Major corporations have embraced the net promoter score (NPS) as a go-to metric measuring customer satisfaction and, by extension, overall corporate performance. But some business experts criticize the metric as misleading, simplistic and frequently abused.
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. A smaller group, however, warns that NPS has shortcomings and is often misused.
A Dubious Management Fad?
A recent article in The Wall Street Journal criticized the metric as “a dubious management fad.” The journal’s research found that more CEOs cite their high net promoter scores in financial reports and earnings calls but 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.
Fred Reichheld, the Bain & Company consultant who devised the score in 2003, complains that companies abuse it. “I had no idea how people would mess with the score to bend it, to make it serve their selfish objectives,” he told the journal.
Problems with the Net Promoter Score
Some experts, including academic studies, have criticized the metric. The score does not explain the cause of customer satisfaction or dissatisfaction, argues a paper form the University of Cambridge. Typically taken at the end of the customer journey, it 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.
Another problem: Companies might focus on improving their NPS as 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.
And to start with, relying on a single question to produce an important metric is unwise, detractors say. Some companies have tinkered with the metric by adding follow-up questions. Organizations can obtain deeper understanding of customer satisfaction through a range of research tools, such as marketing surveys and social media analytics.
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
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 metric 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: As the net promoter score (NPS) becomes more popular at major brands, some measurement experts warn that it’s increasingly distorted and mismanaged. Some companies seem more interested in gaming the score for selfish reasons rather than improving customer service issues.
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.