“How likely are you to recommend our product and services to a friend or colleague”?
There are few questions in customer experience where the answers have been so deeply attributed to growth potential, profitability, and investor strategies. Net Promoter Score has for years been billed as “The one number you need to grow”. And much like B2C, NPS has been used as the gold standard in B2B to benchmark customer satisfaction and potential loyalty.
I would argue though that NPS is inherently flawed and a measurement of the past.
Customer experience has become too complex and nuanced for a narrow, largely inactionable metric. Customer service and support teams are already re-evaluating their options. Gartner predicts that 75% of organisations will abandon NPS as a measure of success for customer service and support within two years.
Before we explore some of the alternatives for your business, why doesn’t NPS work any more?
The psychology behind NPS revolves around gauging customer loyalty and satisfaction by measuring the likelihood of them recommending a product or service to others. However, NPS falls short in establishing a long-term efficient system for several reasons:
Limited insight – NPS primarily focuses on a single question about likelihood to recommend, providing a narrow perspective that may not capture the complexity of customer experiences.
We’re scoring intent not behaviour – saying you will do something doesn’t mean you will actually do it. The survey is static. It doesn’t tell you what customers do next. NPS is typically measured at a specific point in time, offering a snapshot of satisfaction. This static approach also doesn’t reflect the dynamic nature of customer opinions and perceptions over the long term.
Inadequate context -the score lacks detailed context as it doesn’t delve into specific aspects of the customer experience, making it challenging to identify and address specific issues. Even with the addition of an open ended question NPS tends to lack any meaningful context.
It’s a lagging indicator – large-scale NPS surveys can take time to complete, and then it takes time to analyse the results.
Overemphasis on promoters and detractors – NPS often concentrates on classifying customers as promoters, passives, or detractors, oversimplifying the diverse range of customer sentiments and nuances that impact long-term relationships.
Multiple buyers – in B2C, the buyer is usually an individual who has specific needs and expectations. In B2B there are around ”6-10 buyers” and stake holders, according to Gartner, in the average buying group. Senior executives, who sign-off contracts and renew subscriptions, have different expectations, needs, concerns and priorities than your regular contacts, who are probably filling out your survey. There’s a big risk that you are surveying the wrong people and missing the feedback of the people who influence the relationship.
Long journeys – a buying team or user’s willingness to recommend could change as they move through a buying journey. The member who has bought a new software solution could be a ‘9’ during the purchasing process. But a poor user experience could make them a 7 or below if they encounter usability issues.
Human nature – people are more inclined to report a poor experience than a good one. Your ‘promoters’ might not bother to fill in the survey is they were satisfied and wanted to leave it at that.
Should you just update your NPS strategy?
At a minimum, you could ask different questions on your NPS surveys to better understand customers. You could change your ratings or redefine ‘promoter’, ‘passive’ or ‘detractor’ ranges. You could add an open-ended question. But this makes NPS bespoke to you and difficult to benchmark against competitors. The same limitations apply to the score.
With all of this in mind, what are the alternatives to give you actionable insights on what customers think of doing business with you, what’s driving their loyalty and willingness to refer. B2B is built on referrals. What’s causing churn and what needs fixing? There is a better way.
What’s the alternative to NPS?
An alternative approach for a more efficient long-term feedback system could involve implementing a comprehensive customer feedback mechanism that includes a mix of qualitative and quantitative data. This could include AI-powered customer intelligence, detailed surveys and customer interviews to provide a more nuanced understanding of customer experiences, enabling businesses to make informed decisions and improvements over time.
AI-powered customer intelligence – there is no shortage of AI-powered customer intelligence platforms to give you analytics to drive your measurement strategy. Let me give you an example. NPS only tracks intent to refer. With an enterprise-grade customer intelligence platform / referral marketing platform you can track and measure actual referrals.
There is a significant opportunity here. As reported on Fast Company, 80% of organisations have yet to adopt AI or predictive routing for CX measurement. Customer intelligence platforms also surface real-time (and historic) qualitative insights. CX leaders are pulling ahead by capturing insights they need on their customers’ behaviour, preferences, emotional state and intent.
Customer lifetime value – this can be calculated on a single customer – or segment. An increase in customer LTV is a tangible business result. There’s a free customer service metrics calculator here to help you get the data you need to calculate LTV.
You can also measure churn rates, retention rates etc. The list is long depending on the business goal you want to achieve.
Product engagement score (PES) – have you thought about introducing a product engagement score? Unlike NPS and other surveys that give you limited insights on satisfaction, PES measures how customers interact with your product. This can help you strengthen the three elements: adoption, stickiness and growth.
