Estimated reading time: 12 minutes
WHY NPS as Measurement & Methodology: which goals does it serve?
NPS stands both for Net Promoter Score and Net Promoter System.
Net Promoter Score (NPS) is a metric used to assess long-term customer happiness, or customer loyalty. The metric examines the number of people who would recommend a company’s products or services to their family or friends. NPS is different than regular CSAT (Customer Satisfaction) and has proven to be a better predictor of growth.
CSAT gives weight to your most vocal customers, those who will fill your surveys, because they had an extremely good or extremely bad experience (hence called “perception metric”). But then the silent or less frequent customers, how do you measure their interactions? Here is where NPS comes in.
NPS measures what the customers are going to do as result of their perception (hence called an “outcome metric”).
Fred Reichheld, who founded the concept in 2003 when he published an article in Harvard Business Review titled “One Number You Need to Grow”, sees NPS as a key performance indicator for growth, arguing that companies with high NPS scores will experience long-term, sustainable growth. His research found that companies achieving long-term profitable growth have NPS scores that are twice as high as the average company.
Does a high Net Promoter Score drive such growth? Of course not! I think one of the sentences I most often repeat to my clients is “It’s not about the score”. The score is just like one of the gauges on a F1 car cockpit : it is not why you run the race and it is not the only gauge you look at, while also keeping an eye on the track, on what your competitors are doing and so on.
What enables and empowers a pilot to win, is his entire team and how well they use the system.
Net Promoter as System is a complete methodology towards customer centricity and gaining competitive advantage to win the market race.
You can read more about NPS as metric in “10 basics things to know about NPS”. Today we will focus on why companies should adopt an NPS measurement and the entire system around it.
Overall, adopting NPS as measurement and methodology fulfils 5 goals:
- Gathering valuable customer data about – hence measuring – your customer perception of the interactions they have with your company, so you know where you stand in the race and when you need to course correct.
- Providing you actionable insight into customer needs and desires, so you can make customer centric decisions which are based on quantifiable Voice of the Customer, rather than internal opinions or loudest voice. We have covered how to turn NPS data into insight in “NPS score explained with customer hierarchy of needs & resolution time”
- Enabling you to take informed action: Temkin Group identifies four customer insight-driven action loops. We aggregate them in two big areas of action, which have gained different naming in the field:
184.108.40.206. 121 – if/as needed – with each customer that answers your survey as follow-up to their comments, either to address an issue, either to build on further on his/her engagement and/or simply to thank in a personal way.
220.127.116.11. Collectively, via dedicated & targeted communication or as open communication on digital channels – ie. Toward multiple customers who responded selecting same drivers and/or toward all your website visitors (i.e. sharing “you told us xyz, we did kjw to address xyz”). See as best practices what Virgin Media or Higher Logic did in 2014.
18.104.22.168. providing immediate feedback towards employees: for example, in case of transactional survey on contact center, this can be either to celebrate positive feedback or to correct behavior.
22.214.171.124. making quick adjustments: for example, in case of transactional survey on e-shop order, this can be about a missing information on the website that can be quickly picked up and fixed.
126.96.36.199. to address root causes behind drivers of detraction
188.8.131.52. to identify ways to WOW customers based on their needs in order to move them from passives to promoters
184.108.40.206 to keep and intensify doing the identified drivers of promotion
4.1. customers: with the ones who take the time to answer the survey and provide you valuable feedback (the % of companies who actually follow-up directly on comments left by customers is still below 30%, so companies who follow up have a competitive advantage as customers perceive them as really customer caring) or the ones who observe how you react to feedback, i.e. customers who come visiting your premises (or your website, or your ratings & reviews) and see on display feedback from other customers and how you react to it.
4.2. employees: often the positive impact a well set-up feedback system can have on employees goes unnoticed or underestimated. We all strive to make someone else happy and adding value with our work, and we all want to hear feedback about whether we succeed to do so with our actions and, if not, how can we improve. Too often still I see companies (and their working councils) wanting to remove names or not openly share comments. I feel they still come from a “fear of mistakes and blame approach”, rather than seeing, presenting and using the feedback as a way to celebrate, addressing the customer needs and adjusting where needed with a positive attitude.
5.1. Reduced churn/higher retention: thanks to both follow-up actions and structurally addressing root cause
5.2. Reduced costs: thanks to both follow-up actions and structurally addressing root causes which often not only cause low NPS but also increase cost to serve
5.3. Increased upsell and cross-sell opportunities: thanks to better understanding customer needs and to the engagement opportunity
5.4. Higher employees’ engagement and happiness: thanks to gained visibility on actual customer perception (often praise), to capability to see how their action can directly impact it and to involvement in “actions definition workshops”
5.5. Brand reputation and positive word of mouth: when your customers talk positively about you and recommend your brand to friends and colleague, your sales increase without usual acquisition costs and you stay top of mind for customers and prospects whenever a new purchase need arises for them
NPS is an excellent option for organisations wanting to establish a sound voice of the customer assessment process, collect actionable data, and receive maximum return on investment. Net Promoter programs are not traditional customer satisfaction programs, and simply measuring your NPS does not lead to success. Companies must follow an associated discipline to actually drive improvements in customer loyalty and enable profitable growth. They must change their approach from fear and blame, to constructive feedback loops between their customers and employees. Understanding drivers for detractors, passives and promoters is key to identify and prioritize actions that can improve experience and fuel loyalty and growth
Just like other metrics, it’s important to note that a high NPS score alone does not guarantee success. What matters most are the actions done to drive a better customer experience and perception of the experience (not of the score!).
This is why, especially in the automotive industry, present practices in place to influence customer perception of the score are so meaningless and actually harmful to the overall growth.
NPS purely measures the quality of a company’s relationships with its current customers and their likelihood to repurchase or recommend. While this is important, it’s not the only factor playing into company’s growth potential. While NPS is a forward looking indicator of growth, it is only a laggard metric of operational performances.
Companies must not only have a strong following of happy customers with high NPS, but also make smart decisions around other growth factors playing into their industry, and make sure that they have systems in place to continuously observe and correct operational performances, so that VOC feedback can be focused on providing real valuable insight for growth, rather than mere input about what still needs fixing.
More on Net Promoter Score?
- NPS as Measurement Series – Part 2: What and Which Survey
- NPS as Measurement Series – Part 3: When to use NPS and with who
- Make sure everybody in your company is familiar with 10 key things to know about NPS
- Verify that you worded the NPS question effectively
- Are you looking for Customer Experience Excellence? Implement the NPS & CEXP Household Framework
- Sign up to receive a notification when new releases in this series are published – using the form below “Subscribe to blog via email”.
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Setting up an NPS program?
Speed up the adoption of NPS in your organisation by taking the NPS Onboarding Masterclass, a two-day full immersion training that combines high quality content, peer exchange and blended learning. This in-company training is designed by Rosaria Cirillo Certified Customer Experience Professional (CCXP) & Authorised Resource Trainer (ART) by CXPA, and will provide your organisation with in depth learning, exercises and case studies related to the seven critical elements pivotal to the success of this program. Interested?
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