My Views About WSJ Article: “Is Net Promoter (NPS) Score Misleading?”

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Source: WSJ https://on.wsj.com/30M2kPC

There’s an article in the Wall Street Journal that is creating some commotion. It raises the question of whether or not “Net Promoter Score,” otherwise known as “NPS,” is a good measurement of customer satisfaction. Many customer experience (CX) experts say yes. They depend on NPS as a sole metric to determine customers’ perceptions and feelings about their brand. However, others debate the validity and usefulness of Net Promoter Score, saying that “the science behind NPS is bad, and it’s been oversold.” Having worked in Corporate America leading customer experience for many years, I have an opinion about this topic that I’d like to share.

is measuring NPS worth doing?

My answer is yes. Net Promoter Score is a valuable leading indicator of customer loyalty. (If you are unfamiliar about the NPS score, watch a short video in my other article.) I also believe that drivers of NPS are important to measure too, such as Level of Effort, Customer Satisfaction (C-Sat), Customer Sentiments and more. These key performance indicators (KPIs) coupled with NPS (“how likely customers are willing to recommend a company’s product and services”) allow managers to make the most informed business decisions on a strategic and tactical level.



customer experience metrics
Source: http://ow.ly/1Aih50ui0PE

is there any downside to using NPS?

My answer is yes. The numeric score is insightful. Yet, when employees only look at the survey rating without reading customer comments, they miss essential information for action planning. I’ve seen this happen often throughout my career whereby customers provide a high rating (9 or 10 scores) but then indicate pain points within the comments section. They’ll say for example, “I love using your product, but when issues arise it’s challenging to get help, and response times are too long.” If you consider the NPS score by itself, it appears that the customer is a brand advocate. When you read the verbatim however, it is clear that this customer may easily be lured by competitive offers. Consequently, it is essential to analyze BOTH the qualitative and quantitative data for NPS to be fully useful.

is NPS a driver of Revenue?

The Wall Street Journal article shares different opinions about NPS and financial correlations. Despite the debate, it is interesting to see the upward trend of how many companies are referencing NPS at investor meetings. While no one has 100% proven that NPS is a driver of revenue, I believe that measuring customer satisfaction is a useful indicator of risk and future behaviors, whether it be cancellations, bad press on social media and review sites, etc. Thus, it is critical that every company, no matter what size or industry, focuses on customer experience metrics. I encourage all brands to use Voice of Customer (VOC) insights as it really helps to minimize loss of business, loss of customer trust, etc.

NPS and Company Earnings Calls
Source: WSJ analysis of companies’ earnings calls


Should NPS scores be tied to employee bonuses?

My opinion is Yes. It is the only way to make everyone in the company care about customer excellence and OWN it, not just say it. I have worked in organizations where CX metrics were tied to leadership objectives and not frontline teams. That approach did not drive a customer-centric culture or employee accountability. Detractor scores declined only when customer satisfaction goals became a shared objective across EVERY department. I have a lot of stories to share about this topic. Contact me if you want more information and mentorship.

I’m interested to hear your perspective about NPS and the WSJ article. Join conversations on social media: Twitter | InstagramPinterest. Also, Sign Up for my newsletter to receive timely updates about Doing CX Right.



*All opinions expressed are the authors’ alone and do not reflect the opinions of or imply the endorsement of employers or other organizations.

11 COMMENTS

  1. Here is the link of my 6 years study on Net Promoter Score. Based on the data & performance of telecom companies I tracked, I found, there is no relationship between company performance and Netpromoter score.
    I have also compared the Promoters and detractors attitude, in terms of Revenue and Loyalty with the company.

    I agree with wall street journal findings that NPS is misleading. You can read my article full text from below link.
    https://www.researchgate.net/publication/332555244_Investigating_Relationship_between_Net_Promoter_Score_and_Company_Performance_A_Longitudinal_Study
    Moreover, I believe, NPS in some cases can distract the companies from the big picture and detractors can cause more loss than the benefits a promoter can give. Only focusing on promoters and ingnoring detractors can bring horrible results.

