The end of NPS? Why it's time to measure your customers' needs instead
Net Promoter Score has been a valuable metric for customer experience leaders, but many argue it is fundamentally flawed.
NPS, as Reichheld convincingly argued, gave an organisation a remarkably powerful tool for understanding the appeal of the organisation itself, and its products and services, to customers.
The whole idea of NPS is based around asking customers the question ‘How likely is it that you would recommend our company/product/service to a friend or colleague?’ based on a zero to ten scale. In the years since its introduction, NPS has become globally ubiquitous and few organisations now fail to ask their customers this question in one form or another at some point in the customer journey.
Yet there is a clear problem with the semantics of NPS: what does the organisation really mean by the word ‘recommend'? Surely there isn’t the implication that customers are going to be actively going out like disciples to spread the word among the general public?
NPS is open to abuse by being applied in contexts that are inappropriate. If the key NPS question is to have any meaning, the customer experience needs to be substantial and prolonged enough for the customer to have an experience on which a recommendation could reasonably be based in the first place. Buying a car or a kitchen, taking out insurance, eating a meal in a restaurant, staying in a hotel; these and myriad other customer experiences could usefully be the subject of the NPS question.
But NPS has become too widely implemented by organisations that see it as an easy shortcut to providing a metric which allegedly shows that the organisation is keeping its customers happy. Would it, for example, be reasonable to ask the NPS question of a customer who had been given a flu jab, or was simply filling up their car at a petrol station? I have experienced both.
In an epoch when social media allows customers to indicate pretty much instantly how they feel about an organisation, those organisations that want love from their customers need to do far more than merely measure NPS.
The main reason why NPS is only a metric of limited utility is that it doesn’t give any definite understanding of the extent to which an organisation is meeting customer needs, and more importantly which ones it is not meeting.
One particularly serious practical consequence of this is that when an NPS score is going down, organisations typically have no idea why this is happening.
If an NPS is going up, organisations feel safe, but it is arguable that NPS, whether going up or down - and probably especially when it is going up - gives a false sense of security. Why? Because assessing NPS doesn’t actually require the organisation to understand its customers very much: as calculating NPS does not require organisations to understand why that number is produced. It simply produces a number, rather than an understanding of why customers have scored the way they have.
Assessing NPS doesn’t actually require the organisation to understand its customers very much
This is not to say that NPS has no value; it does, but more as a kind of quick barometric reading giving an assessment of how an organisation is doing in relation to its customers rather than anything deeper.
In practice, NPS is more commonly used by marketing departments than operations departments. After all, the job of the marketing department is to focus on creating the best image of the organisation’s brand now and going forward. It’s not surprising that a metric which focuses on the likelihood of customers to promote the brand to others (assuming they make such recommendations at all) sits most comfortably with the organisation’s brand promoters.
A new metric
Customer needs can be defined as the benefits the customer absolutely must be getting from the organisation if that organisation is going to be successfully in business at all.
Customer wants, on the other hand, are benefits that will enhance the experience but are not fundamental needs. Customers of an airline, for example, need a seat in an airplane that will take them safely to their destination on time. A haute cuisine meal on the flight, by contrast, is a want, not a need. A practical observation here is that the terms ‘wants’ and ‘nice to haves’ are interchangeable; indeed, experience even shows that customers are better able to understand the phrase ‘nice to haves’ than ‘wants’.
Identifying specific customer needs and wants is extremely difficult to achieve through NPS, for the simple enough reason that these are not what NPS measures.
I am therefore proposing a new metric - Net Customer Need Score, or NetCNS for short. The genesis of the NetCNS is that for CEOs, COOs, customer experience directors, sales directors and most other people in a senior organisational position, there should be only one question in their minds about customer experience. This question is, 'How are we meeting our customers’ needs on a day-by-day, week-by-week and month-by-month basis?'
NetCNS has been designed to deliver just one number that provides an organisation-wide operational measure and benchmark for how customer needs are being met and also to provide a deeper understanding of the needs that actually drive the score in the first place.
In doing so, the organisation benefits from a clear indication of what it must do now in order to meet its customers’ needs more effectively and meet as many of its customers’ wants/nice-to-haves as it can do profitably. These indications can then be acted upon pretty much instantly by staff on the front line, driving up the number of customer needs that are met successfully.
NetCNS is to an operations team what NPS is to marketing.
It may be argued that NetCNS is in fact the best predictor of NPS. After all, as a matter of logic and commercial commonsense, how could a customer reasonably recommend a service, brand or experience, if their basic needs are not being met?
You’d hardly recommend a hospital that left you feeling as ill when you left as you felt when you went in. Moreover, given the causal link between meeting customers’ needs and wants and the customer’s propensity to recommend or become a Promoter, it is reasonable to assume that the significant body of research and evidence that supports NPS can be applied to NetCNS.
How does NetCNS work?
To arrive at an organisation’s NetCNS you need to proceed through the above straightforward three-step process. It works as follows:
1. Customer Needs
The best way to work out exactly what your customers' needs are is to listen carefully and understand the feedback provided by your customers. Most organisations already have significant quantities of text, verbal and other verbatim data so it is a relatively straightforward matter to identify themes and group the feedback in a way that describe needs and wants. Often common groups of needs emerge from this feedback, however their priority and specific mix will vary from organisation to organisation, across different sectors.
2. Customer Needs Score
Having established what the customer needs are, each customer’s verbatim statements can be scored by them through traditional surveys, face-to-face workshops or online data capture to indicate how well a customer need is met across three different dimensions:
a) Emotion – how do customers feel when the need is not meet?
b) Importance – how important is the need?
c) Performance – how well does the organisation currently meet that need? The Customer Needs Score (CNS) can be calculated by establishing a weighted formula that represents a sum of the experience that relates to the need they have specified and if that need has been met or not
3. Calculating NetCNS
The NetCNS is obtained in the same way that the NPS is, by totalling the number of customer needs that have been met, then taking away the number that have not been met. This is then divided by the number of responses and multiplied x100 to produce a score between -100 and +100. This number is the NetCNS for the organisation.
So, like NPS, the NetCNS delivers a numerical score between -100 and +100. However, additionally and, most importantly to calculate NetCNS, you must have first understood your customer needs and wants, and how each grouping is performing. This means that when the executive board asks why the score has moved, you already know the answer.
Organisations that combine use of NetCNS with the NPS metric will give themselves the best opportunity to maximise their competitive edge, now and in the future. They will also create an understanding for themselves of what they must deliver to meet their customers’ needs and also those customer wants that can be delivered profitably, or at minimum cost.
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As a Fellow of the Institute of Consulting & a Certified Customer Experience Professional (CCXP) Stephen's extensive work with commercial clients and with Central and Local Government has given him experience in a wide variety of industry sectors. Stephen has written 3 books about customers and employee engagement and is a regular speaker....