The Imperative for Diverse Metrics and Measurements in Understanding Customer Sentiment
Introduction
Article Source: https://www.eglobalis.com/beyond-nps-why-customer-feedback-needs-a-360-degree-revolution/
Net Promoter Score (NPS) has established itself as a popular metric for evaluating customer loyalty, satisfaction levels, and the likelihood of customer churn. Widely adopted across industries, NPS has faced increasing scrutiny for its limitations in offering a complete view of the customer experience. This article delves into these critiques, exploring how NPS fares across diverse business landscapes—both in B2B and B2C environments. Furthermore, it investigates contemporary global trends in customer feedback strategies that advocate for a shift beyond simplistic metrics. By embracing a more nuanced approach, organizations can gain a comprehensive understanding of customer sentiment, facilitating more informed decision-making and enhancing overall customer satisfaction.
The Limitations of NPS
NPS, encapsulated by a single question—”How likely are you to recommend us?”—offers a narrow and momentary transactional perspective on customer sentiment. Despite its simplicity, more than 75% of organizations are projected to phase out NPS as a Measure of Success for Customer Service and Support by 2025, according to Gartner. This simplicity overlooks the complexity of customer relationships and experiences, failing to capture nuanced feedback crucial for improving overall customer satisfaction. Companies such as Toyota and Samsung, prominent in Asian markets, have found that while NPS provides a snapshot, it lacks depth in identifying evolving customer expectations and perceptions over time. It’s essential to move beyond singular transactional satisfaction and focus on consistent, longitudinal insights to truly understand customer behaviour and preferences.
The exact same criticism can be made about every metric for everything. In CX, the same applies to CSAT, CES, and whatever. In accounting, your Net Operating Profit number tells you nothing about causes. In health, your heart rate at 160 tells you nothing, and nor does your blood pressure on its own, without all factors and influencer results of your healthy you cannot drive conclusions, for example, knowing whether you were running at the time was you in the Gym, running or Jiu Jitsu training, this already will influence your momentary pressure results. In the report, Gartner mysteriously states that CSAT provides better diagnostics than NPS, but that is obviously false, it provide another kind of feedback a different angle of a needed feedback. No number, or responses provides any diagnostics on its own. The main point here is that we are talking about NPS, but no individual metric can supply all needed information; therefore, I called this article “360 Degree Revolution” since all metrics plus data supply your organization with a much better reality check than anything else.
Should you kill NPS? Not now—it is still important as one metric that provides a limited view of the customer transaction. I did not suggest to companies that they should use NPS too, especially the egocentric number that often gives a dopamine moment for the C-suite when they should not focus on the number since it doesn’t matter in the end. I am clearly not sympathetic to NPS as, for me, it works as a transactional matter, but for one minute of satisfaction, if that is what you look for, maybe that is enough. We do not advise this approach for anyone but advocate for the real use of smart metrics that entail the entire experience over a certain amount of time. Choose what matches your organization. I hope this makes sense, and if not, I am interested to hear your thoughts.
B2B vs. B2C Perspectives
In B2C environments, where transactional interactions are straightforward and brand loyalty is clearer, NPS can serve as a reliable indicator of customer advocacy and satisfaction. European giants like Unilever and Siemens utilize NPS to gauge consumer sentiment and pinpoint areas for product line improvements. However, in B2B sectors characterized by complex decision-making processes and long-term partnerships, NPS often falls short. Sony and LG in South Korea illustrate the challenges of applying NPS effectively in environments where sustained service excellence and relationship management are paramount. Comprehensive feedback from multiple sources, integrating Voice of the Customer (VOC), metrics, measurements, data analytics, real-time sentiment analysis, and evolving AI developments, is essential for gaining a complete customer understanding.
Siemens and Unilever, like all the companies I know, use several metrics, data analytics, and KPIs to drive conclusions. Any company that understands the basics must have additional questions and metrics beyond a simple rating or question. For instance, a company’s operating profit number is useless without additional metrics and other supporting information.
