HINT: It’s not because it’s a technically superior measure of customer satisfaction, customer loyalty or referrals.
Net Promoter Score (NPS)* continues to be adopted by private sector organizations as their key customer experience metric. Even though many academics have determined that NPS is not quite the “One Number You Need to Grow” as it was originally sold. There are other metrics or baskets of metrics that are as good or better at predicting customer retention. Accuracy varies by organization and industry.
However, why are more organizations adopting NPS when they know there may be technically superior metrics? They’re not crazy.
The reason companies choose NPS is likely three-fold:
- NPS is easy to compare to other organizations. The number is simple and can often be compared to other organizations easily or to industry averages – often at no cost. For example, a telco client of ours has two key competitors with NPS of -3 and 20 (telcos generally have relatively poor customer satisfaction). Superior service is a key strategic differentiator for this client, so these benchmarks can suggest when more investment in customer satisfaction is either mission critical or will begin to provide diminishing returns.
- It is easy to understand. NPS is a “north star” metric that everyone can refer to to get a sense of progress. Complicated combined indices or arbitrary sounding numbers (e.g. score of 4.2? Is that good?) can be more difficult to explain and motivate staff around.
- Categories make goal setting more meaningful. NPS allows for thinking about the difference between halting negative experiences and for creating positive word of mouth. For example, stopping over-billing errors might reduce “detractors” while improving value might turn “passives” into “promoters”. The value NPS improvement initiatives can be estimated and the economic value quantified.
How to use Net Promoter Score (the very short version)
NPS provides an overall benchmark for progress. However, it doesn’t provide any insight on where to focus your energy to drive up satisfaction. Additional research is required to determine satisfaction with various elements of the customer experience or core value proposition. It’s also important to identify which of those elements are most important in driving the overall satisfaction score, which can be done with a regression analysis on surveys or by gathering NPS data after a customer interaction (generating a NPS score for that contact point). In general, the elements that customer encounters most often tend to be the most important.
* See here for a description of NPS.