Net Promoter Score – When Logic and Data Diverge

I am regularly asked for my opinion of a performance metric called the Net Promoter Score (NPS), which has become a popular way to assess an organization’s effectiveness by measuring the ratio of loyalists to detractors. Many companies have adopted the metric as a leading indicator of growth — the logic being that as the NPS score goes up, increased growth will naturally follow.  NPS is often adopted at the urging of very senior levels of management, and people want assurances that it’s worth the effort. My advice is always to not take anyone else’s word for its utility; test NPS with your organization’s own data, and if NPS correlates with growth (or whichever ultimate measure of performance you are trying to improve), consider using it.

A pattern I’ve observed is that many firms adopt NPS because of the rationale behind it — not because the evidence at their organizations supports its use. Indeed, an uncomfortably large number of managers have sheepishly admitted to me that they found no correlation between their NPS scores and ultimate performance, long after they’ve adopted NPS as a key organizational metric. This puts them in a terrible bind. NPS is often embraced with great fanfare, complete with incentives and systems that are redesigned to focus the organization on improving the metric.  When NPS is not a leading indicator of growth, organizations expend tremendous effort with little to show for it.

After seeing enough of these examples, I began to investigate what was going on.  Here’s what I’ve learned.  The logic of NPS is very persuasive. It’s clean and intuitive, and feeds our hunger for one clear goal on which we can focus the troops. If a company has more advocates than detractors, good things should happen. And the greater the imbalance, the better the things, right? The problem is that while this might be true as a general principle, it may not be true in a specific context. For example, if all those advocates are consuming your outstanding pre-purchase service, but closing the deal with cheaper competitors, as happened to Gateway computers, their advocacy is doing you little good.

Here’s my advice. Most organizations are already collecting the big three customer metrics — customer satisfaction, customer intention to repurchase, and customer likeliness to recommend.  I strongly encourage organizations to have a runoff between all three measures and the performance measure they’re trying to improve. If NPS is the strongest driver of performance, either in an existing time period or as a leading indicator, then by all means use it. But if it’s not, I suggest discarding it, regardless of the shiny appeal of its high-level logic.

7 Responses to Net Promoter Score – When Logic and Data Diverge

  1. We are big users of the NPS, but I agree that you need to be really careful trying to “tie” the scores to ultimate growth and profitability. I see the benefits for us in two ways, one, as a directional indicator of our customer service delivery (we take the scores primarily after interactions), and the other as a way to “buy in” employees as to their value as service providers, and thus spur them on to deliver good service.. It’s great when I can back up, with data, that NPS is higher even on service calls than it is when a customer has little or no contact with us. That’s the value of their interaction. One other little interesting tidbit- our “churn” is lower with customers that we contact directly and ask the question versus those we try to contact and fail. Just asking them their opinion (and I agree, it wouldn’t necessarily have to be the NPS question) makes a difference.

    Thanks for the post – it never hurts to think more on this type of stuff!
    (are you on Twitter by the way- I’m going to recommend this to my followers)

    Terry Starbucker

  2. I enjoyed reading that post, thank you for writing it. Client relationships are very complicated things and many companies get in trouble when they try to measure them with just one question, namely NPS. I agree fully that any business thinking of implementing such a measure should research whether it is indeed correlated with the desired performance metric before linking it to anything like compensation or incentives.

    Execs should also be aware that there are other measures and methods to quantify the state of client relationships; NPS isn’t the be-all, end-all. Many of those measures can incorporate NPS so that past efforts/enthusiasm aren’t lost, but are more robust in information and application.

  3. Tabitha Dunn says:

    Good food for thought. I have used NPS a great deal and I believe it can have great value, when applied well and within a framework of a larger strategy. The concept that it is the “ultimate question” is where I think NPS tends to struggle. I have found the measuring and taking action on customer satifaction and loyalty is the true key to success.

  4. Vivian Blade says:

    Following and trying to improve the metric itself, whether NPS, satisfaction, or others, will not get you growth. The key is to understand the drivers of strong customer relationships and where your gaps are. Focus on operational improvements that make service and product performance superior – above and beyond customers’ basic expectations. Create unimaginable ‘value’ for customers. Then, the metrics will follow.

  5. A well written and thought provoking article. I think however you need to look at the alternatives that are available to business.

    As a business user of traditional satisfaction surveys for many years I have to say that it was a struggle to get buy in from operational staff, executive and sales staff. The main reason was that the links to business economics ‘real’ or ‘perceptual’ was non existent. Also there was very little action as with 40+ questions it was not clear what to focus on. Then there was the constant question from my CEO “So we moved from 3.4 to 3.5 out of 5 in customer satisfaction. Is that good?”. Aiming for satisfaction also sets your sights a bit low, it should be par for the course and is hardly motivational.

    The best way to look at NPS is as an operational metric that unites the organisation towards achieving an understandable and intuitive customer goal that is motivational and sets your sight high. Importantly it has a strong bias to action.

    However I agree that organisations need to know the key business outcome for their business and run the economics first. Simply put what is a Promoter worth as opposed to a Detractor this also helps you when you are preparing business cases for customer initiatives.

    Vivian got it right when she said “Create unimaginable value for customers Then the metrics will follow” I would add to Vivian’s comment that growth and profit will follow as well.

  6. Adam Dorrell says:

    Chris’s point is spot-on. I’ve been in marketing for 20+ years, and there are very few metrics in marketing that can be shared or benchmarked. The accountancy world got its act together many years ago with recognised terms like EBIT – and marketing people (who, let’s face it, would rather go for a long lunch with an agency than actually measure something). So Net Promoter, for all its faults, is the first step I have seen that actually helps marketing/operations/sales/c-suite to have a meaningful dialogue over a common “hard” metric.

    It took a Venician Monk, Luca Pacioli, to define Double-Entry Bookkeeping in 1494. It’s taken a few hundred years to get right – but now the entire world understands his accounting terms. Net Promoter is just getting going – six years or so.

    NPS means no arguing over a 5 or 10 point scale, or “this 20 question survey methodology is better than last years”. NPS is simple, open and easy to communicate to the entire organisation (hint: buy them all the “Ultimate Question” or show them our 2-minute guide in cartoon form).

    Enough about arguing over whether NPS is a good indicator of performance. I thought Profit was, until recent market events taught me that even Profit is a subjective metric!

  7. Andy Perkins says:

    This is an interesting discussion. I personally am a fan of NPS. But with a couple of caveats…

    1) It can, and should, be easily be supplemented with the other two questions (satisfaction and intention to repurchase).

    2) Where NPS and other measurement systems go wrong is losing site of the real purpose. Raising the score isn’t really what a company should be after. Creating NEW value for customers and shareholders alike is what keeps the firm in business.

    When adopting NPS, the focus should really be on transforming culture to a customer centric model rather than increasing an arbitrary number because it should get you a higher stock price.

    Andy Perkins
    The Satisfaction Questionnaire Blog

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