Companies Supporting NPS Globally
Global corporations like Alibaba in China and SAP in Germany continue to endorse NPS as a valuable metric for understanding customer sentiment and fostering growth. These companies integrate NPS into broader customer experience strategies, complementing it with additional qualitative insights and metrics to paint a comprehensive picture. Medallia, based in the US, provides platforms supporting NPS implementation across diverse international markets, emphasizing the need for localized approaches to customer feedback. This practice is echoed by thousands of companies around the world. Metrics such as NPS, CSAT, CES, ACSI, and double-blind benchmark scores are most valuable when integrated into broader customer experience strategies. Siemens and Unilever, like many other companies, use several metrics, data analytics, and KPIs to drive conclusions. Any company that understands the basics must have additional questions and metrics beyond a simple rating or question. For instance, a company’s operating profit number is useless without additional metrics and other supporting information.
The Rise of Data Analytics, AI and Real-Time Feedback
Advancements in data analytics and real-time feedback mechanisms are revolutionizing how companies collect and utilize customer insights globally. Japanese e-commerce giant Rakuten and French beauty leader L’Oréal leverage AI-driven analytics to monitor sentiment across digital platforms, enabling proactive responses to customer feedback. This paradigm shift challenges the retrospective nature of NPS surveys, offering immediate insights that inform strategic decision-making and enhance overall customer satisfaction.
AI avoids survey bias by covering 100% of customers and addressing the tendency of survey respondents to be more positive about a company than non-respondents, which can vary by culture. Additionally, AI is continuous in nature, using operational data to generate information expressed through existing metrics and KPIs, facilitating easier communication within the company.
Metrics Beyond NPS for Comprehensive Customer Insights
To achieve a genuine 360-degree understanding of customer sentiment, organizations are adopting a range of metrics in additional sometimes to NPS:
- Customer Effort Score (CES): Measures the ease of interaction and issue resolution.
- Customer Satisfaction (CSAT): Evaluates satisfaction with specific interactions or transactions.
- Customer Lifetime Value (CLV): Estimates revenue potential from a customer over their lifetime.
- Revenue Growth: Tracks growth directly attributed to customer experience initiatives.
- Customer Retention Rate (CRR): Measures the ability to retain customers over time.
- Return on Investment (ROI): Calculates profitability from specific CX investments over time, comparing gains against costs.
NPS: Predictive and Reactive
Traditional Net Promoter Score (NPS) feedback often reflects historical data of about one interaction, assessing customer satisfaction at a specific moment. However, its relevance diminishes with delayed insights. By understanding customer concerns in real-time, businesses can shift from reactive to proactive strategies. Effective leadership necessitates leveraging real-time service data and AI to gain a comprehensive view of the customer journey and sentiment upfront. This data-driven approach enables informed decision-making based on precise analysis, moving beyond instinctual transactional responses to dynamic customer sentiments. In today’s volatile environment, customer sentiment can change rapidly. Only a coordinated sequence of data, measures, and metrics can provide a comprehensive view, ensuring customer satisfaction both before and after any interaction. Consequently, real-time insights and predictive analytics render reactive NPS less critical, emphasizing the importance of anticipating and addressing customer needs before they arise.
Implementing Effective Customer Feedback Strategies
To effectively utilize these metrics, companies must define clear metrics, measures, data sources, scorecards, and KPIs aligned with strategic goals. This approach ensures a comprehensive evaluation of customer experience efforts, fostering continuous improvement and adaptation to evolving customer expectations. Companies like Tencent in China and Nestlé in Switzerland exemplify the integration of diverse metrics to drive customer-centric strategies and enhance long-term customer relationships. Yes.
Cultivating a customer-centric Culture: Strategies for Sustainable Growth Beyond NPS
To achieve a comprehensive 360-degree customer feedback system for both B2B and B2C environments, several key elements are essential:
- Multi-Channel Feedback Collection: Utilize surveys, social media listening, feedback forms, and direct interactions to capture diverse perspectives across various touchpoints.
