In 2006, the Net Promoter Score (NPS) metric took the business world by storm, when Fred Reichheld, of Bain & Company, published The Ultimate Question: Driving Good Profits and True Growth. Based on his research, Reichheld proposed that by asking customers a single question, how likely they would be to recommend a brand to a friend or colleague, businesses could calculate one score to monitor the quality of their customer relationships. The NPS metric identifies a brand’s customers as Promoters, Passives, or Detractors and then calculates the brand’s score using the following equation.
NPS – A Valuable Benchmark
The wide-spread adoption of NPS at the C-suite level, in part due to the metric’s simplicity, has prompted companies across many industries to incorporate it as part of their customer experience (CX) program. There are many benchmarks now available for comparisons within specific industries. While these benchmarks point to whether you are better or worse than other companies or the industry average, alone, it doesn’t tell you enough to drive action. It can identify the need for improvement, but doesn’t provide insight into how to move the needle. To do this, you need to know more than your NPS score.
Every industry is different, and every company has unique strategies and operational dynamics. The appropriate metrics for your company should be the ones that allow you to identify how to improve. Whether that’s Customer Satisfaction (CSAT), Customer Effort Score (CES), likelihood to repurchase, comparison to your competition, a Total Value score – or a combination of these with NPS – will depend on your specific business situation.
Affect Change by Understanding Drivers
Many businesses find value in asking diagnostic questions to get at the drivers behind their company’s NPS. Are customers happy with specific features or your product? How well do they rate the packaging? Is your product quality acceptable? Are they satisfied with the service that is delivered in your restaurant or medical practice? Were they greeted quickly when they came in? Did they have to wait too long? By understanding customer reactions to the basic elements of and benefits delivered by your product or service, you will understand what you need to improve.
Further, running a key driver analysis of these factors against your NPS score allows you to isolate those key elements of your product or service that have the most impact on your customer’s willingness to recommend your company. Knowing the factors on which you need to focus, you can leverage that understanding into short-term improvement initiatives as well as long-term strategic and culture change.
Create a Strong CX Management System
NPS can be a valuable component of a customer experience (CX) management system, but it’s not quite as valuable as a stand-alone metric. In fact, in Reichheld’s follow-up book, The Ultimate Question 2.0, he and co-author Rob Markey revisit the metric to recommend using NPS as part of a system for driving “good profits and true growth.”
Whatever metrics you use as part of your CX program, make sure they drive action by creating and supporting a strong understanding of your customers’ attitudes and behavior. Ultimately, the value of any metric you use lies in its ability to serve as a decision guide, helping you facilitate the development of a customer-centric culture. In the words of Orison Swett Marden, American author and founder of Success Magazine, “A good system shortens the road to the goal.” NPS can be one of many valuable metrics in a strong CX management system.