    My some articles in this context, I hope you will find useful.

    https://www.researchgate.net/publication/332251064_Impact_of_Over-the-Top_OTT_Services_on_the_Telecom_Companies_in_the_Era_of_Transformative_Marketing

    https://www.researchgate.net/publication/333260507_Want_To_Stay_The_Market_Leader_In_The_Era_Of_Transformative_Marketing_Keep_The_Customers_Satisfied

    I believe customer-based brand equity is a better indicator than NPS because it has a direct relationship with company performance ( Note: Customer Based brand equity one question is actually NPS question)
    https://www.researchgate.net/publication/309212318_Customer-based_brand_equity_and_firms'_performance_in_the_telecom_industry

    Service quality can also be a good indicator if conducted after incorporating digital aspects.
    https://www.researchgate.net/publication/331571554_Service_Quality_Analysis_Of_Private_Universities_Libraries_In_Malaysia_In_The_Era_Of_Transformative_Marketing

    NPS is easy to understand compared to another matrix like customer satisfaction, Customer-Based Brand Equity, and Service Quality, therefore most of the professional started practicing it. In reality, companies must learn things to understand customers. The products & the process must be easy for customers but to understand companies should not look for easy options ( Just because it is easy to understand and conduct).

  2. Stacy, I enjoyed your comments. I go back and forth on NPS and think the controversy that arises every so often is likely to continue. I did want to say how strongly I support your opinion of tying the NPS to employee bonuses as a way ” to make everyone in the company care about customer excellence and OWN it, not just say it”. Whether it is NPS, CES or whatever, using a universal metric for the purpose you suggest is “spot on”. Sure gets universal attention and collaboration.

  3. it’s an interesting topic, and I was happy to see the WSJ article when it came out – not because I have huge issues with NPS, but because I’m not convinced there’s been enough discussion around it. In many ways, NPS has become the icon for our obsession over metrics and has achieved a sort of holy grail status. When all is said and done, though, it is simply a tool – nothing more. And like all tools, there’s danger when misused.

    NPS is a measure of effect, not of cause. This is a critical distinction to remember because measuring outcomes only is a recipe for disaster. When outcomes become unmoored from the things that create them, bad things can happen – particularly when people have an incentive based on those outcomes.

    Companies are far wiser to focus their metrics on the degree to which employees are using the specific behaviors and skills which lead to the outcomes, rather than the outcomes themselves. If we know, for example, that x, y & z are skills that drive positive outcomes, measure those things. Tie incentives to those things.

    NPS metrics might look good in a presentation to the board, and they may well be indicators of brand loyalty. But, like the speedometer in a car, they don’t make an engine run better or faster.

  4. From my perspective, the rise in use of NPS is more about a) executives’ desire for a simple macro metric, b) analysts’ complacency and risk-aversion, accepting a superficial and often misleading metric, and c) Satmetrix’ and Bain’s marketing effectiveness and skill at pushing NPS as an enterprise goal than anything else. From the time of its introduction in 2003, NPS has been heavily weighed down by numerous significant interpretation and actionability flaws: http://customerthink.com/emerging_chinks_and_dents_in_the_universal_application_and_institutionalization_armor_of_popula/ Further, tying employee bonuses to NPS results creates or sustains a system gaming culture, especially since the metric connects so poorly to granular elements of customer value delivery..

    Bain and Satmetrix have also ‘annexed’ the concept of advocacy behavior, equating it with recommendation. It is not remotely connected to recommendation, which is driven by such elements of brand favorability, consideration set, and positive/negative informal word of mouth: http://customerthink.com/marketing_case_customer_advocacy_measurement/

    Many companies have accepted NPS as a core metric, even using eNPS to help identify employee engagement levels. How well is reliance, and heavy investment, in improved NPS and eNPS scores working out for companies like Comcast? Despite massive senior exec commitment and attempts at moving the employee culture since my original 2015 post, the score stands at -3: http://customerthink.com/comcasts-nps-gamble-can-the-metric-help-fix-the-customer-experience-culture/ Another example is Sprint, where several years’ worth of misguided marketing and executive reliance on NPS have failed to improve perceived customer value, setting up the current situation, where Sprint is about to be acquired by T-Mobile

  5. Stacy, many factors lead to increasing customer value and NPS. These include brand, product, the experience, the satisfaction, service, buying and use experience, and cost (price and non-price (non-price includes effort). As any of these factors go up, NPS and customer value increase. Directionally, NPS shows whether you are doing well, but in of itself is an incomplete measure.
    Customer Value Added is a complete measure proven to relate to market share and ROI

  6. I believe NPS by itself not all encompassing. I don’t see it as a metric, more of an index. I guess it will make sense if primary drivers like service quality, C-sat are linked to it as the author has pointed out.

