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NPS, yay or nay?

Updated: May 14, 2020

The net promoter score (NPS) continues to be widely used as it is seen as a simple way of judging customer satisfaction/experience. By way of an introduction, it is based on asking customers "How likely is it that you would recommend .... to a friend or colleague?". The scale used is 1 to 10 and the respondents are grouped in 3 groups:

· Promoters (score 9-10) seen as likely loyal

· Passives (score 7-8) are satisfied but unenthusiastic

· Detractors (score 0-6) are dissatisfied customers

NPS is then calculated by subtracting the percentage of Detractors from the percentage of Promoters.

The main advantage is naturally the simplicity of the metric which makes it easy to calculate and understand.

Having said this, there are a few things to consider when adopting it.

1. There might be a negative bias as those very unhappy with the product are more likely to reply. There is evidence that confirms that dissatisfied customers are much more likely to write reviews (2-3 times more likely than satisfied customers) which probably applies for NPS too. There is as well acceptance around the fact that such customers might share their experience with as many as 15 people on average. This means that accepting the negative bias is not a good option. It is better to monitor the percentage of detractors and follow up with your unhappy customers. Somehow related to this, NPS is probably not the best metric when customer concentration is high (mostly for B2B).

2. In view of the above I see more scope for monitoring its trend then the current level. Even more insightful is to look at the distribution and how it changes over time, not only the overall level. It can also be used as a warning indicator if the management sets out a limit and follows up with specific interviews.

3. Strive to increase the number of promoters. Given that satisfied customers are less likely to reply, I would argue that those who give you a 10 must be not just happy with your product; they might absolutely love it which is boon for long term growth, loyalty etc. To test this hypothesis look at other loyalty metrics (repurchase rate, frequency, lifetime value) for your promoters. Speak with them to judge the strength of the bond with your product and understand what is it that they value most. This will show you if it's a short-lived attraction or something that can develop into a long-term relationship. Seek to understand what is it that makes the experience of these customers different as this will guide you in product development or market positioning. As an added benefit, speaking with your promoters will boost their loyalty further.

4. Look at the number of respondents vis a vis your total client base. Is it meaningful?

5. Backtest it to see how is it moving relative to other metrics that more closely reflect your company's value proposition. Is it a leading indicator or just useful in getting the pulse of current growth?

6. Include an optional question which allows the client to detail their answer so as to provide you with additional insights. Follow-up with your respondents. Consider approaching both the enthusiasts and the complainers. Approach the latter directly after you got their responses and as well after you have acted on their feedback to build trust and confirm the effectiveness of the measures taken.

7. Establish what the scope of using this metric should be and make sure it is appropriate. In my opinion it's suited for getting a feel about the customers satisfaction but it cannot substitute more detailed analysis that can guide product development.

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