The Net Promotor Score (NPS) is a loyalty metric that measures how willing customers are to recommend a company’s offerings to others. As an alternative to traditional customer satisfaction research, it’s widely believed to reflect revenue performance.
Virtually every Fortune 500 company uses the Net Promoter Score (NPS) to measure customer loyalty — if you don’t believe me, check out how they stack up here. Most invest heavily in improving their scores, and many tie executive bonuses to the results.
There’s only one problem. Customer satisfaction in general and NPS, in particular, are poor predictors of customer behavior. And that means that a good NPS score does not necessarily translate into customer loyalty, increased revenues, or a bigger market share.
The problem with NPS scores
While NPS can serve as a decent barometer of customer satisfaction, it doesn’t give you the bigger picture. It doesn’t provide the backstory of why a respondent would or would not recommend your company.
That story — particularly the negative experiences that frame it — is what really helps predict future customer behavior. The simplicity of NPS can at times, overlook the complexity of company-customer relationships.
Some companies are lulled into a false sense of security by their NPS scores. If they see a year-over-year improvement, they celebrate, but don’t sense the potential dangers that could be lurking right beneath the surface.
This is primarily due to the fact that NPS is a description, not a cause, and measures an outcome without a deep understanding of the actions leading to this outcome. Alone, NPS does not tell you what you need to do to change the rating outcome.
For example, you can have great NPS scores and have flat or declining revenues. You can have a strong NPS result right now, but be ripe for disruption — think of what Uber and Lyft have done to the taxi business.
Because NPS scores don’t provide a complete picture of the relationship you have with your customer and their loyalty to you, you can’t afford to rely too much on those scores.
Still, NPS is not dead, despite reports to the contrary. As the American Marketing Association states, NPS does have its benefits — it’s simple, its findings are easy to understand, and it can be benchmarked.
However, the AMA acknowledges that employing NPS may create tunnel vision for companies, and recommends that it ‘shouldn’t stand alone.’
And that’s the key. NPS represents only a single data set in measuring the customer experience. Customer surveys are another, and inbound feedback provides still more. In isolation, each is incomplete, and almost sure to offer only a partial (and potentially misleading) picture. Taken together, they form a more detailed view of the customer.
However, companies need to dig even deeper to understand customer experiences, particularly the negative ones. Customer response to negative interactions is strong, and those customers with negative perceptions are more likely to take action, such as shopping somewhere else and telling their friends.
Get out your toolkit
With NPS only partially measuring customer sentiment, companies must ensure they have additional, complementary processes in place to help further develop the customer insights they require.
Use Multiple Inbound Data Sources
Call centers, sales, social media — all provide excellent sources of inbound customer feedback. Organizations need to take a broad, holistic approach when managing these different ‘listening posts,’ consolidating, assessing, and actioning the collected data as a whole.
As I’ve written about previously, many customers won’t share their negative experiences when providing inbound feedback. Companies need to reach out to those customers through interviews or other live interactions — building trust through conversation to uncover, acknowledge and explore underlying customer issues.
Deeply Understand Problem Experiences
Companies need a purposeful and deliberate method of getting an understanding of problems. Our research shows that problem experiences negatively impact the likelihood to recommend a retailer.
We also know that one out of two online shoppers will experience a problem before they even make a purchase. Ongoing measurement and tracking of problem experiences is a valuable and impactful tool in understanding the drivers behind the NPS ratings.
Once companies have discovered and acknowledged a customer problem or negative experience, they need to resolve it as quickly as possible. Customers expect a resolution and aren’t concerned if that fix falls within your company policy or is expensive.
Following up post-resolution is also critical. You need to confirm that the problem is resolved and the customer is happy — from their point of view. We see time and time again that when a problem is resolved to the customer’s satisfaction, loyalty and spend actually increase more significantly than if there were no problem experiences at all.
It appears the debate over the value of NPS will continue for some time. Is NPS the best way to measure customer satisfaction, or is it hopelessly flawed?
Our position is it’s neither. It’s just another tool used to capture and assess customer satisfaction. Used alone, it’s flawed and incomplete. Deployed with the rest of the toolkit, it can provide valuable insight into the overall customer experience.
Michael Tropp is Vice President, Business Development at The Verde Group.