brand based on one specific transaction, we can ask how much effort they needed to exert to complete a transaction, a much more relevant, time-sensitive question. There is also a huge body of work that exists for supporting human capital improvements in the case of individual performance. If you’d like more information about alternatives to NPS, please see the article linked.
In the end, NPS is neither demon or angel. It’s a great tool for decision makers who need to track customer perception and forecast business impacts. But its popularity has brought it to a point of damaging overuse and has reduced its credibility in many situations.
At Honest Data, we can give you a straightforward, well, honest assessment of your measurement tools and give you confidence you’re not hammering a screw. Feel free to email our team. We love to talk shop! Reach us at email@example.com
NPS Origination: https://hbr.org/2003/12/the-one-number-you-need-to-grow
CES Origination: https://hbr.org/2010/07/stop-trying-to-delight-your-customers
Response to Jared Spool article: https://www.skycreek.com/4-reasons-nps-isnt-silver-bullet/
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