Does Net Promoter Score Really Measure Customer satisfaction?

3 minute read

August 4, 2016

Does Net Promoter Score Really Measure Customer satisfaction?

According to Forrester, 72% of customers prefer self-service to resolve their support issues over picking up the phone or sending an email. However, trying to measure customer satisfaction can be complicated without getting digging into the heads of your clients.

This is where the Net Promoter Score (NPS) comes in.

The Net Promoter Score (NPS) continues to increase in popularity as a relatively simple way to measure customer loyalty. According to its fans, NPS has helped businesses understand their customer interactions better, resulting in gaining the hearts of their customers who have turned into raving fans.

However, you may be wondering why this particular metric is being hyped as the best way to measure customer satisfaction. Is NPS what it’s cracked up to be or is it just another fad that will eventually pass?

What is the NPS?

NPS was created by Fred Reichheld of Bain & Company as a method to measure how well a business treats their customers and other people that they interact with. It is commonly accepted principle that a company’s customers can placed into three categories:

  • Promoters – the most loyal of customers who keep buying from the company and recommend the company’s products or services to others. They represent 80 percent of the referrals a company receives. Company employees enjoy helping and hearing from these customers.
  • Passives – these customers are satisfied, but are not enthusiastic about the company and can be easily pulled away by a competitor making a better offer. They are only half as likely to purchase from the company again in the future and less enthusiastic about referring others.
  • Detractors – this group is comprised of the unhappiest of all the customers who have had a bad experience with customer service or the product. They are responsible for over 80 percent of the negative word-of-mouth that may be out there about a company. It is even possible they just enjoy making trouble, but they can endanger a company’s reputation, scare off new customers and promote poor morale among company employees.

To begin the NPS process, customers are asked, “How likely is it that you would recommend us to a friend or colleague?” The customers’ responses would be then be scored on a zero-to-ten scale. Responses from:

  • Promoters will generally fall around the 9 or 10 range
  • Passives will land in the 7 to 8 range
  • Detractors will fall in the 0 to 6 range

The percentage for each category of respondents is calculated. To arrive at the NPS, the percentage of detractors is then subtracted from the percentage of promoters. For example, if you polled 250 customers and the results from 150 promoters, 30 passive and 70 detractors, you would set your equation up as 150 – 70 = 80. You would then divide 80 by the total number of customers polled (250) to arrive at a NPS of 32%. This score translates into having 32 percent more promoters than detractors. If the numbers were to calculate to a negative NPS, it would mean that you have more detractors than promoters, which would be a real cause for worry.

It’s not just the score that’s important from the NPS data. Customers should also be asked an open-ended question asking for the reason for the response they gave. This gives company the opportunity to see what customers are saying and offers the opportunity for improvements based on the feedback received.

What Are the Benefits of NPS?

There are multiple benefits to using NPS, including:

  • NPS makes companies think about how customer satisfaction metrics relate to the success of their future growth.
  • Companies that maintain NPS that are twice as high as average companies tend to grow at twice the rate of their competition.
  • NPS is easy to implement and doesn’t require a lot of money to accomplish with field work

Potential Drawbacks of NPS

Even with the obvious advantages that NPS can provide, there could be some drawbacks, such as:

  • It is not always easy to understand what was the driver behind a customer giving the score that they did, some people may just rate high while others prefer to never recommend any type of business or product to others.
  • NPS may not be relevant to your particular market or customers.
  • Businesses who deal in a global market may encounter cultural differences with using the zero-to-ten scale, with 10 only being reserved for extraordinary circumstances.

So yes, NPS can be good for businesses to track to be able to gauge customer satisfaction and to get an idea of how their growth potential may stand up to their competitors. However, it is important to not forget other metrics or conduct other short surveys on occasion that can proactively fill the void that NPS might be missing.

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Alok Chowdhury

Written by Alok Chowdhury

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