A Closer Look At NPS

So, thanks to an earlier edition of this newsletter, you’ve finally been able to explain CX to your dad. Armed with this dangerous information, he’s promptly told every single one of his friends that you’re some sort of business wunderkind. Which is quite alright, until Uncle George (who’s not really your uncle) decides to ambush you with a random question about NPS. For a brief moment, you consider reminding him that this is your child’s birthday party, but you ultimately decide to be a good sport and give it a go. What do you say?

Let’s talk about it.

Watch it instead

Listen on your favorite podcast app

It was 2013, and a well-known auto oil-change company, let’s call it: Spiffy Lube, was a decade deep into a seriously rough phase of its history, having been in the news a number of times for all the wrong reasons. Anxious to turn things around and change customer perception, they decided to go all-in on the Net Promoter Score method. Now, whether or not you’ve heard this term before, chances are, if you’ve ever bought something, especially online these days, you’ve interacted with a question that feeds into a company’s Net Promoter calculation.

First encountered in an article for the Harvard Business Review by Fred Reichheld in 2003, Net Promoter Score, or NPS, is a customer-loyalty metric based on a single question: “How likely are you to recommend our company to a friend or colleague?” Customers are expected to answer this question by choosing a number from a scale of 0 to 10, where 0 is “extremely unlikely”, and 10 is “extremely likely”. I daresay, by now, you’re probably nodding along in familiarity. You get hit with this question multiple times a week, and sometimes, you even respond. Look at you!

What you probably didn’t know is that your responses are then grouped into 3 categories:

If you chose a 9 or 10, you’re a Promoter! You’re loyal, DJ Khaled, and highly satisfied. You’re likely to repurchase from the company and recommend it to the people you know.

If you went for a 7 or 8, you’re a Passive. You’re satisfied, but not you’re not thinking, “Whoa!”. You’re also less likely to repurchase or recommend.

And finally, if you chose a number that’s 0 to 6, you’re a Detractor. You’re mad about something, and you’re not only likely to never come back, but you’re also going make sure you tell as many people as you can that this company is a hot mess.

NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. For example, a company has an NPS of 0 if 30% of its customers are promoters and 30% are detractors. Right away, you may already be thinking, “Well, how are you certain that the promoters and detractors will spread their opinion about you with equal energy and to the same degree?”

Let’s come back to Spiffy Lube. In the wake of all the bad stuff, their NPS was in a nosedive, and their management became obsessed with improving it. They began to focus on short-term tactics to boost their score, including giving customers discounts and free gifts for responding and giving high scores. Oh boy.

As you can imagine, this did help their score get better, but contributed absolutely nothing toward fixing the underlying issues that were causing customer-discontent. And it wasn’t long before this became apparent in sales results. And that’s just one example of how NPS can be misused, mismanaged and misunderstood.

So let’s start there: Potential manipulation. Like Spiffy Lube, some companies have been known to prod customers for a higher score by “making it worth their while”, or to seek feedback only from those expected to give positive responses. This of course skews the data, and doesn't provide an accurate reflection of customer sentiment, leading to misinformed business decisions. If your express goal is to improve NPS, then sure boss, no problem. But if you’re really looking to improve the Customer Experience, you’ve got to know that this isn't a silver bullet.

Speaking of misinformed business decisions, if you don’t understand the context of the responses, your company might make changes that don't address the root cause of a problem. For example, if detractors are complaining about prices, and you crash your prices, you may have missed that the underlying issue might be the value they perceive, rather than the price itself. Hmm… Deep.

Now speaking of deep, you've got to look below the surface. Customer responses might indicate general satisfaction, but these customers might have issues with a particular service aspect. If you don’t delve deeper, you might miss opportunities to address and rectify these specific problems. And that’s the over-simplification problem that dogs NPS: You cannot reduce customer loyalty to a single number. It does not capture the nuances behind the score.

At this point, let’s look at some factors that could impact the very nature of the responses you receive:

1. Bear in mind that customers with extreme feelings (positive or negative) are more likely to respond to your NPS survey, resulting in potentially skewed data.
2. The score you get from a customer can be influenced by transient factors. For example, a customer having a bad day could give you a lower score, while one currently enjoying themselves on a yacht might be feeling unusually generous. In these cases, their responses might not reflect their overall sentiment toward the company. And…
3. Customers from different cultures can rate their experience differently. A score of 7 or 8 out of 10 could be seen as a positive in some cultures, but NPS categorizes those as Passives. A particular episode of Comedy Central’s Corporate comes to mind here (Season 3, Episode 4 "Good Job"). Ha! That was funny.

The Spiffy Lube story goes that sometime in 2017, the company realized that going all-in on NPS was a mistake and it drastically changed course, focusing instead on improving the quality of its services and training its employees around a more customer-centric culture. This, of course, led to better outcomes for the company.

To wrap up, NPS is extremely useful and powerful, but you need to use it with caution, and be very aware of its limitations, so you don’t look to it to give you answers that it just isn’t designed to provide.

But don’t just take my word for it. Fred Reichheld himself has acknowledged in recent years that way too many companies have misunderstood and misused Net Promoter Score, and that there are better ways to measure CX, some perhaps involving a refined, updated version of NPS in collaboration with other methods. And I wouldn’t argue with that guy!

Oh, and... by the time you’re done saying all of this, Uncle George is either utterly impressed, or he’s slipped back into the crowd and is now leading the electric slide. You blacked out and have been talking to yourself for the past 5 minutes!

Thanks for reading this article. How will you use this information to make your customer experience better today? What have you observed in your environment Reach out. Connect. I’ll be reading and responding. And learning.