What do GDP and NPS have in common?by
Beth Karawan of Imprint CX unpacks the histories of GDP and NPS to discover how useful a “one number” approach really is.
First, a quick history lesson. GDP was developed in the 1930s as a better statistical tool to measure economic change. It quickly became the global standard – one number that could sum up a country’s economy. That one number is used to make all sorts of policy decisions worldwide that impact citizens’ daily lives.
Many of us know the origin story of NPS, which is similar: About 20 years ago, Fred Reichheld and his team launched a research project to identify the best one-question indicator of customer lifetime value.
It quickly became the global standard, with thousands of companies, including two-thirds of the Fortune 1000, using it to measure the quality of those customer behaviours that contribute to a company’s growth. As many of us are aware, many organisations use this one number to make all sorts of decisions that impact both employees and customers.
See the similarities?
This next part about the history of GDP is what caught my attention. The lead economist who developed GDP also explicitly warned against the use of this one metric to measure economic welfare. He felt that economic welfare could not be adequately measured without supporting data such as personal income distribution, the effort required to earn that income, or the impact of unpaid labour such as new skills training or household work.
So for almost 100 years, the limitations of GDP have been known and debated. In the US and globally, recommendations have been made on how to fully capture a more complete story of economic well-being. But in the meantime, the use of the one number persists.
While NPS has evolved from “score” to “system,” with the addition of asking “why?” to explain a customer’s rating, there is still consistent debate as to whether that is sufficient data to measure customer experience.
There is constant debate as to whether NPS has sufficient data to measure CX.
At least once a day, I see posts on my LinkedIn feed about NPS and whether or not it provides actionable information to eliminate pain points, improve customer experience, and thus maintain CLV.
I am not a trained economist and am therefore not qualified to solve the GDP conundrum. However, I am a marketing professional with 25+ years of experience in understanding consumer and shopper behaviour. So I have a few thoughts on how to improve how (or even if) we use NPS to adequately measure customer experience.
Use NPS (or any survey requesting customer feedback) judiciously
Survey-slapping or data panhandling, whatever you want to call it, has gotten out of control. Companies think that measuring every single interaction on the journey (i.e., a retailer asking for feedback on your shopping experience, your product delivery experience including rating the driver, and your satisfaction with the item itself) will give them a complete picture of the customer experience.
But look at it from the customer’s point of view. You are putting the burden of your experience delivery on the customer without any expectation of benefit or reciprocity.
Is NPS always the right question to ask?
For example, I recently placed an online order for pickup at my local Target. Before I even got home, I received an email with an NPS survey.
I answered it honestly: based on my most recent experience, I am not at all likely (0) to recommend Target to a friend or family member. While the survey did allow me to explain my reason for the score I selected (“I had a fine experience at the customer service desk but that does not mean I would recommend Target”), wouldn’t it have been more effective/accurate to ask me how satisfied I was with my experience?
Stop gaming the system
We have all heard stories or experienced situations ourselves; whether it be getting “cancelled” on a ridesharing app for refusing to give a driver a 5-star rating, coffee shops posting signs asking for 9 or 10 ratings so they can win a local franchise competition, or car salespeople begging for perfect 10s on a customer satisfaction survey for fear of losing a bonus or the job itself.
Stacking the deck by only asking for positive reviews is essentially data fraud.
Response rates to feedback surveys are abysmal and usually only represent a small fraction of your total customer base. Stacking the deck by only asking for positive reviews is essentially data fraud. Manipulating the data in that way puts blinders on an organisation as to where the real weak spots are and what needs to be addressed to improve customer experience.
Stop making critical decisions that affect both employees and customers without having the full picture
As I stated in a previous article, NPS is not an indicator of customer experience. While it may be highly correlated with CLV, it is simply a metric that by itself does not offer any sort of meaningful or actionable information on how to improve customer experience.
It is a lagging indicator that can tell “what” is happening but not the “why” behind it.
Just like there isn’t one perfect statistic to evaluate economic progress and success, there isn’t one perfect method or metric for gathering customer feedback. Customer experience is holistic, not binary, so why rely on just one number to evaluate the results of your CX strategies?