April 28, 2022
The one thing NPS is very good at!
The one thing that the NPS has been brilliant at is empirically demonstrating the importance of providing great customer experience and the impact word of mouth recommendation has on growth.
The Net Promoter Score (NPS) was launched onto an unexpecting customer experience universe in Fred Reichheld’s Harvard Business Review article – The One Number You Need To Grow.
A simple enough concept – ask people how likely they would be to recommend a product or service and then calculate a score by subtracting the number of detractors from the number of promoters to give you an advocacy rating.
Simplicity is often the key to success and the adoption of NPS across boardrooms (with seemingly no barriers based around sector or international marketplace) has been astonishing.
This has been followed up with a secondary metric (Earned Growth) which looks to compliment NPS by looking at the proportion of revenue driven by returning customers or those new customers attracted by word-of-mouth recommendation to trial/purchase. New customers who are buying based on marketing, promotion etc. are deemed to be ‘bought’ rather than earned.
But the stark truth is that NPS (or NPS 3.0 with its earned growth metric) is no magic bullet to success. From a brand perspective it doesn’t tell you what you are doing well, what you are doing badly or what you should be doing to get better. It is, as its simplicity would suggest, just a score. A singular, linear measurement of performance.
The almost universal adoption of NPS is to be commended. It has done this by proving that businesses that have a good NPS score do well and those with a poor NPS score (at least relative to others in their own sectors) do less well. But (and it is a very big but) there is no cause and effect in operation here. Businesses are not doing well because they have a good NPS score. They are doing well because they deliver great customer service and this is reflected in customer advocacy and, if asked about it, an increased likelihood to say they would recommend. If they weren’t asked the NPS question they would still be getting the great service and the company would still be growing at exactly the same rate. The number itself is not driving the growth, it is the culture of the business and, in almost all cases, the attitude, training and customer focus of the employees that drives customer experience.
The one thing that the NPS has been brilliant at is empirically demonstrating the importance of providing great customer experience and the impact word of mouth recommendation has on growth. This happens to have also coincided with a period where recommendation has had a magnified opportunity to influence behaviour (via social media/online reviews/ratings etc.) so what was true about the importance of advocacy in 2003 is even more important in 2022 and beyond.
What NPS doesn’t do (in isolation at least) is help businesses improve their customer experience performance. Businesses don’t do well simply because they collect an NPS score. To understand what is driving customer experience more data is needed. Data built around the customer experience at every touch point, looking at why and how customers are experiencing good/poor service and what could be done to improve this.
Early on there may have been a correlation between collecting NPS and performing well – those businesses who were focused on CX were most likely to realise the importance and therefore be early adopters, but with the universal adoption of NPS this becomes less likely to be the case. NPS is a metric, CX programmes need to be much more than this, they need to be devised to fully utilise all data available to businesses so they can understand why they are performing as they are and how they can perform better.
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