Why Are We Still Talking About NPS?

In 2006, Fred Reichheld of Bain & Company revolutionized the business world with the introduction of the Net Promoter Score (NPS) in his book, The Ultimate Question: Driving Good Profits and True Growth. NPS quickly gained traction among Fortune 500 CEOs and became a widely adopted metric for assessing customer loyalty. The appeal of NPS lies in its simplicity: by categorizing customers into Promoters, Passives, and Detractors based on their responses to a single question, businesses can gain insight into how customers perceive their performance.

Over time, organizations developed and expanded NPS. They improved the methodology. They extended its use beyond customers, applying it to help build employee engagement and commitment. They discovered new methods to broaden its impact, not just to measure customer loyalty but to improve their organizations.

So, why are we still talking about NPS?

We’re still talking about Net Promoter Score (NPS) because it continues to be a simple yet powerful tool for measuring customer loyalty and satisfaction. NPS provides a quick snapshot of how customers feel about a brand or product and whether they would recommend it to others. Despite its simplicity, NPS has remained relevant for several reasons:

1. Ease of Use: NPS is straightforward to implement and understand, requiring only one question: “How likely are you to recommend our product/service to a friend or colleague?”
2. Benchmarking: NPS allows companies to benchmark their performance against industry standards or competitors, giving them a sense of where they stand in the market.
3. Predictive Value: Some research shows that NPS correlates with business growth and customer retention.
4. Cultural Impact: NPS has become ingrained in many organizations’ cultures as a key performance indicator to align teams around customer-centric goals and to track progress.

However, while NPS is widely used in the business world, some critics argue that NPS has limitations. These limitations can impact its effectiveness:

1. Simplicity and Lack of Depth: NPS reduces customer sentiment to a single number, which may oversimplify complex customer experiences. Without qualitative follow-up questions, NPS doesn’t provide detailed insights into why customers feel the way they do, making it harder to identify specific areas for improvement.
2. Potential for Bias: NPS surveys can have a response bias, which means the results can be biased towards customers who have extreme opinions (either very positive or very negative), overlooking the views of the majority who feel neutral or slightly positive/negative. Additionally, the way respondents are selected can also skew results (e.g., selection bias). For example, surveying only recent customers may not capture the sentiment of long-term customers.
3. Cultural Differences: Customers from different cultures may interpret the NPS scale differently. For example, some cultures may be more inclined to give high or low scores, which can lead to inconsistent results when comparing across regions.
4. Overemphasis on Promoters: NPS categorizes respondents into Promoters, Passives, and Detractors. However, NPS often focuses primarily on Promoters and Detractors, neglecting Passives, who may represent a significant portion of the customer base you could more easily convert to Promoters. Similarly, an overemphasis on Promoters may cause businesses to overlook Detractors’ feedback, missing opportunities to address critical issues.
5. Limited Predictive Power: While a higher NPS is generally associated with better business outcomes, the metric alone doesn’t always predict specific behaviors like repeat purchases or referrals. Other factors can influence these outcomes, which NPS doesn’t account for. Additionally, NPS is based on the likelihood of recommending a product or service, which may not always correlate directly with customer loyalty or satisfaction. Some customers might be satisfied but not inclined to make recommendations, while others might recommend without being particularly loyal.
6. Actionability Challenges: The meaning of the scores can be ambiguous without context. For instance, a score of 7 or 8, categorized as “Passive,” might reflect satisfaction but not enthusiasm, making it unclear how to act on this feedback.
7. Metric Myopia: Businesses might focus too much on improving the NPS score itself rather than understanding the underlying customer experience. This can lead to initiatives aimed at “gaming” the score rather than genuinely enhancing customer satisfaction. An excessive focus on NPS as a key performance indicator (KPI) can also create pressure on employees to improve scores, potentially leading to manipulation or less genuine interactions with customers.
8. No Granularity: NPS does not provide detailed information about which aspects of the product, service, or experience are driving customer satisfaction or dissatisfaction. This lack of granularity makes it hard to identify specific areas for improvement.
9. Inconsistent Benchmarks: NPS benchmarks can vary widely across industries, making it difficult to compare scores meaningfully. What constitutes a “good” score in one industry might be average or poor in another. Also, NPS can fluctuate over time due to factors like seasonality, market conditions, or temporary issues, making it challenging to assess long-term trends or make consistent comparisons.
10. Doesn’t Capture the Full Customer Journey: NPS reflects customer sentiment at a specific point in time and may not account for the entire customer journey. A customer’s experience can vary across different stages of their interaction with a company, which NPS may not fully capture.
11. Limited Use in B2B: In B2B settings, purchasing decisions are often made by multiple stakeholders, making it difficult for a single NPS survey to capture the sentiment of the entire organization.

Despite these limitations, NPS remains a valuable tool when used correctly and in conjunction with other metrics.

Let’s Talk About Improving NPS!

It’s important to understand these limitations and supplement NPS with additional data and analysis to get a more complete picture of customer sentiment and loyalty. To measure NPS more effectively, you should focus on improving how you collect, analyze, and act on the data. Here are several ways to better measure NPS:

1. Optimize Survey Timing: As timing can significantly impact the accuracy of the feedback, send NPS surveys at key moments in the customer journey, such as after a purchase, a support interaction, or the completion of a service. Consider conducting NPS surveys regularly (e.g., quarterly or annually) to track changes in customer sentiment over time.
2. Target the Right Audience: To understand better how different groups perceive your brand, segment your customers based on demographics, purchase history, or interaction type, and tailor your NPS surveys accordingly. Ensure you survey a large enough sample to get statistically significant results. A small, unrepresentative sample can lead to misleading conclusions.
3. Ask Follow-Up Questions: Include open-ended follow-up questions to gather insights into why customers gave a particular score. This provides context and helps you understand the underlying reasons for customer satisfaction or dissatisfaction. Tailor follow-up questions based on the score (e.g., asking Promoters what they love most and Detractors what needs improvement).
4. Distribute via Multiple Channels: Use various channels like email, SMS, in-app, or your website to distribute your NPS survey. This ensures you reach customers where they are most comfortable responding.
5. Keep it Short and Simple: Avoid adding too many questions to the core NPS question and a follow-up that might lead to survey fatigue. Use simple, straightforward language in your NPS survey to ensure customers fully understand the question.
6. Analyze NPS Data Holistically: Track NPS over time to identify trends and understand whether your initiatives are positively impacting customer satisfaction. Compare NPS with other key performance indicators (KPIs) like customer retention, churn rate, or revenue growth to understand how NPS influences overall business performance.

By implementing these strategies, you can enhance the accuracy, relevance, and usefulness of your NPS measurements, leading to better insights and more effective customer experience improvements. And no matter which metric you use, ultimately, ensure it drives action by fostering a deep understanding of your customers’ experience, attitudes, and behaviors. Your chosen metrics should serve as decision-making guides, facilitating the development of a customer-centric culture. By integrating these metrics into your internal systems and operations, you can keep your organization on track to continuously improve customer satisfaction and loyalty. Without this holistic approach, you risk overlooking critical information that could steer you toward success.

Want to integrate NPS (or some other metric) to improve your customer experience … let’s talk! Contact Ellen Pieper, Chief Client Officer, [Ellen_Pieper@researchresults.com, or 919-368-5819] today.