NPS: hype or reality?
Reading about three articles can be "eye-opening" and may help provide a nuanced answer to this question.
Part of the executive summary:
Today's most popular metric, the Net Promoter Score, focuses on how customer word of mouth can advance growth. It claims the ability to predict future growth from customer replies to one question: "How likely is it that you would recommend this company to a friend or colleague?" The authors found that the linkage between the Net Promoter Score and subsequent customer behavior was modest at best; models based on multiple variables consistently outperformed models based on Net Performer. The authors are skeptical that there can be a single metric that reduces complex, multifaceted constructs to one or two dimensions, if there is, they write, "there is a good chance it will ignore one or more important aspects of the equation."
From "MIT Sloan Management Review.
Summer 2008: Linking customer loyalty to growth
Authors: Keiningham, Aksoy, Cooil, Andreassen
From "MIT Sloan Management Review.
Summer 2008: Linking customer loyalty to growth
Authors: Keiningham, Aksoy, Cooil, Andreassen
Part of the executive summary:
The notion that companies must go above and beyond in their customer service activities is so entrenched that managers rarely examine it. But a study of more than 75,000 people interacting with contact-center representatives or using self-service channels found that over-the-top efforts make little difference: All customers really want is a simple, quick solution to their problem. The authors describe five loyalty-building tactics that every company should adopt: Reduce the need for repeat calls by anticipating and dealing with related downstream issues; arm reps to address the emotional side of customer interactions; minimize the need for customers to switch service channels; elicit and use feedback from disgruntled or struggling customers; and focus on problem solving, not speed. The authors also introduce the Customer Effort Score and show that it is a better predictor of loyalty than customer satisfaction measures or the Net Promoter Score. And they make available to readers a related diagnostic tool, the Customer Effort Audit. They conclude that we are reaching a tipping point that may presage the end of the telephone as the main channel for service interactions - and that managers therefore have an opportunity to rebuild their service organizations and put reducing customer effort firmly at the core, where it belongs.
From "Harvard Business Review"
July-August 2010: Stop trying to delight your customers
Authors: Dixon, Freeman, Toman
From "Harvard Business Review"
July-August 2010: Stop trying to delight your customers
Authors: Dixon, Freeman, Toman
Rise and fall of NPS
In this article, Dr. Hüseyin Güngör, a researcher at the University of Amsterdam and a consultant in the field of customer satisfaction and emotional loyalty, reports on his studies conducted among banks and telecom companies in several European countries since 2004. These show that, according to him, the NPS formula rattles. Customer experiences can be better measured by other means and methods. So a recommendation is fine to measure. But the NPS formula should not be used as the sole indicator of a company's success.
From "Telecommerce"
December 2009: "Rise and fall of NPS"
From "Telecommerce"
December 2009: "Rise and fall of NPS"
10 conclusions, based on aforementioned research by Güngör and empirical data
1. The question "Would you recommend us to others?" provides similar data to other conventional customer satisfaction questions.
2. That NPS predicts future financial performance has not been demonstrated.
3. The number of actual recommendations may be much less than the nice answers to survey questions.
4. In the NPS formula, lowest scores (1-4) are unfairly mixed with neutral scores (5-6), although there are significant differences within these so-called detractors.
5. Similarly, passively satisfied customers (7-8) are sometimes unfairly separated from promoters (9-10). This is even though the loyalty of both groups to an organization may be the same.
6. Low recommendation scores do not automatically lead to customer loss. Recent research shows that only 25 percent of detractors actually intend to stop being customers of an organization.
7. NPS surveys are conducted primarily through IVR systems. These measurements can be much more positive than reality. This is especially true if an agent invites the customer to participate in the survey after a positive customer contact.
8. Satisfied customers are more likely to participate in and complete an (IVR) survey. Happy customers are also more likely to rate their pleasant experiences more positively in a survey. Real detractors are likely to be missing from the measurement.
9. The NPS should be interpreted differently by industry. For example, a 6 may be a fine score in a bank, while the same score may have negative implications in a telecom company.
10. In North America, 80 percent of customers with a positive shopping experience recommend the organization. 40 percent do the same, in a standard shopping experience. In North America, therefore, scoring a 10 is quite common. In the Netherlands, an 8 stands for almost excellent, while a 6 passes for good in our school system. Perhaps this is why the majority of organizations in the Netherlands score a negative NPS.
2. That NPS predicts future financial performance has not been demonstrated.
3. The number of actual recommendations may be much less than the nice answers to survey questions.
4. In the NPS formula, lowest scores (1-4) are unfairly mixed with neutral scores (5-6), although there are significant differences within these so-called detractors.
5. Similarly, passively satisfied customers (7-8) are sometimes unfairly separated from promoters (9-10). This is even though the loyalty of both groups to an organization may be the same.
6. Low recommendation scores do not automatically lead to customer loss. Recent research shows that only 25 percent of detractors actually intend to stop being customers of an organization.
7. NPS surveys are conducted primarily through IVR systems. These measurements can be much more positive than reality. This is especially true if an agent invites the customer to participate in the survey after a positive customer contact.
8. Satisfied customers are more likely to participate in and complete an (IVR) survey. Happy customers are also more likely to rate their pleasant experiences more positively in a survey. Real detractors are likely to be missing from the measurement.
9. The NPS should be interpreted differently by industry. For example, a 6 may be a fine score in a bank, while the same score may have negative implications in a telecom company.
10. In North America, 80 percent of customers with a positive shopping experience recommend the organization. 40 percent do the same, in a standard shopping experience. In North America, therefore, scoring a 10 is quite common. In the Netherlands, an 8 stands for almost excellent, while a 6 passes for good in our school system. Perhaps this is why the majority of organizations in the Netherlands score a negative NPS.