Like many of you, I’ve been a bit obsessed with Net Promoter Score (NPS) over the last few years. I implemented it as a tool to measure customer satisfaction at my last company, and it’s become one of our most important KPIs here at Pitchground.
However, I recently came across data that suggests that NPS may not be the best tool for measuring customer satisfaction after all.
In no way does this article discount NPS as a valid metric it just means we need to use it in different contexts and for different reasons than we’re used to.
| Takeaways |
|---|
| Net Promoter Score (NPS) oversimplifies customer sentiment analysis. |
| NPS lacks contextual understanding, making it inadequate for actionable insights. |
| Alternative metrics like CSAT and CES offer more nuanced views of customer loyalty. |
| NPS fails to consider the multifaceted nature of customer relationships. |
| Combining NPS with qualitative data can provide a more holistic understanding. |
| Addressing NPS’s limitations involves embracing a range of measurement strategies. |
What Is NPS?
The first thing to understand about NPS is that it’s an acronym. It stands for Net Promoter Score, which is a metric that companies use to measure customer satisfaction and loyalty.
NPS has been around since 2003 when Fred Reichheld the same guy who came up with the idea for satisfaction surveys first published his book The Ultimate Question.
In the book, Reichheld identifies what he calls the “ultimate question”: “How likely is it that you would recommend us to a friend or colleague?”
The second thing you need to know about NPS is that it’s a simple way for companies to measure customer loyalty and experience.
By asking this question on your surveys, you can get an indication of whether or not customers are happy with your product or service and if they plan on returning in the future (or at least recommend it).
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Why Is It Used?
Why is NPS used?
NPS is a measure of customer satisfaction, but it can also be used as a measure of loyalty. In fact, tracking both customer satisfaction and loyalty over time makes you able to see how they might overlap or differ.
Do customers who are satisfied with their experience become loyal? Or do loyal customers have less need to be satisfied by your company? The answers to these questions will help you determine which marketing tactics work best for your business.
How Is It Calculated?
Next, let’s talk about how NPS is calculated. The score is simply the percentage of people who say they’d recommend you minus the percentage of people who say they would not.
If a bunch of your customers is saying they’d tell their friends about you and others aren’t, it’ll make your NPS score go up.
Here’s an example:
Company A has 10 customers, and five out of those ten say they wouldn’t recommend Company A to anyone else (50%). Company B has 30 customers, but only 15 out of those 30 say there was anything about them that was worth recommending (50%).
What does this mean? Well if we look at these two companies from our sample size alone and ignore any other factors such as whether or not Company A offers better products than Company B.
Then we might assume that Company B is better than Company A because its overall net promoter score is higher. But what if it turns out that company B’s products are pretty bad? Or maybe its marketing campaigns aren’t appealing at all?
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Who Uses It?
If you’ve ever read about NPS, you’re probably familiar with its use in big companies like Zappos and Amazon. But it also pops up in smaller organizations one of my favorite examples is a locally owned restaurant chain called Del Taco.
In addition to being used by different types of businesses, the metric has been adopted across a wide range of industries including:
Retail, financial services & insurance (including banking and credit unions), travel & hospitality (including airlines and hotels), healthcare/pharmaceuticals/medical devices/biotechnology.
Manufacturing/industrial goods manufacturing (including automotive parts suppliers) and technology hardware manufacturers like Apple or Dell Computers.
The False Promise Of NPS
NPS can be a great metric for measuring customer satisfaction, but it’s not a substitute for good communication, customer service, and pricing. The best way to think about NPS is by understanding what it doesn’t mean.
NPS is not a substitute for good communication: It’s possible to have an average or even low Net Promoter Score (NPS) and still have happy customers who love your company and its products!
NPS is not a substitute for good customer service: A high level of happy customers can mean that you’re doing something right with your marketing efforts, but they could also just be satisfied with the quality of your product or services.
NPS is not a substitute for good product quality: If someone buys from you because they think that you offer the best price/value ratio on the market.
Then this will lead them to give you positive feedback regardless of whether or not your product/service delivers on its promise of being “the best.”
Again this isn’t necessarily bad but it does mean that there’s room for improvement when looking at things through the lens of building brand advocacy versus simply generating sales leads which leads us to our next point…
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The Hype About NPS
You may have heard that NPS is a measure of customer satisfaction, customer loyalty, and customer health. Or that it’s a measure of customer advocacy and retention.
