The Pros and Cons of Net Promoter Score - NPS
The Net Promoter Score (NPS) is a customer loyalty measurement developed by Fred Reichheld, Bain & Company, and Satmetrix. It relies on only one question: How likely is it that you would recommend our company/ product/ service to a friend or colleague?
It then breaks up responses into three areas:
Promoters (9-10). The happiest and most loyal customers that are most likely to refer to others.
Passives (7-8). Customers are happy but are unlikely to refer to others. They may be swayed to a competitor fairly easily.
Detractors (0-6). Detractors are customers that are unhappy and may spread negative messages and reviews.
As a metric, NPS has done a lot to help companies rally their organizations around a measurement that is simple to use. This in and of itself, makes NPS a winner. Instead of distributing bulky customer satisfaction surveys, where the people issuing the survey don’t really know what to do with the results, NPS has one question and one metric.
As Fred Reichheld, creator of NPS noted“Most customer satisfaction surveys aren’t very useful. They tend to be long and complicated, yielding low response rates and ambiguous implications that are difficult to act on.”
Recently, we’ve come across some challenges with NPS raised by customers of our clients:
NPS does not always correlate with customer loyalty, retention and growth. When the correlation doesn’t prove out, companies get frustrated because NPS does not provide the reasons behind the ranking. For example, we spoke to one customer who said he would recommend the company but he was also planning to cancel his contract with them. We learned this through an interview and when we asked why the answer was simply. “I think the company is strong and I would recommend them, I just think the competition is better for what we need.”
NPS can tell you what your customers think but not why they feel that way and if you are looking to earn customer loyalty you can ignore some of the challenges underneath the response and equally the opportunities. In one case a client chose to ignore all of the passive grouping and chose to only focus on those that were positively oriented. While you may not be able to mobilize your detractors, it is important to understand why they feel the way they do; through listening the potential exists for fixing the problem.
NPS is a starting place for a series of longer term actions with customers and employees. Like all measurements it is not perfect, but it does bring to the light of day the strengths and weaknesses in one simple measurement. And in today’s currency – simple is gold.