The end of NPS? Why it's time to measure your customers' needs instead

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Net Promoter Score has been a valuable metric for customer experience leaders, but many argue it is fundamentally flawed. 

It was Fred Reichheld’s ground-breaking article ‘One Number You Need to Grow’ in the December 2003 Harvard Business Review that introduced the concept of the Net Promoter Score (NPS).

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.   

Customer needs

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:

NetCNS

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.

About Stephen Hewett

Stephen Hewett

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. He formed iCustomer early in 2016, having worked for Charteris for 12 years. Before that, he worked at John Lewis, where he was Development Manager, Research & Expansion where he was responsible for the development of John Lewis first e-commerce websites & its new insight department. Before his work in retail, Stephen enjoyed a career in aviation, where he held both management and flying roles. As well as his passion for business and the customer he is a keen reader of Science Fiction and a poor, but enthusiastic amateur photographer.  

 

Replies

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18th Oct 2018 10:10

Stephen,

Thanks for this article. There's more and more discussion in this area now.

NPS has helped put customer experience on the agenda and we should be grateful for that. But with time and application, we do realise that measuring 'intention' is a weak proxy for profitability. And whilst NPS was never designed to measure profitability, that is what the modern expectation of the CX Director is - to demonstrate the incremental and sustainable advantage CX investment delivers in terms of profitability.

Perhaps we shouldn't circle in on just NPS. I've seen the less informed commentators promote C-Effort over all others too. Yes 'ease' is important, but it's one of an array of drivers. These commentators need silver bullet measures to support their narrative of 'keep it simple stupid'. But humans are deeply complex and drivers of decision making are unfortunately for podium players earning their crust by telling everyone that CX is a no-brainer, it's complicated.

As you highlight, the needs of customers are multi-layered. How can 'recommendation', 'satisfaction' or 'ease' be a catch all for that!

So, to your point, thinking on CX measurements needs to advance too.

I'll look forward to seeing the progress of NetCNS. We've been working with EXQ (Experience Quality Measure). Using award winning research into identifying behaviours which drive customer decision making, it accounts for 90% of what drives decisions. The outcome it's measured against can be NPS or CSAT, but we have found that 'share of category' is the most relevant for clients, as it shows how to steal share from competitors through improved customer experience. Some 1,200 case studies have been completed to establish it's reliability. The same work highlights that whilst NPS customers demonstrate a high intention to change behaviour, NPS accounts for just 1% of what actually drives decision making.

With NetCNS, EXQ and e-score (the 'okay' index), choices will need to be made because what gets measured gets managed.

I've seen NPS used a a proxy for loyalty. Any business unit can grab a KPI and use it as a proxy for another, it will come undone. Unless CX demonstrates a direct impact on the most commercial of measures for a company, it's importance will be marginalised.

I look forward to reviewing more of your content on this Stephen.

Thanks (3)
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22nd Oct 2018 08:53

Hi Stephen.
I'd be keen to hear more about how you identify customer needs. Or should that be clear? It strikes me that if you simple listened to customers you'd end up with a more disparate cross-stitch of requirements that weren't truly a representation of fundamental needs. I'd love to read more about this.

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to Blessed25
22nd Oct 2018 13:20

Hi, you are right, if you ask customers about needs, they will be disparate. In fact, there are around 300 driver of consumer change. To be able to filter out those which are claimed to change behaviour from those which do is the difference between scientific based CX and luck and judgement. The work completed by Prof Dr Phil Klaus over the past 10 years has identified what matters most to customers. He found there are 25 drivers, which have been refined from an initial set of 300, which we call behaviour drivers. These 25 have reliably accounted for 90% of decision making, with the other 275 making up the remaining 10%. With 1,200 case studies to prove their reliability they provide you 90% accountability of customer decision making. The model is called EXQ (experience quality measure) and we find it transforms how companies prioritise their CX - if you are interested I can share more

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By LisaC1
to christopherbrooks
30th Oct 2018 11:25

Hi Christopher, I would be intereested to hear more about behaviour drivers please.
Thansk you,
Lisa

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22nd Oct 2018 10:53

As you say Stephen, NPS only takes you so far - what is required is something that gives a greater understanding of customer needs. I’d go further and look at how you can understand why customers feel the way they do, and therefore take steps to address their concerns.

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07th Nov 2018 10:00

This is a great discussion and agree that NPS has put customer experience on the boardroom agenda. The problem with an indicator when viewed in isolation is that they can never tell the whole story. It is all about context, what is the context that is seeing an improved or declining NPS score? and yes businesses can be blindsided by improving statistics. Adding in the customers needs to the equation will have the same effect if we only use that particular indicator.
In addition all of these are backwards looking indicators, they have happened in the past. That said the needs element does start to look forward and if matched with an understanding of how the business is planning for the future in terms of skills, empowerment, technology development then better insights can be gained.
Great debate thanks for raising it.

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