Tag Archives: NPS

4 Reasons Why NPS Isn’t a Silver Bullet

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:

  • Those giving a score of 0 to 6 are “detractors”
  • Those giving a score of 7 to 8 are “passives”
  • Those giving a score of 9 to 10 are “promoters”

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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Engage with Us

If you have experience with NPS, we would love to hear from you. Answer one of our questions or add your own insights in the space below:

  • Does your organization use NPS scoring to measure customer satisfaction and loyalty?
  • What do you perceive as the benefits and limitations of NPS?
    What other techniques do you use to collect actionable customer feedback?

We appreciate your input and look forward to your ideas.

What Makes Customers Happy?

Retaining Customers in Today’s “Switching Economy”

Recent consumer research from Accenture revealed that customers are increasingly frustrated by the perceived poor levels of service they receive.

In 2013, the consulting firm’s annual Global Consumer Pulse Survey revealed that 51 percent of U.S. consumers switched service providers due to poor customer service experiences. That number jumped 5 percent from 2012. These compelling numbers motivated Accenture to label the current consumer environment “The Switching Economy.”

This research study affirmed that B2C companies must take action to improve customer experiences and stop churn—right now. Many consumer brands have taken a good first step and implemented post-interaction surveys. However, to maximize the value of these surveys, brands must accelerate analysis and have routines in place to respond to dips in customer satisfaction as soon as they occur.

Six Things that Make Customers Unhappy

As the Accenture study reports, there are several things, which consistently upset customers and trigger defections. Specifically, consumers get frustrated by:

  1. Contacting a company multiple times to address the same issue (91%)
  2. Being put on hold for lengthy periods (90%)
  3. Needing to repeat their questions or concerns to more than one representative (89%)
  4. Perceiving that a company does not make it easy to do business with them (85%)
  5. Noticing a difference between a company’s marketing promises and delivered products, services, or experiences (84%)
  6. Having inconsistent experiences across various channels (58%)

Moreover, 81 percent of respondents did report that companies could have done something different to retain their loyalty. Understanding these unwelcome behaviors and taking steps to remedy them can put you on a good path to improving customer experiences and keeping customers loyal.

However, best-in-class service providers know that customer satisfaction trends are in constant flux. You also need to survey customers regularly and act on their responses to keep tabs on the current state of the customer experiences your brand is delivering. Post-interaction surveys are the path to deeper insight.

Customer Surveys: Beyond the Fabled NPS Score

In recent years, the “Net Promoter Score,” widely known as NPS, has earned widespread hype as the ultimate customer satisfaction metric. NPS asks respondents use a one to 10 scale to answer a single question: “”How likely is it that you will recommend our company to a friend or colleague?”

However, analyst firm, Forrester has noted that there are several issues with relying on NPS alone:

  • Cultural Variances: The use of a one to 10 scale does not translate across all cultures. This makes NPS scoring less valid for firms with international or diverse customer bases.
  • Limited Motivator: Companies may find it challenging to motivate employees to raise NPS scores.
  • Questionable Correlation: Although NPS is supposed to tie to customer referrals or renewals, limited quantitative evidence exists to support this fact.

Despite its shortcomings, NPS can be a valid customer satisfaction measure, when coupled with other customer feedback. Forrester recommends adding Voice of the Customer (VoC) sentiment input to NPS data collection for robust, actionable insights into customers’ perceptions.

Adding Open-Ended Feedback for Honest Customer Insights

Today’s customer experience leaders know that quantitative surveys and metrics are just one source of information about customers. To understand customer’s true feeling about your business, you need to use open-ended sentiment survey questions to solicit high-value VoC feedback. With open-ended questions, you gain customers spoken-word perceptions, which give you context beyond customer satisfaction statistics.

However, you need to recognize the immense worth of customer’s open-ended comments. While some companies rely on computer-based analysis to review customer comments, this approach is shortsighted. Machine-based solutions can only analyze the words your customers speak—but leave a wealth of information unevaluated.

Speech analysis experts know you need to study communication nuances—including tone, word choice, volume, inflections, and more—to gain complete understanding of customers’ true sentiment. Sometimes, you may find that customers who speak affirming words about your company may be harboring hidden negative sentiment. The only way to uncover customers’ true feelings is through human sentiment that goes beyond machine-based survey evaluations.

Achieving Coordinated Following Up

As Accenture’s research proves, having a bad experience can prompt your customers to defect to competitors. Today, however, customers are also likely to share their perceptions on social media—and take their bad feelings public. In fact, consumer research revealed that 95 percent of customers who have had a poor experience tell someone about it, and are 45 percent share negative customer experiences on social media.

What does that mean? You need to move beyond aggregate reviews of NPS data and institute real-time reviews of post-interaction survey data. You also need plans and resources for coordinated follow up with unhappy customers before they defect or spread the word about their poor perceptions on social networks.

As a result, you need a centralized system that provides up-to-date statuses on all customer contacts to front-line employees across the enterprise. With the right tools, you can address customer questions and issues promptly and tackle some of the six things that often prompt customer concerns.

Scoring a “Thumbs Up” from Your Customers

In today’s customer-driven world, listening to customers and taking proactive steps to address customer feedback is an imperative. Focusing on customer satisfaction can help retain customers and solidify your revenues.

Those who don’t are primed to lose—and lose big. Accenture estimates that a potential $1.3 billion dollars in revenue will be in play due to customer’s shifting loyalties.

The time to implement tools and processes to capture, analyze, and act on customer feedback is now. You need to move beyond the comfort zone of periodic review of aggregate customer satisfaction scores and jump into the new world of real-time customer survey analysis.

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Engage with Us

If you are a service provider, we would love to learn more about your real-world experiences:

  • What do you see as the biggest challenges to keeping customers loyal in today’s switching economy?
  • How has your company’s approach to customer survey dissemination and analysis changed?
  • What are you doing to protect your brand in the era of the social customer?

We look forward to hearing from you.