Once a Harvard Business Review article billed it as “The One Number You Need to Grow.” Today, the Net Promoter Score’s (NPS) fabled beginnings have met with a dose of reality.
NPS features a simple, one-question survey. It asks customers how likely they are to recommend a product or service to friends or colleagues. Respondents can select from a 0 to 10 scale. Those who answer on the low end (0 to 6) receive the label “detractors.” Customers choosing 7 to 8 are “passives,” with those scoring 9 to 10 called “promoters.”
But the NPS approach—while simple to administer—has several pitfalls.
#1: NPS Can Deliver the Same Score in Different Situations
Not only is the NPS survey simple, the NPS calculation is simple too. Companies derive their NPS score by subtracting the percentage of detractors from the percentage of promoters.
The problem is, that can yield a different answer in vastly different scenarios. Here is an example:
- Company A has 40 percent promoters and 20 percent detractors.
- Company B has 20 percent promoters and 0 percent detractors.
Both Company A and Company B have an NPS score of 20. Although the scores are the same, they should have different customer strategies. The NPS score alone provides no real insights into what those approaches should be.
#2: NPS Isn’t Precise
NPS offers respondents 11 answer options. Yet, scoring places customers in three broad groups. Companies have no insight into the meaning or make up of those segments.
This is especially important when analyzing the detractor group. Do customers who offer a rating of “0” behave differently than those whose score is a “6”? Do detractors at different levels need varied treatment or remediation strategies? Is one group more apt to vocalize complaints online and influence others?
As today’s brands compete for social, empowered customers who are apt to shift loyalties rapidly, answers to those questions are vital. NPS alone can’t answer them.
#3: The NPS Question Isn’t Always Relevant
NPS creator, Frederick Reichheld, admitted when he first wrote about NPS that the “willingness to recommend” (WTR) question doesn’t work for every industry, product or situation.
Why? In some cases—such as B2B purchasing—the person conducting the transaction does not have actual buying authority. Also, the NPS question doesn’t apply in monopolies or other situations where customers have limited choice.
There is another issue inherent in NPS design. As Forrester analyst Richard Evensen notes, the 0-10 scale doesn’t have meaning in all cultures. This suggests NPS is less useful for enterprises with an international presence.
In fact, Evensen recommends that companies should stop using NPS. He affirms the question has merit—to analyze customer satisfaction and perceived value. However, NPS has not proven to be a good indicator of intention or action in many customer scenarios.
What does all this mean?
Companies need to recognize NPS for what it is: a reasonable snapshot of aggregate customer satisfaction. Leaders can no longer trust that a high NPS score means their company is delivering good-quality service.
Brands must realize that NPS is not a silver bullet to address all their customer experience measurement needs. They need to increase focus on open-ended surveys to collect customer sentiment. In addition, they must perform real-time analysis of customer interactions to gain up-to-the minute insights on customer perceptions. And they need to operationalize this knowledge and evolve their strategies around customer feedback to deliver higher quality experiences.
Let’s break Company A down even further. Suppose 20 detractors were broken out by scores of 0 through 6 as follows
A.1 0(20), 1(0), 2(0), 3(0), 4(0), 5(0), 6(0)
A.2 0(0), 1(0), 2(0), 3(0), 4(0), 5(0), 6(20)
A.3 0(3), 1(3), 2(3), 3(3), 4(3), 5(3), 6(2)
Scenario A.1 has a lot of really unhappy people. Scenario A.2 has a lot of people who are in the middle of the road. And, scenario A.3 has a level distribution.
Admittedly, A.2 is not too far off from Company B. The point is that detractor score alone (sum of customers responding 0 thorugh 6) is not enough to truly reflect the opinions of detractors.
Thank you for sharing your thoughts, Tim. Very good point and helpful clarification.
Well taken points; however, the tip of the iceberg where NPS is concerned. And, NPS (along with ACSI/CSAT) has long been shown to have further 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/
Another of my blogs 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, in addition to the points you’ve articulated, 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. Advocacy and brand bonding research has proven to be considerably more actionable, at a granular level, in improving the customer experience and helping drive downstream customer behavior: http://customerthink.com/customer-advocacy-bonding-endorsement-recommendation-and-influence-whats-the-difference/
Thank you for this article.
While NPS is a quick-and-easy read, your first point drives home the limitation of NPS that the measure alone does not account for the level to which the brand/product/service being measured is polarizing.
And let’s keep in mind that loyalty does not always translate to sales. Consider the ads we see that include the Dos Equis “Most Interesting Man In The World” who claims he does not always drink beer but when he does he prefers Dos Equis. He may be loyal with a brand of beer, but if he doesn’t always drink it then a) what else is he drinking instead and b) how often is he doing so?
Context and additional information is paramount to telling the story.
Michael and Lance, thank you for your comments. I look forward to reviewing your articles and the journal research in detail, Michael.