- Segmentation and Personalization: Tailor feedback mechanisms to different customer segments to enhance relevance and effectiveness.
- Continuous Feedback Loop: Establish real-time feedback loops for immediate responses to customer issues and ongoing improvements.
- CRM Integration: Correlate feedback data with customer profiles and transaction history for deeper insights into behavior and preferences.
- Advanced Analytics and AI: Use these tools to analyze large volumes of feedback data, identifying patterns, trends, and sentiment.
- Cross-Functional Collaboration: Ensure feedback insights drive strategic decisions and improvements across all departments.
- Clear Metrics and KPIs: Align metrics with business objectives to measure the effectiveness of feedback initiatives and track improvements.
- Cultural and Regional Sensitivity: Ensure feedback methods and interpretations are relevant across diverse customer bases.
- Customer-Centric Culture: Foster a culture where feedback is valued and acted upon at all levels, promoting continuous improvement and innovation.
Conclusion
While Net Promoter Score (NPS) continues yet to serve as a valuable metric alongside others for gauging customer loyalty and satisfaction, its limitations in capturing the full spectrum of customer experience are increasingly apparent in today’s global markets. The reliance on a single, simplistic question—”How likely are you to recommend us?”—fails to provide the depth of insight necessary to truly understand and address evolving customer expectations. In the end, why do we talk so much about NPS? Because an entire sector has pushed it forward, and its adoption went well for many years.
The emergence of advanced data analytics and real-time feedback mechanisms presents a transformative opportunity for organizations to transcend the constraints of NPS. By embracing a diverse array of metrics and leveraging cutting-edge technologies such as artificial intelligence (AI) and machine learning (ML), businesses can obtain a more comprehensive and nuanced understanding of customer sentiment and other important facts. This holistic approach not only facilitates proactive decision-making but also enables organizations to anticipate customer needs and deliver personalized experiences that drive loyalty and satisfaction.
Furthermore, integrating qualitative insights alongside quantitative metrics allows for a deeper exploration of customer motivations, preferences, and behaviours. While NPS remains a useful tool among many others, evolving it into a broader ecosystem of customer feedback strategies is essential for businesses aiming to thrive in today’s dynamic markets. Thanks to AI, the market is progressing, and the advice to use multiple metrics is now more relevant than ever.
By embracing diversity in metrics and harnessing the power of advanced technologies, organizations can unlock deeper insights, foster meaningful customer relationships, and position themselves as leaders in customer experience excellence. The reliance on any single question or metric fails to provide the depth of information needed to achieve these goals.
Five questions for you:
- How has your organization’s reliance on Net Promoter Score (NPS) evolved in recent years amidst criticisms of its limitations?
- Are you integrating additional metrics beyond NPS to achieve a more comprehensive understanding of customer sentiment and behaviour?
- What challenges has your company faced in adopting diverse customer feedback metrics across different business landscapes (B2B and B2C)?
- How are advancements in data analytics and real-time feedback influencing your customer experience strategies compared to traditional NPS methodologies?
- Can you share examples of how your organization has leveraged AI-driven insights or other innovative technologies to enhance customer satisfaction beyond NPS?
Some of my sources:
– https://www.smartkarrot.com/resources/blog/nps-net-promoter-score-does-not-work-any-more/
– https://www.gartner.com/en/newsroom/press-releases/2021-05-27-gartner-predicts-more-than-75–of-organizations-will-
– https://hbr.org/2019/10/where-net-promoter-score-goes-wrong
– https://chartio.com/learn/product-analytics/what-is-net-promoter-score-nps/
– https://www.eglobalis.com/why-nps-doesnt-work-any-more-and-whats-the-alternative/
– https://www.surveysensum.com/blog/net-promoter-score-analysis
– https://businessoverbroadway.com/2018/05/07/data-science-reveals-three-problems-with-the-nps-dogma/
– https://www.skalin.io/blog/en/nps-is-dead-long-live-sentiment-analysis
– https://promisingoutcomes.com/the-net-promoter-scam-how-nps-is-misleading-your-business/
Respectfully, because advocacy and brand commitment historically track so closely with actual customer behavior, and have done so for over 20 years since the measure was originally developed and tested in multiple industries, I would add Customer Advocacy (CA) at the top of the emotional/sentiment metrics list
This article doesn’t mention the serious objection to NPS that some people like me never recommend companies, especially investment companies, because I don’t want my friends to be angry with me if they don’t have a positive experience. I can have a very good interaction with the company but still choose the “not recommended” option for this philosophical reason.
