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NPS: Using It Correctly

Introduction

In 2003 Fred Riechheld introduced the Net Promoter Score (NPS) as the “one number you need to grow” within the customer experience field. Since that time, many companies have adopted this measure. At MaritzCX we are often asked about our perspective on the use of the Net Promoter Score (NPS) versus other customer experience metrics, its advantages and disadvantages, and its proper uses. Here we will provide a brief perspective on NPS.

The NPS Calculation

As a review, NPS uses a standard question, a standard response scale, and a standard scoring technique. The question is:

How likely is it that you would recommend Company X to a friend or colleague?

The response scale ranges from 0 (labeled as “Not at all likely”) to 10 (labeled as “Extremely likely”). The NPS Score is calculated at the aggregate level and is the percentage of respondents who select 10 or 9 (defined as Promoters) minus the percentage of respondents who select 6 or below (defined as Detractors). Therefore, an NPS score can range from +100 to -100.

NPS quote

Advantages of the Net Promoter Score

The promise of the Net Promoter Score was that it is the best predictor of company growth (not customer loyalty as is commonly assumed – see side bar) across industries. However, since the publication of Reichheld’s HBR article and subsequent book, many studies have disputed this claimi. Presently, most customer experience practitioners seem to view NPS as similar to many other customer experience metrics such as Overall Satisfaction, the Customer Effort Score, or the traditional “Big 3” index of Overall Satisfaction, Likelihood to Recommend, and Likelihood to Return/Repurchase.

Probably the biggest advantage of using NPS is that it has gained wide acceptance within the customer experience industry. Therefore, it is often used as a benchmarking measure for companies, both within and across industries.

Cautions When Using NPS

As mentioned above, the greatest advantage of using NPS is that it can be used as a benchmarking measure. However, for NPS scores to be comparable, consistency in asking the question is key. Not only do the question, response scaling and scoring need to be consistent, other factors need to be consistent as well.

  • Who is responding: NPS is generally used to measure a company’s current customers’ perceptions of the company. Scores from respondents that contain other consumer groups (e.g., lost customers, consumers who know of but are not customers of the company) are not comparable.
  • Context in which responses are gathered: NPS is usually considered to be a customer relationship measure. Therefore, the NPS question should be used in customer relationship surveys rather than transaction-based surveys. If the NPS question is asked in transaction-based surveys, the outcomes of the individual transactions will affect the NPS score.
  • Cultural Factors and Other Biases: The NPS question is not immune to factors that affect other survey measures. For instance, cultural differences in the propensity of respondents to give top-box scores will affect the NPS measure. Therefore, comparing NPS scores across cultures is discouraged. Placement of the question within a survey should also be considered. Generally, it is better to place the question early in a survey so it is a “top of mind” measure rather than late in a survey where it will act more as a “considered response” measure.

Another factor to consider is that NPS can give you a good idea of HOW your company is doing compared to others, but it won’t give you any idea of WHAT your company is doing right or wrong in your customer experience efforts. For that reason, NPS usually should not be used alone. It should be used in conjunction with key diagnostic questions (both closed-ended and open-ended) to determine areas for improvement.

Many companies conduct customer surveys to identify and follow-up with at-risk customers. Just measuring NPS will not help you accomplish this. Therefore, in most cases you should implement a robust closed-loop program in your NPS survey. We recommend contacting as many detractors as possible to resolve their problems the best you can, but don’t forget about the people that rated you seven or eight (Passives). Usually, Passives can be converted to Promoters much more easily than Detractors.

Finally, NPS may not be the best metric to use if you are trying to drive specific outcomes rather than using it solely for comparative purposes. NPS is generally less useful for predicting key outcomes within a particular company for two reasons. First, as Reichheld noted in his book, The Ultimate Question, NPS was the best predictor of growth across all industries, but it was not the best predictor in each industry. Specifically, he states, “In eleven of fourteen cases, this question ranked first or second. In two of the other three, it was so close to the top that it could serve as a proxy for those that did rank number one or number two.” (pg. 28) While not reported, it is also likely that NPS was not the best predictor of growth for each company. Second, while company growth is an important outcome metric, it can be far removed from the customer experience because other factors (e.g., effective marketing, financial management, charismatic leadership, etc.) also affect company growth. Often, a better approach is to define the customer outcome variable you are most interested in affecting (e.g., customer advocacy, transactional customer satisfaction, repeat purchasing, etc.) and conduct linkage analysis to determine the best and most important predictors of that variable for your company.

Summary

When asked in a very consistent way, NPS can provide valuable benchmarking information for companies. However, custom measures based on the specific outcomes your program is trying to achieve and the factors your participants can influence are better able to drive improvement initiatives.

i See for instance:

Keiningham, T.L., Cooil, B., Andreassen, T.W., & Aksoy, L. (2007). A Longitudinal Examination of Net Promoter and Firm Revenue Growth. Journal of Marketing, Vol. 71, 39-51.

Grisa e, D.B. (2007). Questions About the Ultimate Question: Conceptual Considerations in Evaluating Reichheld’s Net Promoter Score (NPS). Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior, Vol. 20, 36-53.

Kristensen, K. & Eskildsen, J. (2014). Is the NPS a trustworthy performance measure? The TQM Journal, Vol. 26, 202-214.