  7. On one level, NPS is a number, and I think of numbers as agnostic expressions of anything. Assuming the underpinning data and calculus are accurate and mathematically correct, the only way to assess whether NPS is misleading is by examining how NPS is interpreted. Like most statistics, someone will spin the number to suit his or her agenda, goal, or objective. Right or wrong, it pays to be skeptical, and consider motivations for the spin.

    On another level, NPS is a registered trademark, and the company behind the number has a revenue and profit motive for promoting it as an elixir for revealing complex, hard-to-find, hard-to-measure insights. According to Qualtrics, the company that markets NPS, “With Qualtrics’ NPS software you get a simple, flexible and powerful platform to engage your customers.” The company offers seven benefits of NPS, sure to appeal to business developers. Among them, not surprisingly, is “Benchmark against industry and competitor scores.” So clearly, the CRO at Qualtrics knows about the network effect. I’d do the same thing. My point is not to debate the efficacy or veracity of NPS, just to understand motivations for promoting it, and to acknowledge the possibility that Qualtrics might be recommending or endorsing NPS for insights that it’s not really well suited for. Think how Big Pharma promotes its products as cures for whatever, except here, it’s a number. Marketing 101: “It slices! It dices! It chops! . . .”

    With NPS, I think the wrong questions are consistently asked. I’m less worried whether customers are willing to recommend my company’s product and services, or whether they will be loyal. Highly satisfied customers often choose not to be vocal. And many products, e.g. personal healthcare, don’t often get advocated. And churn is a highly flawed proxy for customer satisfaction. My company might see low churn numbers because we have effectively enacted onerous switching impediments.

    I think the high-level question that needs to be asked and answered is “how well are we doing our jobs in delivering value to customers?” More than advocacy, more than customer satisfaction, more than anything else, a company cannot survive long term without a favorable public perception. If NPS accurately reflects that sentiment, then by all means, use it and follow it. Otherwise, any interpretation of NPS as a leading indicator of revenue is probably illusory.

  8. Thanks so much for keeping the dialogue going, Stacy! CX professionals should continue to debate and examine. Personally, I subscribe to Bruce Temkin’s perspective, which is that WHICH metric isn’t as important as what you do with it.
    https://experiencematters.blog/2019/05/29/is-nps-a-dubious-fad/

    The one statement in your article that I’d like to challenge is that tying NPS to employee bonuses “is the only way to make everyone in the company care about customer excellence and OWN it, not just say it.” The issue I have is with the word “only.” I agree that tying employee bonuses to NPS is A way to connect employees to efforts to improve CX, but if we say it’s the only way, we risk assuming employees (most of us) will only do what they’re (we’re) paid to do when, in reality, what motivates each of us as individuals is complicated and goes far beyond monetary compensation. When we reduce humans to coin-operated opportunists, they will behave accordingly, and we might miss out on the greatest contributions they can make to the organization.

    In fact, there are reasons to believe that tying bonuses to any kind of customer feedback can actually be detrimental to results. Even Rob Markey, a partner at Bain and co-author of The Ultimate Question 2.0, cautions against this practice.
    https://hbr.org/2011/09/the-dangers-of-linking-pay-to

    The alternative, which is a bit more complicated and difficult, is authentically enrolling and engaging employees throughout the organization in the CX cause. An article I published last year for CXPA explains how I’ve seen organizations get better results by listening to employees, involving them, educating, enabling, empowering, and reinforcing customer-centered attitudes, mindsets, behaviors, and outcomes.
    http://cxday.org/broadcast-bribe-or-badger/

    Of course, this debate, too, is as old as management itself, summarized quite well in Douglas McGregor’s writing on Theory X and Theory Y, as well as in Abraham Maslow’s writing on Theory Z.
    http://www.netmba.com/mgmt/ob/motivation/mcgregor/
    http://maslow.org/sub/theoryz.php

    I look forward to the continued discussion!

  9. Thank you Eryc and others for your comments. I’m enjoying the community discussions a lot.
    Eryc, I agree and REMOVING the word ONLY from my article on CustomerThink AND on my blog, DoingCXRight. https://wp.me/p96U0h-1Gb

    On a different note, I’m very interested in knowing the most effective org design… Where should CX sit within the business? In Marketing? HR? On its own? What about Employee Engagement (VOE). Combined within CX function? I’ve seen different examples but interested in knowing others views. any research? -Stacy

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