Major corporations have embraced the net promoter score (NPS) as a go-to metric measuring customer satisfaction and, by extension, overall corporate performance. But more business experts now give the NPS a poor score for measuring company performance.
To compute its NPS, a company asks customers one question: How likely are you to recommend our product or service to your friends or family? Responses range from 0 (very unlikely) to 10 (very likely). Customers are categorized into three groups based on their responses:
Promoters, who answer 9 or 10.
Passives, who answer 7 or 8.
Detractors, who answer 0 to 6
Companies then subtract the percentage of detractors from the percentage of promoters. A score of less than 70% indicates room for improvement; over 70% means it’s time for self-congratulations. Business leaders mostly praise the score. The NPS concisely sums up customer satisfaction and correlates with revenue growth, they say. In addition, customers are more likely to answer the question than complete long surveys.
NPS is quick and easy, but is it really meaningful?
Problem: NPS Answers vs. Real-life Actions
Some experts warn that NPS has troubling shortcomings. A single question produces only general, broad information at best and inaccurate, misleading conclusions at worst.
The biggest problem with the NPS is the disconnect between people’s expectations and actions. Those who say they’re likely to recommend or not recommend a product often don’t follow through, explains Christina Stahlkopf, associate director of research and analytics at C Space in a Harvard Business Review article. One example: NPS ratings indicated that 33% of consumers are detractors of Twitter, but only 3% had actively discouraged others from using the platform.
A paper from the University of Cambridge criticizes the NPS as a business metric. It doesn’t explain the cause of customer satisfaction or dissatisfaction and can mask underlying issues. Calculating meaningful results requires a large sample. Asking the question at the wrong time can skew results. The score’s goal is to measure the entire customer experience, not just the latest transaction.
Some companies have tinkered with the metric by adding follow-up questions. Other companies seek deeper understanding of customer satisfaction through a range of research tools, such as marketing surveys and social media analytics.
Stahlkopf of C Space recommends an alternative to the NPS: the earned advocacy score. It’s calculated by subtracting the percent of active discouragers from the percent of active promoters. Companies with an average NPS can win higher earned advocacy scores by turning inclinations-to-recommend into actual recommendations. When paired with open-ended questions about why people recommended or disparaged a brand, the score can provide crucial insights.
More NPS Shortcomings
The NPS presumes that someone cannot be both a promoter and a detractor, but a C Space survey found that 52% of consumers both actively discouraged others from using a product and recommended it, states Stahlkopf. When giving advice, consumers consider if the product is a good match for a person, Stahlkopf explains. Example: A Spotify user recommended the service to friends for its ease of use and customizability but discouraged his parents from trying it because he felt it was too complicated and too expensive for them.
Also, enthusiasts may praise a brand but lambast a single product in its lineup that they dislike.
Inappropriate Use of NPS
Some companies misuse the metric, according to research by The Wall Street Journal. The journal’s research found that more CEOs cite their high net promoter scores in financial reports and earnings calls. It found no instance of an executive reporting a low or falling NPS.
Unlike profits or sales, the metric is not audited. Companies calculate the scores themselves and often cite them to justify executive compensation.
“I had no idea how people would mess with the score to bend it, to make it serve their selfish objectives,” Fred Reichheld, the Bain & Company consultant who devised the score in 2003, told the journal.
Although still somewhat helpful for revealing customer satisfaction levels, the score has become largely outdated, says David Vranicar, content manager at Oberlo. It dates from a time when AOL still reigned supreme and customers commonly called companies to resolve problems. Small online retailers in particular find the score obsolete. Even the question, which hinges on the verb “recommend,” seems outdated. In 2003, recommend meant a word-of-mouth endorsement. Today, some may equate recommending with clicking on a like button.
Don’t Just Look at It
Another problem: Companies might focus on improving their NPS as a goal in itself rather than seeking insights to improve products and services. Under pressure from management to produce high scores, front line retail employees learn to game results.
Even NPS advocates caution that companies sometimes use the score improperly and fail to obtain its full benefits. The point is to learn how to improve underlying problems rather than obsess over the score itself.
“The NPS measurement means nothing unless you do something with it,” asserts Shep Hyken, a customer service & customer experience expert, in Forbes. “Don’t just look at it. Use it to build an extension of your salesforce with customers who are willing to recommend you!”
Bottom Line: Although popular, the net promoter score (NPS) produces little meaningful information and can even mislead brands. Even worse, it’s increasingly distorted and mismanaged. Some companies seem more interested in gaming the score for selfish reasons rather than improving customer service issues. Some experts recommend moving beyond the simplistic single figure and adopting more sophisticated customer research.
This article was first published on May 20, 2019, and updated on Nov. 4, 2019.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.