By now, net promoter score (NPS) is likely the most popular metric and benchmark in the market research industry. With all of the attention paid to how great of a KPI and metric it is, you rarely see anything produced about its limitations in market research. Don't get me wrong, NPS is an excellent benchmarking statistic for an organization or company, but there are some cautions. Understanding these limitations helps clients better understand the pros and cons of NPS and helps them decide on creating a KPI dashboard that best reflects their tracking needs.
Understanding NPS helps you know when and when not to use it.
Your market research firm is likely not talking to you about these. They'll praise NPS, adopt it, and worship it because it's the "thing to do". Many blindly jump on the NPS-bandwagon and apply it in each and every survey regardless of objectives or taking a minute to step back and consider other KPIs which may be better suited for the scope.
As part of the Voice of Customer (VoC) training course I completed with MaritzCX is Las Vegas a few years back, the instructor taught the class to be mindful of metrics used in business strategy. No metric exists that does not have a flaw. No market research methodology exists without a flaw. As one of the only VoC accredited professionals in Central New York, this perspective is an invaluable one. Thinking about the flaws and drawbacks in VoC and market research makes our company a more well-rounded consultant.
Net promoter score (NPS) is calculated by subtracting the percentage of 0 to 6s from the percentage 9 or 10s using a 0 to 10 likelihood to recommend scale to arrive at a score. NPS can range from -100 to +100.
Here are 5 cautions when it comes to using net promoter score (NPS) as the be-all and end-all in your surveys. Consider the following limitations when designing your next survey. These should help you create a better vision with how to use NPS.
Limitation 1: It Measures Relationship, Not Transactions
One of the largest misapplications of NPS is using a likelihood to recommend score in a transactional survey with a customer. The very existence of NPS is to measure a customer relationship which implies a broader scope. Yet, NPS is far too often misused in surveys where KPI metrics like customer effort score (CES) would work better for short and succinct purchases or transactions with a customer.
For example, asking a B2B customer likelihood to recommend a company after purchasing a box of disposable coffee cups from a local distributor is odd. Asking this question after a very basic and routine purchase may seem out of place. The customer may think: "There just paper coffee cups." Who would I recommend these to? I make this purchase every month. It's always the same." How and why would a business was to test the relationship of this arrangement?
What would be a better fit would be questions around the transaction. How easy was it to place the order? How easy was the website to use? Did the order arrive on time? How satisfied were you with the purchase process? These types of questions are a far better fit than NPS and they fit the transactional nature of the relationship.
Limitation 2: It Has No Standalone Value
As is the case with many KPIs, they work well as benchmarks and measurement tools but they lack context. If your NPS score comes back as a +45 what does this mean? You may realize this is lower than the +55 you received last year but why? As a single statistic it only provides a highlight of company or organization performance, not the full story.
We always recommend asking a follow-up open-end of "why?" This simple open-ended comment box can provide a client or market research firm with all of the information needed to dig a level deeper on NPS. Yet too many companies and organizations forget to ask this simple Part 2 question after asking NPS.
These open-ended comments can be categorized and coded to allow the market research team to read into findings, interpret NPS, and make assumptions about why the NPS dropped 10 points since last year. Without a follow-up question, NPS holds very little standalone value in a survey outside of a simple measurement.
Limitation 3: It Doesn't Help You Understand Segments
At the highest level, NPS does not help you segment your audiences to understand differences between key demographics. NPS is calculated as a universal statistic. "Here is our NPS score for our entire company based on the 1,200 survey completes from our customers." The metric is typically presented at the aggregate.
So much opportunity exists (if the same size is large enough) to dive into audiences and segments and create several NPS scores for each. You can understand that males are a +60 and females are a +40. Or those aged under 45 are a +75 yet those 45 or over are a +20. Or how about a separate NPS score for each of your 12 stores? This type of analysis using NPS can prove far more valuable than a global NPS benchmark score.
Limitation 4: It Pays Little Attention to Passives
Here's something that has always surprised me a bit. The VoC certification and training process teaches the quickest path to customer growth is by taking what your promoters love about your brand and selling that message to passives. Research and past efforts have shown this requires less effort and budget than trying to focus on detractors and moving them up the NPS scale.
Even with this being the general teaching, so little attention is paid to passives when dealing with NPS in market research reports. They are essentially the "middle child" right? We care about those who love us as raving fans. We also care about those who hate us and want to change their minds by fixing the problems they have with our brand. Yet, the poor 7 and 8 passive audience gets no attention even though it's much easier to move them to a promoter than a detractor. The passives are the "Jan" of the NPS Brady Bunch.
Limitation 5: It Creates Tunnel Vision
We've seen it before. It's easy to get caught up in NPS that you ignore lots of other valuable feedback from a survey. Since NPS is an easy metric to grasp and calculate it often gets a lot of internal attention at companies and organizations. NPS is understood across departments including marketing, finance, accounting, management, operations, and merchandising. Everyone understands NPS but it can create a narrow-minded focus.
We recommend choosing from several different KPIs for your company. These KPIs can all be featured on a dashboard or one-pager paying equal importance to each metric. This can include NPS but it doesn't only have to include NPS. Read more about 6 KPIs your business should be measuring.
Drive Research is a market research firm in Syracuse. Interested in learning more about measuring net promoter score (NPS) or other market research metrics at your company or organization? Contact us at firstname.lastname@example.org or call us at 315-303-2040.