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NPS: It’s good…but not that good

by Innovationbubble | 2nd November 2016 | posted to Insights

The Net Promoter Score (NPS) is a simple but powerful tool that uses a single question to obtain a comparative measure of client satisfaction. Some businesses also use NPS as a measure of loyalty but it can be seen as an indicator of WOM (word of mouth) promotion or Buzz surrounding a brand.  NPS is also a useful indicator of the growth potential of the business or brand.

The NPS is calculated by analyzing the responses given on an 11-point rating scale. Respondents are categorized according to their rating: 0-6 = DETRACTORS; 7-8 = PASSIVES and 9-10 = PROMOTERS.nps

The NPS as a tool has a lot going for it:

  •    It produces an unambiguous number that is easy to understand
  •    The NPS can be tracked over time and used to evaluate promotions or advertising campaigns
  •     It can be used to help develop a customer-centric culture; focusing on recommendation creates a positive ‘do unto others’ culture between employees and between employees and customers.
  •     NPS is an indicator of customers who want to do repeat business; the essence of growth and profits.

As stated earlier, the NPS is very useful comparative tool. It answers the question “How are we doing?” but the answer must always be relative to other NPS metrics from previous surveys (performance over time); from competing brands; or against average NPS for the industry/product/market.

But in the end, NPS is just a number and standing alone an NPS is meaningless. The score has to be compared with another. The NPS is neither a precise measurement nor a particularly insightful one but it is a very good holistic barometer of business health.

The NPS is understandably seductive because of its simplicity and although a robust measure in itself, if not used and interpreted carefully,  it can create more problems for businesses than it solves, for example:

  •       Concentrating on improving the score without understanding the drivers behind the responses can lead to a ‘target-driven’ culture that ignores the theory behind NPS.
  •       Its simplicity is masking a complexity that is generating the score.
  •       NPS states “How we are doing?” not “What we need to do!”

The very popularity and clarity of the NPS has generated much criticism and skepticism within market research circles, most of it focusing upon its simplicity and “lack of scientific basis”.

The range of technical shortcomings pointed out includes:

  •     The lack of a correlation between recommendation scores and actual customer behaviour
  •     Non-customers are rarely included in the NPS surveys
  •     There is no distinction made between 0 and 6 scores although this could be significant
  •     The NPS is quite idiosyncratic e.g. for 60% Promoters and 20% Detractors the NPS would be the same as for 40% Promoters and 0% Detractors i.e. +40.

It’s good but how could it be so much better?

Users of the NPS can reliably use it as a quick and reliable measure for comparing business performance and using the metric as useful shorthand for indicating business health.  However, in order for the NPS to be useful as a cultural change tool or as a spur for the organization to enhance customer and/or employee experience, the underlying drivers of Promoters and Detractors need to be identified.

This can be done by coupling the NPS with an Emotix ® survey. The resulting data will allow a fine-grain analysis of ‘why’ the NPS score arises, and which points in the customer journey are important.  Reichheld maintains that the NPS is about “emotional difference”, otherwise CSAT metrics that deliver rational expectations will suffice.

Having a fuller understanding of what drives or destroys NPS will allow businesses to make appropriate adjustments at important touch-points to reduce the proportion of Passives & Detractors and increase the percentage of Promoters. The NPS/Emotix® route will allow businesses to build a core of emotionally committed customers.

Take-aways

At the strategic level, the NPS is a useful heuristic as a quick and understandable measure of how the business is doing. However, it is not a ‘stand-alone’ metric and figures need to be compared with previous surveys, with competitor brands and/or against benchmark averages for the sector.

Basing your organisational strategy solely on NPS scores is flimsy at best.  The business leaders should try to ensure that the rest of the organization does not fall into the trap of ‘Target-Culture’, whereby managers spend their time and resources manipulating the NPS numbers. It is essential that the leaders make arrangements for more in-depth data to be collected alongside the NPS survey. The NPS does not give you the ‘why’ behind the scores nor does it give you any clue as to how to move the numbers up. Adding this capability will allow executives to identify ‘friction-points’ in the organization or customer journey, and the accompanying emotional experiences and truly be in a position to understand what is driving the experience at any moment. Emotix ® is such a complementary emotional measure that can accurately identify the underlying drivers of the NPS. Looking at the fine-grain data that is generating the NPS allows for targeted improvements to be introduced that will improve the culture, communication and engagement of the organization and grow its profitability.

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