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NPS: Helped or Harmed CX? 

Dave Fish, Ph.D. | May 21, 2016 534 views 5 Comments

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PoiseIt has been about 12 years since Dr. Fred Reichheld wrote his original article in the Harvard Business Review entitled The One Number You Need to Grow, which later led to an entire book on the topic. This seminal work has had a profound and lasting impact on the CX industry.

For the uninitiated, the Net Promoter Score (NPS) is a 11 point anchored “would recommend” scale where you subtract the top 2 (promoters) from the bottom 6 (detractors) to get a “net” promoter score[1]. This measure has been enormously popular and widely adopted in many CX metric programs. But one question that I think the industry needs to know is:

Has it helped or hurt?

Helped
In the “helped” column it placed a clear focus on customer experience among the C suite types rather than pursuing “bad profits”; short term gains at the expense of long term enterprise health. Companies that otherwise would have not been interested or perhaps were intimated by the cacophony of opinions on the topic embraced customer experience efforts and invested heavily.

Indeed, according to Markets and Markets the total spend on CX in 2020 is projected to be roughly $10.8b up from $3.8b in 2014. In case your math is rusty, that’s more than double the investment in 5 years.



Also, it has offered a nice shorthand to benchmark your own company, competitors, and even across industries. The genius lays in its simplicity, it can be explained in about 2 sentences to busy executives and worker bees alike. No complex multi-layered attribute models and weighted indices, it’s just plain old “would recommend” with a twist of lemon. Delicious!

Harm
In the harm column, it is arguably one of the most confused concepts in Customer Experience today. No, it is not the best predictor of business performance, and I don’t ever believe Dr. Reichheld ever exactly said that it was. No, it is usually not the best measure to incentivize your divisions, departments, stores, or employees. No, it is not enough to measure one question to understand the customer voice. As one of my analysts posted, perhaps a bit harshly, on Fred’s blog “Dr. Riechheld, I give you idea an 4, based on your logic, that’s all you need to know to improve.”

However, I think the biggest unforeseen and unintended consequence was that business people started focusing on the number rather than what to do about it. I cringe any time I hear about how some company “needs to improve NPS”. No you don’t need to improve NPS, you need to improve the customer experience and order to do so, you have to do something.

This paucity of doing something is perhaps why we have seen almost zero improvement in the last 20 years in the American Customer Satisfaction Index. In quarter 3 of 1994 the ACSI was 74.8 and in that same quarter of 2015 we have achieved a score 73.8. Now that’s progress!

From Indices to Actions
To be fair, I don’t think Dr. Reichheld ever foresaw or intended the warping and perversion that we have seen with NPS in practice in some instances. So much pressure on one tiny little number. Like many inventions, it was an innocent and good idea that went rogue.

NPS has also inspired a collection of new indices such as Customer Effort, Net Emotional Value, and others. That’s great in that it keeps the focus on the customer. Understanding customers’ thoughts and feeling are requisite for improving the experience, but there are no magic bullets.

Let’s spend 1% of our time worrying about the numbers and 99% doing something about it. Investing in experiential design from a customer first perspective will pay much larger multiples in business outcomes than measurement.

Let’s design online and in store experiences that make customers want to come back. Let’s focus and hiring and training the best people we can and give them the right tools to create a great experience. Finally, let’s invite customers to help co-create that experience at scale. This is where we will get the true recurring dividends out of CX, not rejiggering the metrics.

What do you think?

[1] I always felt bad about those lonely ignored “Passives”
Image courtesy of Nikole Dickinson https://happyandhealthyandme.wordpress.com

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5 Responses to NPS: Helped or Harmed CX?

  1. Michael Lowenstein May 21, 2016 at 10:19 pm (1317 comments) #

    Net: Harmed. It has made many market researchers complacent and risk averse re. more actionable frameworks, such as customer advocacy. Per Manning and Bodine of Forrester Research, for instance: “Companies that use NPS for this dual purpose (as an outcome metric and a perception metric) trade off a detailed understanding of the experience for simplicity” (P. 131, Outside In, 2012).

  2. Shaun Belding May 22, 2016 at 6:32 am (63 comments) #

    Awesome introspection – and bang on I think. Far too many organizations have become married to the NPS number – but not the actions it takes to change CX.

  3. Bob Thompson May 22, 2016 at 7:24 am (226 comments) #

    Somewhat grudgingly, I have to give the edge to “helped” for the reasons Dave stated. NPS is a key reason that people are interested in CX, and why it’s become a boardroom issue.

    As Dave stated, the key issue is action. My benchmark research finds that “closing the loop on customer feedback” is a critical differentiator for business performance leaders. Out of 25 practices studied, it had the 2nd highest impact.

    I used to worry that people would rely too heavily on NPS as a flawed and overly simple metric. Hasn’t happened.

    When I looked at companies that closed the loop effectively, they used NPS, CSAT, and Liklihood to Recommend in nearly identical proportions. Those that *didn’t* close the loop effectively used the same 3 metrics in the same proportions.

    Over all, my study found that companies are using an average of 3 metrics and only 5% use just one. My conclusion: the hype about any one metric is overrated, as is the fear that companies are so stupid that they will pin their hopes on NPS or anything else.

    ACTION drives performance.

  4. Michael Lowenstein May 24, 2016 at 12:37 pm (1317 comments) #

    Other issues: NPS (along with ACSI/CSAT) has long been shown to have granular interpretation and actionability challenges:

    http://customerthink.com/emerging_chinks_and_dents_in_the_universal_application_and_institutionalization_armor_of_popula/

    http://customerthink.com/customer_advocacy_behavior_personal_brand_connection/

    One of my past CustomerThink blogs on this subject summarized a 2011 article from the International Journal of Market Research, by Professors Robert East and Jennifer Romaniuk of the University of South Australia: “The NPS and the ACSI: A Critique and an Alternative Metric”.(http://www.ijmr.com/AboutIJMR/Samples/Sample5.pdf). Long story short, the authors injected incidence and volume of positive and negative word-of-mouth into a core customer behavior framework, and compared their results (in several retail and consumer products verticals) to both NPS and ACSI.

    Here are their Overview and Conclusion statements from the article:

    Overview: “As a consequence, metrics based only on current customers, such as the NPS, do not measure negative word-of-mouth effectively. We show that detractors give little of the total negative word-of-mouth on the brand and that, in two out of the three categories that we studied, detractors were responsible for more positive word-of-mouth than negative word-of-mouth. Similar patterns are found in an analysis based on the ACSI measures, which suggests that the NPS and ACSI are closer than their respective proponents are willing to claim.”

    Conclusion: “We show that the NPS and the ACSI do not measure negative sentiments about brands effectively.”

    So, the non-representation of positive and negative word-of-mouth in understanding consumer decision-making is a critical missing element in making both NPS and ACSI more actionable, particularly at a granular (communication, relationships and emotional connection, functional performance, brand positioning, etc.) level.

    The inability of NPS to represent full-spectrum WOM in consumer decision-making is another, rarely discussed, harmful shortcoming of the metric.

  5. Ravi Magroriya June 1, 2016 at 8:06 pm (1 comment) #

    The ideation and thought process is good and important to debate on such discussions.

    However did it help, I belive not exactly to the extent the Insights it should help us. I believe important is to educate the customer about NPS as many merely will rate their experience of your products and services availed at a score of 8 considering its a good score and don’t want to pamper organization with a higher score.

    With Indian consumer indices, 80% marks is brilliant and when education extends of NPS the score extends to 9 even for a delighted customer.

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