The Net Promoter Score (NPS)

By Marie Boucher (Director, Consumer Insights)

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?


NPS is…


  • Easy for customers to understand and answer… but it’s also easy for customers and employees to manipulate
  • Easy to calculate… but it erases nuances from extreme detractors and more neutral customers
  • Less positively biased due to the skewed rating calculations… but not all industries or products have the same level of positive bias
  • Strongly correlated to loyalty behaviors… but those correlations do not necessarily extend to other desirable customer or employee behaviors and those correlations might not hold up if a brand or product varies from the norm
  • A long-standing metric with decades of available benchmarks… but those benchmarks are not necessarily gathered in a standardized way in most cases and may be misleading as a result
  • Easy to implement and track… but it is hard to account for all the confounding variables, making decisions and actionable outcomes challenging
  • Validated across a wide variety of industries… but it is not necessarily valid among young, emerging, or uniquely-positioned industries or products.


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...


  • Track the very bottom of the brand funnel, the loyalty level
  • Assess a direct customer experience with a retail or product experience
  • Assess the end of a complete customer journey
  • Assess the health of a brand or company as a whole


DO NOT use NPS to…


  • Test marketing or communication concepts or strategy
  • Assess brand or product strength among general population consumers with no familiarity
  • Assess passive or reactive customer experiences such as reading content or filing paperwork
  • Assess brand loyalty among extremely specific user groups who may not see relevance in “recommending” a brand or product 
  • Assess customer satisfaction before a customer journey is complete, regardless of the business structure
  • Assess an individual’s performance



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 research@honestdata.com


Sources:

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

Jared Spool article: https://blog.usejournal.com/net-promoter-score-considered-harmful-and-what-ux-professionals-can-do-about-it-fe7a132f4430

Response to Jared Spool article: https://www.skycreek.com/4-reasons-nps-isnt-silver-bullet/

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