Many smart companies use Net Promoter Score (NPS) to measure how well they’re meeting the needs and expectations of their customers. Enterprise messaging software company Slack, for instance, treats NPS as a leading indicator of growth, using it to improve its interactions with customers and prospects.
Bill Macaitis, CMO of Slack, explains, “The larger the number of advocates for product, the lower the customer acquisition costs for the company, and the more effective customer success team will be.”
The growing list of companies that use NPS includes global brands like Apple, the BBC and American Express.
So why are more and more companies using NPS? And, more importantly, how can your company use NPS to make better business decisions? In this blog post, we examine the pros and cons of NPS and explore ways you can get more out of this important metric.
What is a Net Promoter Score, exactly?
Created by customer loyalty researcher Frederick F. Reichheld, Net Promoter Score—also known as Net Promoter System—is a measurement system that allows companies to track their promoters and detractors with the goal of gauging business performance from the perspective of the customers. Companies send a 10-point scale survey to customers asking them a single question: How likely are you to recommend our product/service/company to a friend or colleague?
People who answer between nine and 10 are considered ‘promoters,’ while those who score the company between zero and six are considered ‘detractors.’ People in between are called ‘passives.’ To calculate NPS, simply subtract the percentage of detractors from promoters.
NPS differs from customer satisfaction surveys (CSAT) in terms of the question posed to customers. Whereas NPS measures how likely customers are to recommend a company, CSAT asks questions like, ‘How satisfied were you with the transaction?’
NPS also differs from customer effort score (CES), a metric introduced by a group of Corporate Executive Board researchers in 2010. To calculate a CES, brands ask customers a single question: How much effort did you personally have to put forth to handle your request? CES gives companies a clear indication of when and where brands are making customers’ lives more difficult than they need to be.
That said, NPS, CES and CSAT do share a few notable traits: They’re simple to use (usually asking just one question) and give an indication of what went wrong in the customer experience. In short, these metrics serve as useful alarm bells.
What are the main advantages of the Net Promoter Score?
In a Harvard Business Review article, Reichheld, inventor of NPS, argued that one of the main advantages of NPS is its simplicity.
“Too many of today’s satisfaction survey processes yield complex information that’s months out of date by the time it reaches frontline managers,” he says, arguing that a more straightforward metric like NPS is more useful for businesses.
According to Reichheld’s research, NPS also correlates to company growth. “For most companies in most industries, getting customers enthusiastic enough to recommend a company appears to be crucial to growth,” he adds.
NPS isn’t just a predictor of growth—it’s also an indication of repeat business. A 2016 study by the advisory firm Temkin Group, for example, found a strong correlation between NPS data and customer loyalty. The report examined the use of NPS data in 20 industries and concluded that a brand’s ‘promoters’ are five times more likely to repurchase from the company, seven times as likely to forgive a brand and almost nine times as likely to try new offerings.
What are the disadvantages of the Net Promoter Score?
As a customer experience metric, NPS falls short in a few key areas.
The score depends heavily on one experience.
Your NPS data can be skewed by a single interaction a customer had with your brand.
“NPS captures just one point in time with a customer, and the customer’s response will depend heavily on their most recent experience,” writes Jennifer Winter, marketing content writer for the UserTesting blog. A loyal customer, for example, could appear as a ‘detractor’ in an NPS survey if her last experience with your brand was frustrating—even if 99 percent of her other interactions with you went great. “Focusing solely on NPS as a measure of overall CX is a dangerous habit that could eventually turn loyal promoters into detractors.”
It contributes to survey fatigue.
People are getting tired of surveys, and the rise of NPS in the business world is part of the problem. As a result of the survey epidemic, response rates for NPS and other surveys have declined significantly in the past 10 years.
In fact, even Reichheld, the founder of NPS, admits that he’s getting tired of NPS surveys. “The instant we have a technology to minimize surveys, I’m the first one on that bandwagon,” he recently told Bloomberg.
The rise of NPS has contributed to the growing need for customer data, which has, in turn, encouraged companies to spam their customers with more and more ad-hoc surveys.
It’s susceptible to manipulation.
As NPS has gained traction among the majority of Fortune 1000 brands, many companies started tying bonuses to these metrics. Unfortunately, that has an unfortunate consequence: it incentivizes staff to game the system. It’s not uncommon today for staff to explicitly ask customers to give them a perfect 10 in their CSAT surveys, often offering additional assistance if customers aren’t 100 percent satisfied. But when employees pressure customers to give them high marks, the accuracy of the NPS results becomes questionable, perhaps even misleading.
It doesn’t reveal why.
The bigger issue with NPS, ironically, has to do with its main advantage: it’s simplicity. NPS is so simple that it fails to give businesses information on the why behind the score. It’s not prescriptive—it doesn’t tell companies how to provide a better product or service.
In The Enterprise Guide to Customer Experience, Tyler Douglas, chief sales and marketing officer at Vision Critical, explains, “NPS can’t tell you what about an experience makes a customer want to recommend you to a friend or not…Like CSAT, NPS only addresses a single part of the customer journey and is by definition reactive.”
Ultimately, companies need to cultivate a deeper understanding of, and empathy for, the customer. NPS scores fail to do that since they tend to treat customers as mere data points. To really improve customer experience, you need to go beyond NPS.
How to add context to your NPS data
NPS has some disadvantages, but when used appropriately, it can be a valuable data point for customer experience leaders. The key is to give your NPS score some much-needed context.
“The true power of NPS is in the follow-up, not in the score,” explains Dana Severson, director of marketing at the NPS software company Promoter.io and a contributor to Inc. To unlock the true power of NPS, companies must continue the conversation with customers. Severson’s advice is to “ask more questions” of customers and “build relationships.”
“The true power of NPS is in the follow-up, not in the score."
When it comes to customer loyalty metrics, “it's never a good idea to put all your measurement eggs in one basket,” says Jeff Sauro, founding principal of the consulting firm MeasuringU. “Consider multiple measures of both satisfaction and loyalty. You should also look to understand how well the NPS correlates (or even predicts) revenue and growth in your organization and understand how other measures may do a better job.”
More importantly, use other sources of customer intelligence to get a more complete picture of your customers. Douglas, for example, says insight communities—groups of thousands of customers who opt-in to offer regular feedback and suggestions to companies—can provide the necessary context missing from NPS.
Explains Douglas, “By cultivating long-term relationships between customers and brands, insight communities build trust and allow companies to learn about who their customers are, how they behave and why. Insight communities allow brands to learn about customers progressively over time—unlike the one-off survey data used to tabulate NPS or CES, insight communities yield higher quality insight with each interaction along the customer journey.”
Net Promoter Score is just a starting point
Your NPS data is an early alarm system—a heuristic that tells you whether you’re on the right track. But NPS data is just that—data. It’s not prescriptive enough, failing to tell you why people do what they do. When used in isolation, NPS can’t tell you how to truly improve your marketing campaigns, how to enhance customer experience or what product innovations will result to sales.
The real secret to making sense of NPS is to combine it with authentic customer engagement—to use the human touch to add context and to humanize your customers.