Product market fit (PMF) – you could ask customers a simple survey question – how they would feel if your product was no longer available to them? Would they miss it? The test originates back to Sean Ellis, the first marketer at DropBox. Group respondents into 4 cohorts ranging from “very disappointed” to “somewhat disappointed” to “not disappointed” to “I no longer use this product”.
Adoption rate, customer effort etc. There are so many options depending on the business, metrics, and measurement models and approuch.
Tip: Ellis created the ‘40% rule’, which is a common metric for benchmarking survey results. If 40% of your customers would be “very disappointed”, or they view it as a “must have” then you’ve created a product that fits into your market.
Respondents who answer “very disappointed” if your product was no longer available to them are is your insights gold mine. Your customers in this group could also be your best salespeople.
Supplementary surveys – NPS has been elevated to “cherry” status on top of a layered cake of customer experience metrics like value enhancement score (VES) to predict loyalty outcomes (retention, positive word-of-mouth, wallet share). Customer satisfaction score (CSat) and customer effort score (CES). Arguably feedback via these surveys can give you a fuller picture of your CX – especially for service and support. There is scope to add qualitative questions to get to the why customers may feel a certain way, and why they do the things they do.
But these types of surveys also arguably have a limited shelf-life. Read our recent post What’s next in VoC as traditional customer surveys fade from our memories?
to find out why.
While NPS provides a quick and easy metric, it is often criticised for being overly simplistic and providing only a surface-level understanding of customer satisfaction. It focuses on the likelihood of recommendations but may miss the intricacies of the customer experience. NPS is transactional in nature, concentrating on a single point in time and categorising customers into promoters, passives, or detractors. This categorisation oversimplifies the complexity of customer relationships and fails to capture the ongoing dynamics and evolving expectations of customers.
In essence, NPS is considered a part of a short-sighted view of customer transactions because it doesn’t provide the depth and richness of insights needed for building lasting, meaningful customer relationships over the long term. There are alternatives to give you a more granular, deeper understanding of customer relationships. Three-quarters of companies are already rethinking NPS when it comes to service and support. Are you rethinking your strategy? Change could require a different mindset at the top about how the business needs to shift from using metrics like to NPS to measuring tangible business outcomes.
What did I forget to mention in my original article?
Recognizing the oversight in our exploration of NPS alternatives, it’s crucial to address the often overlooked yet immensely impactful factor of cultural nuances in the context of Net Promoter Score (NPS). The cultural dimension significantly influences how customers express satisfaction and loyalty, and a one-size-fits-all approach, as exemplified by NPS, may inadvertently neglect these subtleties. Cultural diversity can manifest in varied expectations, communication styles, and preferences, ultimately affecting the accuracy and relevance of NPS metrics across different demographics and regions. Therefore, any discussion about evolving customer experience measurement must consider the necessity of culturally sensitive metrics that resonate with diverse populations. By acknowledging the role of culture in shaping customer perceptions, businesses can refine their strategies, ensuring a more inclusive and accurate representation of customer satisfaction in an increasingly globalized market.
This article was originally posted at: https://www.eglobalis.com/why-nps-doesnt-work-any-more-and-whats-the-alternative/
Your thoughts will be greatly appreciated.
NPS: A Misleading Metric For B2B In Unprecedented Times? https://www.forbes.com/sites/peggyannesalz/2020/12/03/nps-a-misleading-metric-for-b2b-in-unprecedented-times/
How to Calculate Customer Lifetime Value (CLV) & Why It Matters https://blog.hubspot.com/service/how-to-calculate-customer-lifetime-value#clv-formula
Definitive Guide to Net Promoter Score https://www.salesforce.com/eu/learning-centre/customer-service/calculate-net-promoter-score/
Is the Net Promoter Score dead? Why it may be time to look beyond this metric
How customer sentiment analysis improves the customer experience https://www.zendesk.co.uk/blog/customer-sentiment-analysis-improves-cx/
Beyond Net Promoter Score: Customer Experience Measurement Reimagined https://hbr.org/resources/pdfs/comm/Genesys/BeyondNetPromoterScore.pdf
Using Sean Ellis Test For Measuring Your Product/Market Fit https://productcoalition.com/using-sean-ellis-test-for-measuring-your-product-market-fit-c8ac98053c2c
Gartner Predicts More Than 75% of Organizations Will Abandon NPS As a Measure of Success for Customer Service and Support by 2025 https://www.gartner.com/en/newsroom/press-releases/2021-05-27-gartner-predicts-more-than-75–of-organizations-will-