Or even that it’s a measure of profitability! But none of these are true. These are myths that the industry has created over time and they’re all wrong.
There isn’t one common definition for what “NPS” means (and there shouldn’t be). Instead, consider each organization as having its unique definition based on what matters most to them.
For example, if you’re convinced NPS can help improve your marketing efforts by increasing sales or driving new customers through referrals from existing customers or if you want to use NPS metrics as part of an incentive program for your sales team.
Then make sure those things are included in your calculation of total score (discussed below).
What Do Other People Say About NPS?
It is not just this one company that thinks NPS is a great metric. Most people who have strong opinions about NPS either love it or hate it.
You will find endless articles online with the title of “Why Net Promoter Score [insert reason here]” or “How To Improve Your Net Promoter Score [insert method].”
While I do believe there are some companies for which NPS isn’t a bad measure, I would argue that most companies don’t realize what they are measuring and how it can be misleading when used alone.
We’ve Been Using NPS All Wrong. Here’s How We’re Fixing It
NPS is a great way to measure customer satisfaction. It can be used to measure the success of your marketing campaigns and track customer loyalty.
Here’s how you can use NPS:
Look at the responses from your last campaign and see how many customers gave you a “9” or higher rating, then look at how many were willing to recommend you to others after seeing your campaign.
This will give you an idea of how satisfied they were with it, which will help determine if any changes need to be made or if things are working well enough that there isn’t a need for any change at all (which would be awesome).
If someone gives you a 9 or 10 rating on their experience with one particular campaign (or even just one specific piece of content), send them another email asking about why they gave such high marks and what did they like most?
What did they dislike least? What would have made things even better? This might not happen right away but eventually, those who give high scores will likely reply as well as possibly share their experience with others who may also respond positively because of it!
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What We Are Doing To Fix Our Score, And How You Can Benefit From Knowing This Too
Here’s what we did to fix our score:
We stopped sending a survey to people who had never interacted with us before, which was the majority of them.
We only sent surveys where there was enough time for the customer to have an experience and give feedback about it (not immediately after one).
We started collecting more data from customers that were already engaged online or in-store, but at a slower rate than the traditional NPS, the approach suggests.
We focused on getting more qualitative feedback by asking customers open-ended questions rather than multiple-choice responses like most NPS tools do today (e.g., “How likely are you to recommend this company?” vs “How likely is it that you would recommend this company?”).
And finally, we made sure all of our employees were trained on how important it was for them to listen to their customers’ needs and concerns over simply asking them how they felt about the service or product they received or purchased this made all of the difference!
Recommendation Number 1
NPS isn’t a bad measure to use at all. It’s a good idea to use NPS as a way to get feedback from customers and employees.
You can also use it as a way to get feedback from partners and vendors, investors and shareholders, or even your competition. It’s very useful because you’re not just getting their opinion on your product or service but also their thoughts about the company itself!
Recommendation Number 2
NPS is a great tool for gauging how your customers feel about your company, product, and brand. It’s best used as an indicator of customer satisfaction.
However, it has serious limitations in this regard because it doesn’t account for the customer’s experience with your business.
NPS is only one small part of the customer experience: It accounts for what you do when things go right but has nothing to say about what happens when things go wrong or are less than perfect.
NPS can’t tell you what customers value most about your offering or why they choose to remain loyal to it over time (or don’t).
And even though NPS asks respondents if they would recommend their experience with a company or product/service.
There’s no guarantee that those who answer “yes” will do so down the road especially if their subsequent experiences aren’t up to par with expectations set by early interactions with providers like yours!
Recommendation Number 3
The third way to use the Net Promoter Score is to measure customer satisfaction, loyalty, and advocacy.
Customer Satisfaction: If you’re measuring customer satisfaction with NPS, then your goal is generally to improve the overall experience a customer has with your company and/or product.
You want to make sure that the customers who are using your products or services are happy with their experience.
Customer Loyalty: Many companies believe that loyalty drives higher lifetime value for their customers.
They also believe that NPS can help them understand how loyal their customers are by giving them an indication of where they rank among their peers (e.g., compared to other companies in their industry).
So if you’re looking at ways of increasing loyalty within an organization as well as improving overall LTV.
Then this might be another good way for you to use NPS data by comparing it against similar industries within your market space; however there’s no guarantee that this will work either!
Often these types of comparisons don’t work because there isn’t enough data available across all industries; so while doing so may provide some insight into what works best for different types of businesses at least one thing remains constant:
You need more than just one metric before making any conclusions about results!
