When it comes to analyzing how customers feel about an organization, the Net Promoter Score has become the business benchmark for measuring brand loyalty. But are businesses putting too much faith in this NPS metric? Is it really an accurate way of gauging customer sentiment and their likelihood to advocate for a brand based on their experiences to date?
What is Net Promoter Score?
A Net Promoter Score survey is used to understand how likely a customer is to actively promote or actively criticize an organization. It’s delivered as a single question that asks the recipient on a scale of 0-10 how likely they are to recommend an organization to someone they know, based on their experiences to date with a product or service or with the elements of customer experience (CX) related to them.
The NPS survey was first used by Bain & Company in 2003 as a simple yet accurate means of predicting future purchasing and referral behavior. But its development, by Fred Reichheld (a Bain employee), started 10 years earlier. And even though it was a metric devised in-house, Bain & Company chose to share the methodology so that all organizations could potentially benefit.
How is an NPS metric calculated?
The aim of an NPS survey is to segment the customer base into detractors, passives or promoters, based on their feelings toward the business. Customers who respond to the NPS survey with a score from 0 to 6 would be categorized as brand detractors and, therefore, people who would actively dissuade others from becoming customers. Those returning a score of 7 or 8 are considered passive — they will neither recommend nor openly criticize the brand. The final segment, those giving an organization a score of 9 or 10, are promoters and the most likely to actively advocate for the brand.
An organization’s NPS score is calculated by subtracting the percentage of detractors from the percentage of promoters. So, if 10% of customers are detractors and 30% of customers are promoters, the NPS score would be 20.
Why is Net Promoter Score so popular?
One of the reasons that NPS has grown so much in popularity over recent years is its sheer simplicity. It’s a survey that’s easy to send and easy to process and, crucially, simple to understand. It’s a piece of valuable customer data that can be used to drive business decisions, yet it’s also something that can be expressed as a single number.
However, no matter how simple the process, it will not be adopted unless there’s a motivation to do so. And that motivation is customer experience. Organizations that lead within their industries or sectors do so because they’re customer-centric. As NPS is essentially a means of quantifying performance relative to CX, it has grown into a universally recognized benchmark.
What are the benefits of NPS?
The biggest single benefit of adopting the Net Promoter Score survey and system is customer segregation. With the response to a single question, it becomes easy to identify customers who are at risk of breaking ties with an organization and those who have reached a level of loyalty where they’re ready to advocate. And let’s consider how powerful word of mouth and digital influence have become. Being able to leverage this group of people becomes a very effective form of authentic marketing and promotion.
Likewise, when an organization knows the signals that suggest a customer is about to cut ties with its brand, they have a chance to engage and retain.
Another clear benefit is that NPS can give you an overview of how the different elements of CX delivery are performing. The NPS metric can provide context for other metrics, such as customer satisfaction (CSAT) and first contact resolution (FCR).
Does NPS have limitations?
Yes, NPS absolutely has limitations. Because it measures a cumulative experience, it’s a survey that should be used sparingly. It isn’t realistic to expect a customer to provide an NPS on a monthly basis. Therefore, unlike CSAT, NPS isn’t a real-time metric.
Likewise, because it isn’t a timely survey, the recipients most likely to respond will be those who have had memorable experiences. This means there’s a genuine risk that results will be skewed, capturing the feedback of the biggest promoters and detractors. And the fact is that regardless of the brand, most customers live within the passive range of the promoter scale.
As well as returning potentially skewed results, there’s no guarantee that every recipient will even complete the survey. It’s not uncommon for organizations to get a 10% response rate when sending out surveys.
The final potential limitation is the depth of insight. An NPS metric can’t tell an organization why customers feel the way they do. Even with a prompt to provide further details, different customers express themselves in different ways. This, in turn, can make it challenging and time-consuming to draw genuine insights from responses.
Is the NPS metric flawed?
A lot has changed since the NPS metric was created. For instance, the continued digitalization of modern life and with it the access to information at consumers’ fingertips means that they choose brands differently and their definitions of positive CX have also evolved. A customer’s position on a brand can be in a continued state of flux. This means that NPS survey results could already be outdated by the time they’re processed.
Likewise, the promoter scale focuses on extremes. It’s equally possible for someone who falls firmly within the passive segment to be an active promoter. It’s also possible to be both a detractor and a promoter. Someone can love a product but dislike the service supporting it.
As such, a Net Promoter Score survey might not always be reflective of true customer intent or behavior. Our own research shows that consumers are more likely to post reviews or share experiences when they have a positive rather than negative interaction with an organization.
With this in mind, it could prove insightful to add a second question to the traditional survey, asking if the customer has ever recommended a brand, to put their promoter score into context.
Nevertheless, despite its limitations, an NPS metric is still useful and valuable, especially if it’s viewed alongside other mission-critical measures of customer experience. To learn more about the most important metrics for managing a contact center, check out our ebook for operations leaders, “Measure & manage contact center performance.”