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The fuss about NPS

The fuss about NPS

NPS or Net Promoter Score is a popular customer loyalty metric used across industries. More than two thirds of fortune 1000 companies use this metric. Its promoters (Fred Reichheld, Bain & Company, and Satmetrix) referred to it as the ‘One Number You Need to Grow’ in a 2003 HBR article. It was (and still is) considered to be the perfect antidote to the complexity and frustration associated with designing, deploying and analyzing data from the traditional customer satisfaction surveys, otherwise known as CSAT surveys. NPS is designed to help brands focus narrowly on their most loyal and enthusiastic customer base (the ‘promoters’) and extract maximum value from them. Loyal customers purchase more and recommend the brand to others.

So, deploying an NPS based system for customer listening is pretty much a no-brainer. Right? Actually not. Let’s take a closer look at NPS to understand how powerful yet ineffective it can be when deployed incorrectly.

NPS surveys are brief and easy to deploy compared to traditional satisfaction surveys. The CSAT surveys are typically elaborate and complex, which makes it harder to measure and track the various KPI’s that they are tasked to measure. The founders of NPS have said that it is simple and profound, although many experts tend to disagree with that claim. NPS is (in an abstract way) a proxy for loyalty which is one of the key drivers of growth. So, some might argue that NPS correlates with profitability and growth. These assertions have led to the popularity of NPS across industries thus making it useful as a benchmark to evaluate loyalty/ growth of a product, service or a business as a whole.

On the other hand the critics of NPS question the whacky science behind the NPS formula. They say it hides UX success. The eleven point scale confuses customers and results in a lot of noise that is mistaken for science. They even question the claim that NPS is a good indicator of customer loyalty. The NPS question (on likelihood to recommend) requires respondents to predict future behavior, an approach that has seldom resulted in reliable research.

So, is NPS all that bad?

It all depends on how it is used. The net promoter score just by itself is useless. It is easy to game.  It tells us nothing about the quality of experience and might even be misleading at times. A high NPS does not necessarily mean that the brand offers delightful experiences, and has loyal customers. Similarly brands offering satisfactory experiences could end up with a poor NPS. So, that makes the whole bench-marking effort futile. And if your business decisions are based solely on the score you might want to rethink your strategy.

The real value of NPS comes from the follow up question. It comes from associating NPS with an experience or an actual customer behavior (like a repeat purchase or a referral). For example, on Speedrate we capture experiences at each stage of the customer journey, and track how NPS changes with each experience. This helps us identify the stages (and touch-points within each) that cause the change in score. It makes it easier to accurately predict the NPS improvements once the bottlenecks have been identified and eliminated through CX improvement initiatives.

Interested in learning more about how we ‘unsuck’ the NPS? Check us out here.

By | 2018-07-30T01:20:39+00:00 January 16th, 2018|Customer Experience, Customer Feedback, CX data|