With the 10-year anniversary of Net Promoter Score (NPS) upon us, it's hard to deny this metric's impact on the customer experience space over the past decade. Introduced by Fred Reichheld at the end of 2003, NPS has become the most widely accepted loyalty measurement, offering companies a simple, intuitive way to gauge customer satisfaction and likelihood to recommend.
NPS's infamous 10-point scale aims to quantify consumer behavior in a manner that is both easily understood and actionable. "NPS evolved out of a need to go beyond measuring 'overall satisfaction' to understanding just how loyal or disloyal a customer may be," says MJ Crabbe-Barberis, global product marketing director at Infor. "The measurement of 'would you refer?' is an attempt to put a numeric rating on a highly complicated behavior."
Yet, while NPS has seen significant adoption, particularly over the past five years, this metric has also seen its fair share of contention. Many companies and executives now view NPS as an incomplete measurement that fails to incite action, for its close-ended nature offers only black and white consumer responses, even if the actual answer may be somewhat gray.
According to Reichheld, creator of NPS, the metric was designed to represent a universal language relevant to all functions across any given enterprise. NPS offers frontline teams a number to rally around, motivating them to create satisfying customer experiences that will elicit scores of nine and 10. When it comes to NPS's 10-point scale, nine and 10 indicate strong likelihood to recommend a given brand or product, seven and eight represent the consumer's neutral stance, and those within the zero to six range count as detractors. Reichheld aimed to bring attention to the fact that a company's reputation was ultimately a result of the lives they touched each day. This broadly adopted measurement altered employee focus as they worked to limit detractors by delighting customers at every turn.
However, Reichheld notes that NPS's simplistic nature may be what's confusing the average adopter.
"Too many people think simple means it's easy," says Reichheld. "Yet, while the idea is simple, having it influence every dimension of your business-what kind of customers you want to do business with, who your target segment is, how you get better profits, how you hire and train employees, how you reward them-that is really hard work."
Reichheld hopes to deepen the understanding of NPS and what it implies for those running a successful business. "I think too many companies are shocked that this is a many-year journey of change from being product-centric to being customer-centric," he adds. "It feels so intuitive to people that they don't think they have to dig into it, and the greatest concern is there are many people who have an incredibly superficial understanding of Net Promoter. They know it's a score, but they have no idea that it links to a mission, a set of values, and that it has implications for how you run every part of your business."
Unfortunately, those with opposing viewpoints still argue that NPS fails to move beyond the superficial distinction between promoters and detractors. While most agree that NPS ushered in a new era for customer experience, bringing more focus on the customer to the executive level, NPS provides little guidance as to what drives these promoters and detractors to score themselves as they do.
As Crabbe-Barberis highlights, companies that merely add the 'recommend' question but neglect to go any further are common. While the question's response does provide them with more loyalty related information than they may have had prior, companies must also take action to understand the factors that impact customer loyalty at its core. By doing so, companies may unlock numerous opportunities for improvement and growth across their organizations regarding NPS.
"Users of NPS or other similar measurement strategies must recognize the work involved not only to measure likelihood to recommend accurately, but also to follow systematic process around calculating NPS and analyzing the root causes of the lows or highs in order to determine and prioritize actions that should be taken to move customers along the loyalty spectrum," Crabbe-Barberis adds.
NPS, however, inherently fails to inform executives and management teams about what methods are working and which strategies need to change, says Larry Freed, president and CEO of ForeSee. This static metric doesn't offer any information on what motivates both promoters and detractors, and offers little insight into actionable next steps. Opponents also note that, in many cases, NPS elicits response bias, as the most satisfied customers are also most likely to respond to surveys, skewing results toward the positive.
With an array of data at any given company's fingertips, NPS has the power to create an insightful foundation, but today's leaders also recognize the need to build upon this groundwork in order to comprehend customer behavior and sentiment so they may make the necessary changes required to boost business. As businesses evolve and prepare for an increasingly connected future, so must NPS and the way these companies measure satisfaction and loyalty.
"While it's great to understand who are your promoters, you really want to understand who your true detractors are," says Freed. To compliment NPS, ForeSee introduced the Word of Mouth Index (WoMI), which allows NPS to focus on promoters and customer loyalty, while WoMI identifies negative word of mouth in an attempt to weed out the drivers behind the detractors. "The numbers are staggering when it comes to how much NPS overstates detractors. But if you can figure out what's common about them, you can begin to fix things and address the problem."
Though NPS's simple beginnings continue to persist and enhance businesses across industries, companies understand that, in today's environment, customer experience stands as the primary differentiator. Therefore, they must do all they can to ensure that they understand customer sentiment and can act upon this insight to drive improvements and continued success. Yet, while NPS may need to evolve or coexist with other budding metrics, it's its underlying simplicity that will ultimately drive companies to seek the path of least resistance in their effort to determine which data points will help them move forward.