Net Promoter Score: Vanity or Value Metric?
There is a lot of talk about Net Promoter Score these days even though it isn’t a new concept.
How Did We Get to Here?
Fred Reichheld and his colleagues at Bain & Company, along with assistance from Satmetrix, initially created Net Promoter Score (NPS) in 2003 as a better way to measure customer satisfaction and loyalty.
Reichheld found typical customer satisfaction surveys weren’t injecting insights back into customer facing processes effectively to generate a behavior change and thus improve the experience. But, after significant research, they found that answers to one question appeared to correlate with customer behavior:
On a scale of 0-10, how likely are you to recommend this brand/product/service to a friend or colleague?
The scale was as such:
Those who were very likely to recommend (selecting 9 or 10 on the scale) appeared to be those that bought more, were more loyal, referred more people and were more engaged. In fact, data indicated that those brands that had high net promoter scores grew at more than twice the rate of their competitors.
Brands ask their customers the “likelihood” question. Customers respond and fall into one of three categories:
“Promoters” give a score of 9-10. These are your fans, loyalists, and brand advocates. They buy more over time and become the real value drivers for you. They love you, and they refer you to help you get new customers.
“Passives” give a score of 7-8. They are satisfied customers, for now. But as the image suggests, they are becoming indifferent, or maybe they already are. They won’t speak negatively about you, but they won’t sing your praises either. They aren’t emotionally invested so they could churn.
“Detractors” give a score of 6 or lower. These unhappy customers feel trapped in a bad relationship and can’t wait to get out. Churn is probable. They will speak negatively of you, which can ultimately hurt your brand.
Scores range from -100 to 100. Your net promoter score comes from subtracting the percentage of detractors from the percentage of promoters..
Interestingly, an NPS score of less than 90% doesn’t necessarily spell trouble.
SPG Consulting came up with the following rating score for brands to analyze their net promoter scores:
- Perfect: 100
- Spectacular: 85 to 99
- Excellent: 70 to 84
- Very Good: 55 to 69
- Good: 40 to 54
- Average: 25 to 39
- Mediocre: 0 to 24
- Poor: -25 to -1
- Terrible: -50 to -26
- Abysmal: -100 to -51
NPS varies based on different industries. Last month, Temkin Group released its findings of its Net Promoter Score Benchmark Study, 2016.
Results are as follows:
As you can see, score ranges are all over the map.
I mentioned at the start of this post that there has been more talk about NPS lately.
This is because more brands finally understand that customer experience is what is driving growth, and as such, they must become customer-focused in order to survive. Why? Because, according to Walker Info, by 2020, customer experience will overtake price and product as the key brand differentiator.
NPS, Vanity Metric?
Here is where things get muddy for NPS.
While NPS has its pros – it’s fairly simple – you are only asking your customers a couple of questions (the likelihood question and its follow-up question, why they selected the score) to start gauging loyalty – which gives you a feel for your promoters, passives, and detractors, it does have a dark side…especially when brands start expecting too much from NPS.
Here is where brands go wrong:
They focus on the number, not the mindset.
This is not difficult to do considering we are inundated with data by the second and thanks to Big Data and cloud computing technologies, the need to make data-driven marketing decisions constantly intensifies. NPS is another metric that feeds this habit. And, seemingly, why NPS is measured inconsistently.
However, brands don’t understand the what’s, why’s and how’s of NPS. That requires a mindset shift.
They believe that NPS is everything, instead of part of a greater whole.
They view NPS as a one-number standalone metric that is the be-all end-all to measure customer experience. But, they don’t understand how it collaborates with the other elements of customer experience to drive growth.
They focus on increasing the score and not improving the score.
They focus on the number and not the actionable insights they discover that could be used to drive business decisions and progress towards increased corporate growth.
Used in this way, NPS is nothing more than a vanity metric. Its value can be equated to that of a social media like or follow or worse, a false positive that corporate leaders use to incorrectly gauge success.
However, if you treat NPS as a value metric, you will achieve success.
How To Treat NPS as a Valuable Piece of Your Customer Experience Framework
1. Understand that NPS is a part of your overall customer experience strategy and know where and how it fits.
Really focus in on the goals of your customer experience. Begin with the end in mind. What bottom-line revenue outcomes do you want? What activities will you engage in to produce the results to generate those outcomes?
Create a customer experience framework to support these goals:
- Understand the customer touch points that make up the customer journey so you can map out the customer’s experience
- Continue to fine-tune the customer journey by creating a voice of the customer feedback loop, interviews and interactions via other channels so you can capture this valuable customer data
- Create a mechanism for identifying insights and sharing them with key stakeholders, such as Sales, Customer Experience, Product and Marketing
- Determine the insights that are actionable
- Create and implement a plan of action
- Report back to your customer on the progress of the feedback they shared
- Always be in improvement mode – fine-tune your customer experience engine to enhance your customer’s experience
Be realistic with how NPS will support these goals.
2. Realize that NPS is not a standalone metric.
Combine NPS with other metrics such as your Customer Satisfaction Score (CSAT) and Customer Effort Score (CES).
This will give you a total customer experience picture.
3. Treat NPS as a journey, not a destination.
That means knowing the right time to ask the “likelihood” question and knowing the right frequency of the ask.
Of course, the likelihood question shouldn’t be the only question you ask. It should be accompanied by its follow-up question – “would you tell us why” you selected that score? This gives the customer the opportunity to provide valuable feedback.
Think relationship throughout the NPS process. Once you ask the question and its follow-up, continue to build the relationship with the customer. Focus on building the relationship and turning the customer into an engaged one.
4. Be sure to benchmark NPS.
While you should benchmark NPS within your own industry, you should also benchmark NPS within your own company. Monitor the performance of NPS. Is your number improving? Focus on the trend. Emphasis should be on why and how the number is changing, and what is attributing to that change.
5. Create an NPS improvement plan.
Your goal should be to improve your net promoter score through growing promoters and converting detractors and passives into promoters.
Not all detractors and passives will become promoters. Some will churn.
The point is you can take what you have learned from your insights and apply tactics to grow promoters, and convert passives and detractors into promoters.
This is going to require a deep-dive into each classification. For example, you might determine that some of your promoters are ripe for a formal brand advocate program. Or your research might show that a detractor of 0 is very different from a detractor of 6. You need specific plans of action to deal with each segment of your customer base.
Customer Experience drives corporate growth. Knowing how and where NPS fits into your overall customer experience is half the battle. The sky’s the limit on being creative with net promoter score. Use your engaged employees to grow engaged customers and you’ll see increased growth and in turn, increased loyalty and success.
The importance of customer lifetime value (CLV) can’t be overstated. If you want to increase your CLV, then you should start by investing in customer success.
Onboarding can be a powerful tool that helps you deliver value, provide support and improve ease of use for your customers. Appcues’ Jonathan Kim explains how to successfully implement intentional onboarding within your organization.