NPS surveys are a failure

Net Promoter Score (NPS) surveys are a staple of customer satisfaction surveys. We have all had exposure to them. When we buy something or interact with a company, we get a message asking us to rate how likely we would recommend the company itself or the product or service we recently bought for a friend or colleague. We fill in our answers on a 10-point scale. A score of 10 means that we will likely recommend the product or service, and a low score of 1 means that it is extremely unlikely any recommendation will be forthcoming.

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Those who select a 9 or 10 are called "Promoters," as they will likely discuss the product, service, or company favorably. Those who choose a 7 or 8 are called "Passives," and those who select a 6 or less are called "Detractors." Promoters are loyal to the company, Detractors are not, and Passives can go either way.

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Fred Reichheld of Bain & Company invented NPS in 2003, and implementation has soared rapidly since its first introduction. NPS's output is a single number from -100 to +100, and the calculation to get to the NPS score is relatively straightforward: the percent of Promoters minus the percent of Detractors. The aim is to have as high a number as possible. So, if the percent of the Promoters and Detractors are the same, the NPS becomes 0. An NPS score below 0 means a general dissatisfaction, between 0 and 30 means the company is doing average, and above 30 means customers, in general, are satisfied with the company's product or service.

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NPS's goal is to provide an easy-to-understand snapshot of how satisfied or not a company's customers are. Unfortunately, that is a promise that NPS does not deliver. In fact, the whole premise of NPS is flawed. While the question: "Would you recommend?" means that a buyer can sum up the complex mix of feelings and assessments related to a purchase or interaction with a company into a single number, which is brilliant, as that is how actual decision-making works. Still, the rest of NPS simply does not work. And here is why! Take a look at the following:

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1. Survey respondents' bias.

In a statistically significant consumer survey conducted by my company in September 2022, we found that the majority (58 percent) of the population will only fill in an NPS survey if they are already fans of a company or a product or service, while a smaller portion (32 percent) say they may or may not fill in an NPS survey.?

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Only a very small percentage of those directly dissatisfied with a product or service (6 percent) will fill in the survey. This means that the reported NPS is not even a close approximation of the satisfaction profile of a company's customers; the resulting NPS score will be much more positive than the actual customer satisfaction really is. This by itself will render NPS virtually useless for almost all purposes.

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2. The dangerous Passives

While Detractors are unlikely to buy from your company again, Passives may. Passives are totally ignored in the way NPS is calculated; they are not part of the calculation. This is a big problem because if a company has many Passives, NPS may indicate they are doing well. Yet, they will have few returning customers or a significant "churn" rate if the company sells a subscription. And this leads to the following issues with NPS.

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3. Actions resulting from the NPS

The next issue is, what should a company "do" as a result of its NPS score? If the score is high, the company's CEO can "waltz" into the boardroom and joyfully proclaim to the board of directors: "We are doing really well." Good for him or her, but that's about all that it will do.

If the NPS is not so good, it does not tell the company why the score is terrible. It does not tell the company what to do to improve the score. It does not say if customers are dissatisfied with the experience of dealing with the company and what part of that experience needs to improve. Also, it does not say which aspects of the company's product or service might need to be improved. Again, this makes NPS pretty useless.

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Furthermore, as a company's NPS score typically is separated from its competitors' NPS score, it is seen in a vacuum. But NPS cannot be considered by itself, simply because no marketplace is a vacuum with only one buyer choice. There are always alternatives, and a company that does not know how it compares in satisfaction among those who make choices other than buying from the company is at a significant disadvantage to those who are in the "know."

So, while the basis for NPS is solid, that of a customer who sums up the complex mix of emotions, preferences, and perceptions that leads up to a single decision, buy or not to buy, the implementation of NPS is not. What, then, is the remedy?

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• NPS surveys should not be conducted by the company itself but by an independent agency to significantly reduce survey respondents' bias.

• The survey should include NPS for both the company and its key competitors.

• The survey should also include details of the company's product and/or services and the interaction with the company.

• All the data captured in the NPS survey will need to be segmented for the company itself and each competitor covered in the study.?

• For NPS to "work," it becomes crucial to know what drives those who are Detractors to become Detractors. To understand exactly what aspects of the product, service, or interaction make them unhappy. Only when companies are aware of what drives customers to become Detractors can they take action to remedy the situation and minimize the number of Detractors. ?

• Furthermore, it is crucial to understand what makes Passives become Passives. Understand what they are missing from a company's product or service. Understand why they are not enthusiastic about the interaction with the company. In short, why they are lukewarm? And then, of course, take corrective action. Alter products or services, or how customers interact with the company, to make Passives into Promoters. ?

• It is also essential to know why Promoters are Promoters so that the company does not remove a feature, function, or benefit that Promoters particularly appreciate. Because only with this knowledge can a company view itself from the buyer's perspective and get to know what aspects of its product or services or customer interactions or activities will affect customer satisfaction to reduce the number of Detractors and Passives.

So now, what will you do? Continue regular NPS surveys, or take these to a whole new level of practicality and value for your company? I know what I would do.

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Per Sjofors aka The price whisperer(TM)

Sjofors & Partners, Inc

www.sjofors.com

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