The Best NPS Methodology We Have Ever Seen

This article is co-written by Sara Bochino and Boaz Maor

NPS is one of the most contested KPI’s in the Customer Success world. Invented back in 2003, it quickly gained traction and was adopted by many companies as the single best metric of customers’ sentiment towards a vendor. Its power comes from an extreme simplicity (a single question!) which yields a high response rate, a strict wording of said question that enables comparison and benchmarking among products and even against other companies, and a thoughtful methodology that makes sense.?

That said, following 20 years of experience there is little evidence that NPS is strongly correlated with actual company performance (measured by revenue growth, profitability, or customer retention). Also, relying on a single question challenges companies’ ability to identify the reasons behind the metric and turn them into actions.??

With decades of personal experience as leaders of Customer Success teams using NPS and many other KPIs, having done significant research and intense interactions with others in the field, we believe that:

1. NPS is not the only or even the most important metric for a company or a CS team, but
2. NPS (done right) can be the best gauge of customers’ sentiment towards you, the vendor, and therefore?
3. NPS can be a most powerful tool for driving actionable insights that will meaningfully improve performance in your org. Consequently:
4. You should deploy NPS in your company! But know that:
5. NPS’ biggest Achilles Heel is the way it is implemented - which is too often suboptimal at best.?

This is where this blog series can help. We will share with you the best NPS methodology we have seen in practice and help you tailor it to your org!?

This post is part one of a three-part series:

• Part one: Provides the case for using NPS, including a (very) brief overview of NPS’ key strengths and weaknesses, and shares the results we have generated when deploying a very specific methodology for it.?
• Part two: We will dive deep into the actual methodology we developed including very specific suggestions and explanations of the different facets and elements needed to maximize its impact.
• Part three: We will expand on the methodology with a practical set of playbooks and actions you can deploy in your organization after launching your NPS program.

1. Why Read this Article?

The Problem We are Trying to Solve:

One of the top objectives of the Customer Success function (alongside fostering usage of the solutions and adopting more features by more users) is collecting customer sentiment toward the company and its solutions. Which metrics best reflect that sentiment and what methods are best to collect them is a common area of anxiety among teams. Each metric has pros and cons, and each method holds challenges and advantages.

Any way you look at it, the main challenges all customer-sentiment survey methodologies face are two-fold:?

a) How to collect enough data for it to be representative of customers’ sentiments, and?

b) How to attribute the feedback to the right team (sales, service, product, etc.)

We are going to share a methodology, that we have recently developed, used, and found truly best-in-class (read: the best we have seen among all of our previous workplaces and colleagues in the industry).

How Good is This Methodology??

High Response Rate: We have consistently yielded 22-25% response rate (10x normal surveys!!) with >20% of those respondents also providing comments (>5x common surveys). This volume of data enables statistical significance in analyzing the results and trust that they accurately represent true customer sentiment.

Actionable Data for Improved Customer Experience: We were able to effectively use the data we collected to understand what customers want, isolate which feedback is relevant to which team (are the issues focused on the way Sales sold? The way the Product works? The way the Implementation team deployed it? or the way the Support team provided ongoing Service? Which product caused more/less challenges? Which services added/diminished value?, etc.) and direct our Product, Sales and Service teams to prioritize the appropriate changes to address those wants. As a result, our periodic review meetings were packed with people interested in the rich discussion, and actions were frequent to follow.?

Simple and Cost-effective: One question, short and direct for easy distribution, easy interpretation, and easy maintenance.?

Continuous Improvement: All of our motions - from the response rate to the actual NPS score and delivery to the engagement of people in meetings - were on a steady increase throughout the 2 years we evolved this program.

So, Who Should Read This Article??

This article will be of most value to Chief Customer Officers (CCO) as well as Sales, Product, and Customer Experience leaders. Some CEOs would find this info valuable as they direct their leaders/teams in this area.

2. NPS: The Metric Everybody Loves to Hate?

A Very Short Introduction to NPS

NPS was invented by Fred Reichheld, a Fellow at Bain & Co., in collaboration with Satmatrix Systems back in 2003. It was a breakthrough in thinking about customer sentiment at the executive level and provided a powerful - and scalable - way to measure it. It quickly became a standard among many companies and a go-to metric for Chief Executives. It is estimated that most large publicly traded companies and most tech companies (including privately held ones) use NPS internally to measure their customer sentiment and externally to benchmark themselves against competitors.??

