Net Promoter Score US

Is Net Promoter ScoreSM the Ultimate Metric?

CloudCherry | Featured | June 27, 2016

Ask yourself this: If you were to pick between simplicity and zero compromises, which one would you pick? That exactly, is the question you have to face when considering NPS® as your source of motivation for growth. Here’s why NPS is widely accepted as the ultimate metric:

It is a simple metric to track – Get your customers to answer the one question “How likely are you to recommend our brand to your friends and family? ” on a 11-point scale ranging from 0 to 10. 0-6 are detractors, the utterly dissatisfied ones that could potentially harm your brand image. 7 & 8 are passives, they neither love nor hate your business. 9 & 10 are promoters, your evangelists, your ultimate goal.

The calculation is effortlessly easy – Take the percentage of promoters and subtract the percentage of detractors from it. What you are left with is your Net Promoter ScoreSM.

The insights are also fairly straightforward – The objective of any business is channeled towards customer retention. And when that is the case, customer loyalty is the biggest indicator of customer retention. The higher the loyalty the better the business, the more the returns. Hence, brands ought to constantly aim for a higher NPS.

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But what works as the greatest strength of the Net Promoter Score® is also its biggest weakness. It is very simple in its approach. Brands focusing solely on improving their NPS will potentially miss out on a lot of other factors that contribute to an overall business growth. That apart, by attaching as much value to a score, brands might lose sight of their vision.

Much like many other things in life, simplicity almost always translates to compromises. You simply cannot have it all! Treating NPS in isolation might save you a lot of time and effort, but it can never replace a detailed CEM strategy. Over the decade (and three years) that the “Ultimate Question” has been around, several industry experts have stripped it off its glory and projected its limitations to us. And not just that, the inventor of NPS, Fred Reichheld, himself has openly admitted that the ultimate question has its limitation when it comes to proving the relation between NPS and growth.

A number of perspicacious readers have noted that the statistical evidence provided in my book The Ultimate Question is imperfect. It does not provide proof of a causal connection between NPS and growth. Nor are some of the timeframes ideal.

What are these compromises that we are talking about? Let’s take a quick look:

1. NPS® is a 11-point scale with 3 points

Yes, the range is between 0 & 10, but the implication of the range is reduced to 3. Whether I give a 0 or a 6, it doesn’t matter – I’m a detractor. This doesn’t give much insight into the extent of satisfaction or dissatisfaction.

2. No activation of the passives

Like we just saw, the calculation of NPS is the result of the sum total of the 9 & 10 scorers minus the sum total of the 0-6 scorers. 7 & 8, not needed. While the chance of a passive-promoter flip is far, far higher than a detractor-promoter flip, there is no mention of passives in the calculation of the score.

3. It merely reflects the intention

NPS looks at the likelihood of a recommendation and scores are calculated on the basis of this likelihood. There is no guarantee of loyalty because the customers who gave their feedback merely mentioned their intention of recommending (or not). There is no more to this than a particular set of people who give their rating as per their intention of returning or not to the brand. The likelihood that it revolves around makes it highly precarious.

4. Does not look at ‘WHYs’

The problem is that NPS tells you how many detractors you have and how many promoters but has absolutely no way of indicating why you suffer from as many detractors or how you can appease the passives to convert to promoters or any insights that can help you better your score. It only quantifies the experiences of your customers in a manner that will tell you how many are happy and how many or not. The lack of an investigative approach makes it rather demotivating for employees as they are forced to increase the score without actually being given any inputs as to the exact issues at hand.

It is only when you know why you have a certain score can you address the loopholes and hope for a higher one and for this to happen, NPS will have to have a few follow up questions which examine the reasons behind the rating that the customer has given.

#5 Its universality is insensitive to cultures across geographies

What may be perceived as an amazing experience in one part of the globe may just be an average experience in another. If customers from different parts of the world were asked to rate an “outstanding” experience on a scale of 0-10, one may be as generous as giving a rating of 10 on 10 whereas someone else may give the same exact experience a 7, simply because his standard of “outstanding” is 7! This subjectivity is not taken into consideration while calculating the NPS.

Each person experiences a brand differently, and a numerical scale does not accommodate that much versatility in opinion. The likelihood of recommendation varies from one person too another, one region to another, even one industry to another!

The Middle-Ground

Many industry pundits take on NPS mercilessly owing to these reasons and a few more that they believe is wrong with NPS. However, the foundation of the concept is customer loyalty and as long as brands have the discretion to pursue customer experience in a more diversified manner, NPS is still invincible in conveying as much with such a simple formula.

Yes, it is incomplete without a follow up question and it does not investigate into the causes for detractors and such, but all this can be taken care of by investing in a CEM platform which can help collect customer feedback based on your initial take-away from the Net Promoter Score.

You won’t have to wonder why a customer gave you a certain rating – Instead you can design your own questionnaire targeting exactly that aspect of customer experience that you are most concerned with and about. You get to understand more than just how many promoters you have. The WHY’S can be answered.

Customer feedback will be analysed to give you insights into customer needs and expectations. All this will only help you better communicate with your employees as to what the plan of action is when it comes to improving customer experience and thereby the Net Promoter Score. The end goal remains the same but the approach is more effective since you can now back up your strategies with data, which the Net Promoter Score alone does not provide!

NPS was designed to help brands identify where they stand from their customer’s perspective, and it does just that. So far as the limitations are concerned, none of them are incorrigible. The rigidity of the NPS can be supported by the flexibility of a Customer Experience Management tool that goes beyond the ultimate question. The ruthless universality of NPS can be balanced by a customizable CEM tool which gives you the power to approach different audiences accordingly.

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Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.