Net Promoter Score: What you should (and shouldn't) use NPS for
NPS is the most widely-adopted system for managing customer feedback and improvement. But what is it useful for - and what is it useless for?
Net Promoter Score is the most widely-adopted system for managing customer feedback and improvement, used around the world in many cultures and languages.
But NPS is not a panacea for customer experience problems and business performance woes – and indeed it has never claimed to be.
Nonetheless, it certainly has its uses. MyCustomer spoke with Maurice FitzGerald, keynote speaker, trainer and author of Net Promoter: Implement The System, about the uses and misuses of NPS. Here is Maurice’s advice about what NPS is best used for, and what it shouldn’t be used for.
Use NPS as an indicator of business growth
Business leaders, shareholders and venture capitalists alike all examine indicators of growth to gauge how healthy the future looks. Net Promoter Score’s logic is that the more enthusiastic customers you have, the more new customers you can attract, which becomes a cycle and serves as a growth engine.
According to research by Bain and Satmetrix, co-holders of the NPS service mark, in most industries, Net Promoter Scores explained roughly 20% to 60% of the variation in organic growth rates among competitors. On average, an industry’s Net Promoter leader outgrew its competitors by a factor greater than two times. In other words, a company’s Net Promoter Score is a good indicator of its future growth.
As Fred Reichheld, creator of NPS, noted in the Harvard Business Review that introduced the business world to the Net Promoter Score: “The only path to profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department.”
FitzGerald notes: “It’s an excellent revenue predictor and market share predictor in most industries. However, if for example you want to look at NPS trends competitively amongst bricks and mortar bookstores, it doesn’t matter how good your trend is, you’re still likely to be losing revenue because it is an industry that is in structural decline. So NPS trends are best thought of as an excellent predictor of market share trends, rather than revenue trends. And that is true for most industries but not all, according to the original research.”
Don’t use NPS to measure contact centre performance
Research by Call Centre Helper suggests that NPS is being viewed as an important metric by fewer and fewer contact centres. In a survey of 350 contact centre professionals last year, less than a third of (32.8%) respondents said that they thought of the metric that way, compared to 36.1 the year previous. At the same time, the number of contact centre professionals that actively think of NPS as not important has risen sharply, from 28.5% in 2017 to 40.3% last year.
“There are cases where NPS isn’t useful and I would put support centres at the top of that list,” agrees FitzGerald. “I believe that by far the most useful metric for call centre operations is the customer effort score. It is pretty intuitive that the thing that people want from customer support (whether it be online chat, call centre, etc) is that it is easy and that they find the answer to their queries quickly. And customer effort is measured on the question: to what extent do you agree that the company made it easy for you to handle your request? It is measured on a scale from 1 to 7.
“In call centre interactions, customers want to spend as little time as possible to get what they need. They want to get on with their lives. So, as Dixon, Toman and Delisi point out in their excellent book The Effortless Experience, ‘delighting’ customers is pointless.”
It’s perhaps unsurprising, therefore, that in CCH’s research customer effort score’s popularity now dramatically outstrips that of NPS, with nearly half (48.9%) of respondents rating customer effort as a very important metric, and only 10% viewing it as unimportant.
Use NPS as a simple, universal way of communicating CX performance
More sophisticated measurements can be designed that will be better predictors of growth than NPS – something that Reichheld has freely admitted. Compound metrics that combine the likes of CSAT with financial spend metrics or share of wallet metrics, for instance, can deliver more accurate predictions. But NPS was always promoted as the best single-question predictor for the majority of businesses – in other words, the best simple scoring system that could be easily communicated.
“Every time you need to explain your customer experience progress to a new audience, if you’re talking about NPS you don’t have to explain what it is – because it is the standard,” says FitzGerald. “Whereas if you’re going to move to something like wallet allocation, for instance, there’s always going to be at least one person in the audience who hasn’t heard of it and you’re going to have to explain it to them while everyone else in the room falls asleep.
“Even CSAT is complicated because there isn’t any standard for what the term ‘satisfied customers’ means. One of the core skills that a customer experience leader has to have is communication skills. And so if you start trying to communicate complex metrics that few other companies use then you’re going to make your life much more difficult than it needs to be.”
Don’t use NPS to compare countries
In large multinationals, FitzGerald says the biggest mistake that he sees people making with NPS is comparing one country to another. “Never do it,” he says. “Your competitors are local, so you should be comparing yourself locally.”
“I recall a story from a former Apple employee who told me that for years the company’s Japanese stores were at the bottom of the daily NPS results, and they knew the staff weren’t to blame since what the employees were doing was identical to that in, say, California. So they blamed the customers, believing they were just grumpy. Then, one day, one employee challenged this by suggesting it was the company that was the problem. And they eventually took huge strides by adjusting the way they conducted business to reflect the cultural norms of Japan – for instance, not insisting on addressing every customer by their first name; and putting goods on racks rather than forcing visitors to engage with staff. Once they had done that, they were surprised to see the scores improve considerably - while still remaining low compared to the US. So this demonstrates that there just are substantial cultural differences. Therefore, organisations shouldn’t leap to conclusions that staff or customers are to blame for international variations in NPS.”
Use NPS to gauge the viability of your word-of-mouth network
Word-of-mouth represents a crucial marketing tool for many businesses. Research indicates that over 90% of consumers trust recommendations from family and friends above all other forms of advertising. Elsewhere, studies suggest that a high-impact recommendation (i.e. from a trusted friend) is up to 50 times more likely to trigger a purchase than is a low-impact recommendation. And word-of-mouth is influential throughout the customer decision journey, from consideration to moment of purchase.
Based on the question of whether you would recommend a product/service, Net Promoter Score enables organisations to gauge the viability and strength of their word-of-mouth network.
“NPS is a reliable predictor of whether people really will recommend your product or service to a friend or colleague, and research supporting that was conducted by Satmetrix in the early days of NPS,” says FitzGerald.
“The catch that you need to bear in mind, however, is whether customers will have the opportunity to make that recommendation. It’s not necessarily enough to know that they’re willing to do it. So companies have a role in ‘enabling’ or ‘encouraging’ customers to recommend by making it as easy as possible. For instance, if a customer has given a 9 or a 10, does your business have a way of getting back to them to acknowledge that they would recommend the product/service, and encouraging them to post a picture of the item on Instragram? So NPS predicts the willingness to recommend very well - and the actually doing it, reasonably well.”
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Neil Davey is the managing editor of MyCustomer. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 15 years, including Internet Works, CXO magazine and Business Management. He joined Sift Media in 2007.