What Makes NPS So Powerful?

In one word: simplicity.

In a few more: NPS’ power comes from its simplicity. When used on its own, it is a quick and easy way to capture feedback. It uses a single number to illustrate its rating (or “score”) regardless of the industry, sector, company size, or number of customers. Also, it is extremely rigid with its question. Anybody who ever worked with surveys knows how sensitive they are to the specific wording of the questions being used. Different questions yield different interpretations and therefore different responses from customers. Data from Survey Monkey, a survey company, indicates that every additional question added to a survey might cut the response rate in half.?

The fact that NPS uses a single question AND that question is worded in a very specific way, using a very defined scale for the response, makes it possible to use NPS as a benchmark across all companies and industries without inserting bias.

Next, the question being asked is very inclusive. Rather than focus the customer on a particular interaction (which is the case with Customer Satisfaction, for example: “How satisfied were you with the service you were provided?”), NPS asks the customer to take into account all of their experiences and then make an emotional decision: would you recommend this company to a friend or colleague? The assumption is that people only recommend companies or products that they feel very good about and the appeal to the emotional commitment is aimed at generating a truer, more meaningful response.

The Drawbacks of NPS

Over the years, criticism arose about the use of the NPS metric. The key ones were:?

a) The oversimplification and lack of specificity in identifying practical actions resulting from a single question and a single metric, and?

b) The lack of a strong correlation between company-level performance (mainly Revenue Growth or Net Retention) and NPS.

The first is understandable as the customer response can result from a multitude of factors, but since the survey/feedback form consists of only a single question, it is very limited in its ability to interpret the reasons for the response. Without the reasons, it is hard to turn the feedback into action. This is why we often see the NPS question buried inside a lengthy customer survey, which is aimed at increasing the depth of insights, but tends to reduce response rates due to increased customer abandonment of the survey.?

The second is also credible and is consistent with most survey responses. At its core, it is an indication that what people say and what people do are not always the same. In an article called Net Promoter 3.0 published in the Harvard Business Review from November-December 2021, Reichheld and team suggested a new metric as an alternative, or maybe the evolution of the NPS idea from a metric focused on feedback collected from customers via a survey to a metric of customer sentiment observed from financial data. It is a highly worthwhile article to read and potentially a methodology to follow, but we find it complimentary, not contradictory to the core NPS.?

NPS - Implemented Well - Is a Most Powerful Metric!

The methodology we developed was specifically designed to take advantage of the strengths while addressing the drawbacks of NPS illustrated above. We want to preface and say that we found NPS, when implemented correctly, a strong and powerful metric to understand customer experience and sentiment across the customer lifecycle, and to direct its insights to teams for action.?

At the same time, we do not see NPS as the only metric worth tracking or even the primary one to drive the business. It is a lagging indicator, but also a very complimentary metric to others you may use. For example, you may very well want to track a number of other metrics, such as:

• Customer Satisfaction (CSAT) for the satisfaction of customers from a single service interaction, normally with technical support agents or interaction with specific product features?
• Customer Ease Score (CES) for the level of effort required by a customer to use a product or feature, a very good metric to assess frustration levels by customers if they need to spend too much effort on your solution
• First Call Resolution (FCR) to measure the portion of customer-reported incidents that are resolved in the first interaction between the support team and the customer
• Public Reviews on such platforms as Google, Yelp, Amazon, Facebook, Brandwatch, etc.) and of course?
• Churn Rate in its different forms, which measures buying actions and not sentiment, but clearly indicates sentiment

Now that we covered the "Should I use NPS?" question, in our next post, we will dive into the actual NPS methodology we have developed to help you put it into practice in your companies.?

Before you leave - we would be most grateful if you could take 2 minutes to provide us with some information on your experience with NPS. We plan to analyze this data and share insights from it in one of our next posts. Please take this short survey here.??

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Sara Bochino and Boaz Maor are veterans in the Customer Success world and have worked at a number of companies, leading customer-facing teams in different formats.