Ever since HBR first called net promoter score “The One Number You Need to Grow” some 15 years ago, it’s been widely accepted as one of, if not the, most important metrics for measuring customer health. It’s certainly an appealing concept. One question, a simple rating scale, and almost magical insights into your customers.
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No wonder over two-thirds of Fortune 1000 companies use it to guide their marketing and customer experience activities, as reported by Bloomberg two years ago. Christine Rimer, who is SurveyMonkey’s VP of product marketing and voice of customer, sees NPS as a great equalizer when it comes to customer experience feedback.
Christine Rimer
“Any time you’re in a B2B business, there usually tends to be a handful of larger accounts, and this handful of larger accounts often have influence – a direct line to the executives – and that can sometimes bias where an organization might spend their time,” she asserted in a recent webinar for Waypoint Group. “And so part of what the NPS program did is really democratized what matters across the base, so driving that response rate is critical.”
Sounds almost too good to be true, right?
In a perfect world, it’s a perfect metric. A clear, single number benchmarking how happy your customers are, how long you’ll retain them, and how much they’ll refer you to other customers. It’s all a retention marketer’s dream, assuming that the necessarily equivocal nature of reality never creeps in. But given how much stake so many businesses put into NPS, it’s worth questioning whether the number really tells us as much as we think it does – and whether we’re using it accurately. After all, widely accepted practices are always worth a second look, especially when considering its place in your own business.
Today, we’re going to examine how marketers tend to use NPS for retention, why that might be misleading them, and how to use it more effectively to create and retain loyal customers.
NPS’s Role in Retention
As mentioned earlier, NPS is considered one of the most important customer loyalty metrics. Whether you literally consider it “the one number you need to grow,” as HBR’s claim states, or track it along with other customer satisfaction data, it’s likely something you calculate regularly.
It’s gained a lot of momentum, largely because it was developed by the global consulting firm Bain and Company, with their wide reach and strong reputation. Companies like Qualtrics assert that NPS is the “gold standard” in customer experience metrics, and an entire niche of software is growing around helping businesses measure it.
The logic behind NPS is as follows. If people are willing to recommend your business to a friend, they:
- Actually will recommend it to a friend
- Are completely satisfied as customers
- Can be easily retained for a long time
The implications here touch upon so many things that are relevant when improving retention: measuring satisfaction and loyalty, along with encouraging word-of-mouth and potentially starting or engaging the relationship you have with your customers.
Additionally, as a “heartbeat”-like metric summarizing every aspect of customer health, it’s potentially an easy and simple way to spot changes in customer behavior over time. It’s often tied to growth results like increased profits, reduced churn, and increased customer engagement.
But is NPS as directly responsible for those results as it’s often believed to be?
Why Some Second Guess NPS
NPS definitely seems on the surface to be perfect, which is exactly why we should be skeptical. As helpful as it sounds, there’s a valid case against it being the magic number its reputation makes it out to be.
Jared Spool
User Interface Engineering (UIE) Founder Jared Spool, for one, recently published an essay outlining several reasons why “we can’t reduce user experience to a single number.” He goes on to argue that NPS causes more harm than good. Let’s hope Bain doesn’t send him any surveys. Or should we hope that they do? Naysayers fall into many subgroups who see different problems with the score, each with different dangers to warn of.
A popular argument is that the math itself is overcomplicated and doesn’t make sense. Unlike a straight average or percentage, the NPS formula breaks customers into three groups, completely ignores one, converts the others into percentages of the entire group, and so on and so on. Why give more weight to detractors than promoters, or vice versa, and why is the middle ground excluded from the calculation?
Another point is that the default, most common question asked to measure NPS, “How likely are you to recommend us?,” is the wrong question entirely. Drawing the direct connection between recommendations and retention makes a lot of assumptions. For many reasons, customers may continue using your product or service without recommending it. On the flip side, they may be perfectly happy customers you’ll retain for a long time, yet for some reason they’re not actively recommending you.
Alex Birkett
Or, as HubSpot’s Alex Birkett once wrote in the ConversionXL blog, “While it makes intuitive sense that NPS correlates with growth (people are more pleased with the company, they tell their friends, more people buy stuff, etc), sometimes it’s not so simple and clear cut.”
In reality, our customers’ experiences and opinions are more nuanced, enough so that one number can’t accurately summarize it. Despite how complicated the formula itself is, it still greatly oversimplifies your customers and retention marketing down to a single number.
Yet so many marketers still measure NPS, and do see results from doing so. How and why can that happen if this metric is so off-base?
Proper NPS Use for Maximum Retention
Yes, NPS does simplify the process of measuring customer experience. But what the metric’s biggest critics don’t understand is that it’s not just about the number.
First of all, while it’s hyped as “the only metric that matters,” most marketers aren’t using it as the one and only way to predict retention or measure customer satisfaction. Rather, it’s one of several indicators, to be used alongside more direct and specific metrics.
Additionally, smart marketers don’t stop with the simple 0-10 rating question. They use that as a starting point to collect more comprehensive customer feedback. Even harsh critics like Jared Spool concede that it can be helpful as a trigger for follow-up. “Every smart implementation follows up with a qualitative question, asking why?”
Between rephrasing the question itself to prompt more specific information and asking for qualitative data to explain the simple number, marketers can use NPS prompts to better understand the customers behind the scores.
“NPS is just a starting point to drive meaningful engagement with that customer and a deeper relationship,” Promoter.io CEO Chad Keck recently told Customer.io’s Janet Choi. “Everything hinges on the follow-up which is often referred to as ‘closing the loop.’’’
And it’s only when you manage to successfully and strategically close the loop that the magic happens. It’s simply a springboard for dialogue that ideally leads to addressing people’s feedback, empowering them to achieve more with your product, deepening the connection, and cultivating a sense of co-investment.
For example, “detractors” are high risk customers worth devoting customer service time to in order to improve their satisfaction quickly. On the other hand, those who fall in the “promoter” range should hypothetically be telling their friends and family about you, but as mentioned above, that doesn’t mean they are. Segment them to nurture into the referral and word-of-mouth marketing engines that their NPS shows they have potential for.
Jay Baer
And then there’s the muddy middle, which thought leader Jay Baer sees as a major goldmine. They’re the people who, when activated, have the potential to become your biggest advocates, he noted in his 2015 book, Hug Your Haters.
“The real problem for your business are the people who have a poor experience but are not passionate enough about you and your company to take the time to say something it in a form or fashion that you can find and act upon,” he wrote in the book.
Simply asking customers for feedback has the potential to unleash some of the most valuable information you can hope to get. It’s information that, when used properly, can turn silent grumblers into loyal advocates.
Don’t Peg Your Success to Any One Number
Ultimately, measuring NPS in your business won’t actively hurt your growth so long as you’re not putting too much weight into it. Done well, it can be a truly effective way of collecting customer insights and engaging that relationship further. Just remember that it’s a starting point and not an end-all-be-all metric.