I hope the CX community can stop arguing about how to measure customer sentiment (NPS, CSAT, etc.) and start talking about how to improve the customer experience and drive business results. Revenues, profits. Until then, we are perceived as a joke by the the C-Suite – and deserve to be.
Unfortunately, until now there has been a rather lemming-like acceptance of NPS objectivity and actionability within the CX research and analysis community. Ever since NPS was introduced over 20 years ago, many inconsistencies, faults and challenges associated with the metric have been identified and reported. Here is just one example: https://customerthink.com/emerging_chinks_and_dents_in_the_universal_application_and_institutionalization_armor_of_popula/ Recognition of its real-world limitations have, increasingly, come to light during this time.
Only today, as Ricardo points out, are companies realizing the limitations of NPS and how it can lead in non-useful and unproductive CX, EX, and BX directions.
Thank you, Michael, for your very important observation. I did consider adding Customer Advocacy due to its strong correlation with actual customer behavior. However, I opted to keep the list concise to avoid overly lengthy explanations as I am not always concise.
I agree with your point about NPS. In my view point, with the rise of AI and real-time CDP systems and other technologies, we can leverage these technologies alongside all metrics, including NPS in some specific cases, to obtain a more comprehensive and accurate understanding of our current situation. What do you think about it? Thanks so much again R
Thank you for sharing your point of view Greg. I apologize, but I believe we are focusing on different aspects of CX. If you read about my work and some of my articles, you’ll see that I am one of the least romantic individuals in the market regarding CX’s appeal. I always focus on results and revenue generation. In any project, even after nine years with Samsung, the first questions always concern operational costs, benefits, and the approximate time to revenue.
At Samsung and Software AG, as with SAP, CX is taken seriously in terms of its potential to generate revenue, net profit, and enhanced adoption rate results as ROI for each program. While I am not entirely familiar with your work, to secure investment, the C-suite of different companies within the Samsung group always considers costs versus benefits. They are very operationally driven.
Therefore, I partly agree that there are many individuals who talk a lot and sometimes make us look like CX enthusiasts rather than people who get things done. However, in my experience, returning to my article, NPS is losing relevance. At Samsung, our large client, after some convincing campaigns, is now using a much broader approach for measuring results across different divisions and companies within the group.
I hope this makes sense. Have a lovely week , kind regards R
Thank you very much for your commentary, Dr. Robert P. Holley. It’s nice to e-meet you. For nine years, I tried to persuade Samsung’s strategic group to abandon NPS. In some companies and divisions, we succeeded, while in others we did not. A few months ago, I wrote an article critically examining NPS and presenting alternative ideas. The article received a significant number of comments, both positive and negative, here and on LinkedIn. I never recommend NPS for organizations, and I hope that with the 360-degree approach used in some parts of Samsung, they will eventually move away from NPS completely. Here is the article I mentioned saying exctly the same that you just mentioned: Why NPS Doesn’t Work Any More and What’s the Alternative: https://www.eglobalis.com/why-nps-doesnt-work-any-more-and-whats-the-alternative/ thanks so much for you rpoint of view 🙂 Thank you again for your insightful commentary.
Kind regards, Ricardo
Thanks again, Michael. I truly appreciate your always valuable feedback and analyses on the subject. Highly appreciated. Regarding the abandonment of NPS, I simply think that now people understand much more what is really important and what is a waste of time. I am happy that we have reached a point where companies can clearly see the practical outcomes, or lack thereof, from certain metrics. kind regards, R