Introduction to the Net Promoter Score (NPS)
The Net Promoter Score (NPS) is a widely used metric helping organizations measure general customer loyalty. During the process the organization asks current customers one simple question: On a scale from 0 to 10 how likely is it that they might recommend the brand to their family, friends, or coworkers?
Originally developed by Fred Reichheld in 2003, the NPS methodology has been widely adopted in VoC programs around the world. Merits of the measure include the fact that it is an easy-to-follow KPI that can serve as a north star for an organization’s CX initiative. Some of the many disadvantages of the method include misleading comparisons with other companies distracting from internal improvements, the false use of the NPS to measure transactional satisfaction instead of loyalty, as well as the sensitivity of the metric to the method being revealed to the sample audience, which makes the method useless in the employee space despite many attempts to measure an employee NPS (eNPS).
The NPS is a prominent metric in the world of CX and many leaders in organizations understand its importance and correlation with financial success. This in itself is a great achievement and helps CX leaders around the world secure executive support for their initiatives.
Choosing NPS as the north star your organization follows on their way to more customer centricity is a powerful motivator and creates a broad drive towards better CX.
These points have made the Net Promoter Score a popular metric. However, there are plenty of pitfalls to be aware of.
While the Net Promoter Score (NPS) is a useful metric for measuring customer satisfaction, it also has certain limitations that should be considered. These limitations do not diminish the value of NPS, but they justify mixing the NPS with other metrics in your VoC program. Here are just a few of the pitfalls to avoid when using NPS in your VoC program.
The “Let’s do NPS!” Order from the C-Suite
It is a typical start of a CX initiative in an organization: a senior leader decides they want to “do the NPS”. A team is chartered to set up the survey and then repeat it regularly to provide the leadership team with that one CX metric.
Those organizations who leave it at that, do now follow-up analysis of survey results, do not conclude prioritized improvement actions, and to not embed the NPS survey into a well-orchestrated voice-of-the-customer program have done nothing but cause customers
the effort of filling-in yet another survey. They set the – to be disappointed – expectation that the organization will do something with the results and improve.
If you are part of a “Let’s do NPS!” initiative, make sure to develop the CX initiative from here and not settle for just sending out an annual NPS survey!
The “one-size-fits-all” Pitfall
The Net Promoter Score measures loyalty! The question is somewhat odd and the scale from 0 to 10 is counter-intuitive to scales used in most cultures around the world. But the result justifies this – you get a globally standardized loyalty metric in return!
The Net Promoter Score does not measure satisfaction! There are better measures to do that, so don’t fall for the tendency to “standardize” your VoC program only on the NPS metric and use it to also measure transactional satisfaction.
We have seen clients actually use very questionable algorithms to convert satisfaction scores on a 0 to 3 scale into NPS scores, just to make their VoC metrics “comparable”. This is utter nonsense and robs you of the ability to smartly mix your VoC metrics in the most effective way.
We have also seen market research firms suggesting questionnaires to their clients where the initial NPS question was then followed-up with transactional deep-dive questions also using the NPS scale …. only to not “confuse the respondent” with too many different scales. That, too, is nonsense, since it creates a methodically wrong approach that also bores the respondent out of their socks instead of asking relevant questions with appropriate scales.
If you intend to use the NPS, use it to measure the loyalty of your customers only, not their satisfaction with interactions and not the effort they had to spend achieving their objectives.
The Employee Net Promoter (eNPS) Score Pitfall
While there is much to be said for the Net Promoter Score for measuring customer loyalty, the metric is pretty much useless for measuring employee sentiment. The NPS methodology depends on it not being revealed to the respondents! You just don’t communicate “only 9s and 10s are good scores” or you will ruin historic comparability of your results. However, this is exactly what happens in corporate environments. Together with very random timing of related employee sentiment events like annual reviews, acquisitions, lay-offs, or more, we yet have to see an eNPS line that is not as erratic as the one in our (real life) example below.
The Branch vs. Headquarters Pitfall
It is best practice to link the performance of your CX initiative to the individual objectives of employees across the organization. But be aware that we can get pretty crafty when it comes to finding ways to “trick the system”.
Every week we see examples like the ones in the image below where local teams communicate to customers at the point-of-sale, revealing the NPS methodology and, hence, tampering with the survey and the results from it. Not always is this bad-intended – often employees just want to do their bit to be successful.
This, however, is yet another argument for not using the NPS for measuring transactional satisfaction at the point-of-sale. There are better – more tamper-proof – metrics for that!
The “Benchmarking” Pitfall
Whenever we get scored in life, we want to understand how we did relative to others. This feeling of competition is deeply engrained in our culture and drives improvement in the quest to get better every day!
However (with capital letters throughout the word!), industry benchmarks and comparisons of your NPS with that of your competitors are a splendidly useless waste of time!
Firstly, mostly your customers don’t buy from your competitors, they buy from you. Consequently, they don’t compare you with your competitors, but they compare you with their airline, their online retailer, their telco, and their local grocery store.
Secondly, every employee in your organization, when confronted with a benchmark you missed or a competitor score being higher than yours, will spend an abundant amount of brain capacity to explain why “your situation is so special that the two simply cannot be compared”!
Be smart and be demanding by not comparing your NPS score today with anything, but your own NPS score yesterday! Make yourself the benchmark for improvement and manage toward constant improvement of your NPS rather than closing a perceived gap that might be too underwhelming or too aspirational to fill – you will never know, which of the two it is.