Customer Advocacy – In addition to measuring how satisfied or dissatisfied customers feel after interacting with us online through social media channels like Twitter or Facebook posts etc., we also want them to talk about us positively on those same platforms too!
This means helping others learn why they should choose our company instead of someone else’s brand when making decisions about shopping online etc.”
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Recommendation Number 4
Recommendation number 4: Use NPS to measure the success of your marketing campaigns
When it comes to measuring the success of a marketing campaign, there are many different ways you can do this.
You could look at how much traffic your website and social media profiles get, or you could use Google Analytics and other tools to see how many people have completed an action on your site (like signing up for a newsletter).
There are also more advanced metrics like conversion rate optimization that we’ll discuss in a future post. But none of these will tell you how good those ads were at engaging people so that they become customers.
For example, maybe they got lots of traffic but didn’t convert well; maybe the ad drove lots of clicks but no sales; or maybe after seeing the ad people decided not even go through with it because they thought it was too expensive or had bad reviews online.
These kinds of insights are important for companies who want their advertising efforts to be successful, especially because if those efforts don’t work then every dollar spent on them becomes wasted money!
That’s why we recommend using the Net Promoter Score (NPS) as part of your measurement system when making decisions about whether an advertising campaign should continue running.
Or not based on its performance over time instead of just looking at immediate results like click-through rates (CTRs) alone.
Takeaway
I’ll give you my six recommendations to use NPS and come up with shippable feedback.
NPS is a great way to measure customer loyalty. It’s also a good way to measure the health of your business, marketing, and product so that you can make course corrections when necessary.
But It’s Not A Great Way To Measure Marketing Specifically
The core problem here is that NPS asks customers whether they’d recommend your business (not your product) and then assumes that those who answer “yes” are loyal while those who say “no” aren’t.
That assumption isn’t always true. More often than not it isn’t true! There are many reasons why someone might give you negative feedback for something other than disloyalty: maybe they’re just being honest about how frustrating their experience was;
Maybe they were trying out your product as part of some experiment but don’t plan on sticking around long enough for future interactions with your brand or company; maybe they were just having an off day when filling out the survey (we all have those days).
Conclusion
I’ve talked previously about how NPS is a flawed measurement for tracking growth, but I think it’s worth repeating here: if you want to use NPS as a way of measuring your company’s success, you’ll need to be careful about how and why you’re using it.
It’s not the only metric in town. There are many other ways to measure growth that don’t involve asking customers whether they’d recommend your product or service. One thing remains true: when it comes down to it, customer satisfaction is still king.
Further Reading
Here are some additional resources that delve deeper into the challenges of Net Promoter Scores (NPS) and provide insights into alternative measurement approaches:
The Problems with Net Promoter Scores: How to Better Measure Customer Advocacy Short Description: Explore the shortcomings of NPS as a measure of customer advocacy and learn about more effective measurement methods.
NPS (Net Promoter Score) Does Not Work Anymore: What’s Next? Short Description: Delve into the reasons why NPS may no longer be effective and discover alternative strategies for gauging customer loyalty.
Why Net Promoter Score Is Actually a Bad Tool and What to Use Instead Short Description: Understand the limitations of NPS and find out about alternative tools and metrics that can provide more accurate insights.
FAQs
What are the main limitations of using Net Promoter Scores (NPS)?
NPS has faced criticism due to its simplicity, lack of context, and inability to provide actionable insights beyond a numerical score.
Why is NPS considered insufficient for measuring customer advocacy?
While NPS provides a general sense of customer sentiment, it fails to capture the nuances of customer behavior and the factors influencing their opinions.
What alternatives can be used to replace NPS?
Alternative metrics such as Customer Satisfaction Score (CSAT), Customer Effort Score (CES), and detailed qualitative feedback offer more comprehensive ways to assess customer loyalty and satisfaction.
How does NPS fall short in gauging customer sentiments?
NPS relies on a single question, neglecting the complexity of customer relationships and overlooking factors that contribute to a holistic understanding of customer sentiments.
Can NPS still be valuable in certain contexts?
NPS can offer a basic overview of customer satisfaction trends, but it should be supplemented with more comprehensive measurements and qualitative insights for a complete picture.
Costantine Edward is a digital marketing expert, freelance writer, and entrepreneur who helps people attain financial freedom. I’ve been working in marketing since I was 18 years old and have managed to build a successful career doing what I love.
