The Net Promoter Score (NPS) earned widespread acclaim as an essential measure of customer satisfaction. In fact, some companies use NPS as the one and only barometer of customer experience.
Part of the appeal of NPS is its simplicity. It aims to measure customer loyalty based on a single question: “how likely is it that you will recommend this product to a friend or colleague?” Responses range from 0 for (not likely) to 10 (extremely likely). NPS scoring groups respondents into three categories:
While NPS has some merit, it does not tell a full story about customer experiences.
NPS can provide an aggregate picture of how well a company is relating to its customers. However, the NPS approach does nothing to address the “detractors”—a potentially volatile group of unhappy customers who can quickly take their negative impressions online. Moreover, NPS does not help a company distinguish which detractors are at the greatest risk of churning.
Smart brands need to understand the limitations of NPS and look for additional ways to collect actionable customer insight.
#1: The NPS Question Doesn’t Always Apply
Although billed as a “one size fits all” solution, NPS doesn’t work for every market product, or situation. In fact, in his 2003 Harvard Business Review article, NPS creator Frederick Reichheld affirms the “would recommend” question isn’t effective in every industry.
In some cases, asking a customer if he or she would refer a product or service to another person is simply not relevant. For example, in B2B purchase situations, the individual who completes the transaction may not have buying authority. Moreover, the “would recommend” question has little merit in monopolies, where customers have very limited choice.
Other consumer research valiates that the NPS “willingness to recommend” (WTR) metric is a valid predictor of customer behavior in some industries, but one of the worst measures in other industries.
In one study, WTR had little relevance to predicting future retail customer behavior. Asking customers a different question—what share of their next 10 shopping visits they expected to dedicate to a specific brand—was a better predictor of future customer visits and purchases. This underscores that NPS does not apply across all customers, products, and markets.
#2: NPS Lacks Precision
Although NPS respondents have 11 possible answer choices, scoring lumps them into three broad categories—promoters, passives, and detractors. Companies have no way of distinguishing meaning within these segments. They have no tools to predict whether a detractor who gives a score of “0” will behave differently from a detractor who answers “6.”
Often, companies who use NPS tie aggregate NPS scores to organization-wide business results, such as revenue, sales volume, and market share. Such macro-level analysis can have value. However, in today’s economy, paying close attention to individual customer’s feedback, loyalty, and behavior is growing in importance.
#3: NPS Can Yield the Same Score in Varied Scenarios
To calculate NPS, companies can subtract the percentage of detractors from the percentage of promoters. This approach, while simple, can lead to calculating the same NPS score in multiple scenarios.
For example, a company with 50% promoters and 40% detractors would have an NPS of 10. However, that score would also occur when a company had 10% of its customers as promoters and 0% detractors. Despite achieving the same score, the brand should respond very differently to those case scenarios to bolster customer loyalty.
#4: NPS May Not Capture the Full Expression of Customer Experience
Consumer research suggests that many companies who use NPS may experience inflated scores. The reason: satisfied customers are traditionally more likely to respond to surveys.
Moreover, the NPS question is worded in a positive and leading way. The phrasing assumes that respondents are at least somewhat likely to recommend a product or service to others. Also, analysts note that the 0-10 scale may not have relevance in all cultures, which makes NPS less useful for multinational organizations.
Another limitation to NPS: it is, by nature, a closed-ended survey. This approaches forces respondents to fit their perceptions into a specific category, when their feelings may be more open-ended. This suggests NPS could fade in importance as companies turn to collection of Voice of the Customer (VoC) input.
Moving Beyond NPS
Ultimately, NPS can provide a snapshot of a company’s performance with its customers. Having a high NPS score can create a perception among management teams that a company is delivering good quality customer service. However, NPS provides no insight beyond a raw score.
Today’s brands must angle to retain customers in an economy where switching loyalties is the norm. That means they need to expand their approaches to customer feedback collection and analysis—and pay careful attention to the difficult “detractor” customer segment.
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