Here’s why the Net Promoter Score remains a satisfaction metrics mainstay, and how it can be put to good use

Brand advocates and ambassadors are invaluable these days, but it can be tough for marketers to determine which customers truly are satisfied and loyal enough to publicly sing a brand’s praises—and which of those customers are influential enough to effect change. For the past dozen years, many marketers have looked to one metric, in particular, for help.

Invented in 2003 by Fred Reichheld, a partner at Boston-based management consulting firm Bain & Co., using data from Redwood City, Calif.-based customer experience management software provider Satmetrix Systems Inc., the Net Promoter Score (NPS) was conceived as a means to help executives find a better way, other than traditional customer service surveys, to know how customers felt about their company and establish accountability for the customer experience. Reichheld and his team tested a variety of questions to see how well the answers correlated with customer behavior, and found that high scores on one question, “How likely is it that you would recommend [company X] to a friend or colleague?” correlated strongly with repurchases, referrals and other factors contributing to a company’s growth.

Customers are prompted to rate their likelihood to recommend the company on a scale from zero to 10, and then are sorted into three categories based on their responses: promoters, who rated their likelihood at 9 or 10, who will keep buying from the brand and referring others; passives, who answered with a 7 or 8, who are satisfied but unenthusiastic; and detractors, whose responses ranged from zero to 6, who generally are unhappy customers who could damage your brand through negative word of mouth.

The beauty of the tool is its simplicity, but its findings present just the tip of the iceberg, according to NPS experts. Here, experts offer insight on the pros and cons of NPS, and how marketers can make the most of it.

Pros

1. It’s simple. According to Andy Zimmerman, CMO of Somerville, Mass.-based Evergage Inc.​, a SaaS company that uses NPS to measure customer satisfaction and loyalty: “It’s a simple question, and everyone can understand it. With some surveys, customers interpret the question wrong and your data can end up being inconsistent,” but NPS is straightforward, he says, and is readily applicable in the digital era. “The question, itself, has gained relevance these days with the advent of social media, review sites and word-of-mouth marketing. If someone’s an active detractor on social media, it’s really risky. NPS gives you a quick indicator of the general health and happiness of your customers.”

2. Its findings are easily digestible. “For years, we’ve been measuring customer satisfaction through things like [the American Customer Satisfaction Index], but people can’t always get their arms wrapped around that number,” says Deborah Eastman, chief customer officer at Satmetrix, the firm that worked with Reichheld to develop NPS. “If I tell you your customer loyalty index is 7.2, what does that mean to you? If I tell you that 60% of your customers are promoters, it’s much more understandable. Net Promoter helps get everyone in the organization engaged in building a better customer experience.”

3. It can be benchmarked. Because the NPS process is standardized, you can compare your results from period to period, and from company to company, Zimmerman says. “You can do a search on the Web and get Net Promoter Scores from companies in your industry, and get a sense for where you stand, and whether you’re above or below target with your peers.”

Cons

1. It focuses on the relationship more than the transaction. The single-question format requires more follow-up, says Rob Markey, partner and global leader of the customer strategy and marketing practice at Bain & Co., and co-author of The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World.

“In the old days, we simply asked, ‘How likely would you be to recommend, and why?’ Today, we recommend a refined approach where we ask their likelihood to recommend the company, and then we ask a second question about the transaction, itself,” he says. “The limitation that often gets raised is that asking about someone’s likelihood to recommend a company or brand is a relationship question. When you do that right after a specific interaction or transaction, you may get responses that have very little to do with that particular hotel stay or telephone call, or Web-browsing experience. The modified approach allows you to get a read on the overall relationship and the transaction’s impact on it.”

2. It shouldn’t stand alone. Adds Zimmerman: “NPS is a health indicator, but if you’re really trying to improve the product in certain areas, it won’t give you any insights. You have to complement it with a more detailed customer satisfaction survey. We do progressive surveying, where the NPS score might be the first [question], and based on how you answer that, you’ll get a different question in the future” to dive deeper into a customer’s satisfaction or dissatisfaction.

3. It might create tunnel vision. “The score is only an indication of whether you’re heading in the right direction,” Markey says. “If you want to improve your company’s ability to earn customer loyalty, you can’t ignore the energy, enthusiasm and creativity of your employees. If marketers are facilitating the connection between employees and customers, employees will be motivated and empowered to do the things that will earn customer advocacy.”

As with all satisfaction surveys, NPS necessitates an action plan to fully leverage promoters and help to assuage detractors. “It’s like losing weight,” Eastman says. “Stepping on a scale will give you a measurement, but the only way you get an outcome is by changing your behavior.”

It’s pretty self-explanatory, but customers who fall into each of NPS’ three categories require distinct communications, she says. “If you have a large base of detractors, you’ll want to identify them and reach out to them, and identify opportunities to do service recovery and address customer experience issues. With passives, you want to understand why they like you but don’t love you, and what you need to do to move over that goal line. With promoters, you can think about how to mobilize them to help you acquire new customers through word-of-mouth recommendations.”

Enlist your C-suite to help implement your action plan, Eastman says. “Marketers can’t do it alone. Without engagement from their operational leaders, they won’t be able to impact the Net Promoter Score, and that will result in challenges in terms of customer retention and acquisition.”

Think of NPS as a starting point for a longer-term conversation with your customers, Zimmerman says. “It requires you to continue the dialogue. It’s one question. It’s not the only question.”

For more on the Net Promoter Score, check out “The Key to Deciphering Brand Value,” from the June 2015 B2B Marketing e-newsletter.

Source – Ama.org