Numerous companies place the customer experience at the center of their concerns and the Net Promoter Score (NPS) intends to be the standard tool for the quality measure of this experience.
This article provides insights about the emergence, benefits, but also the limitations of the NPS for optimum exploitation at an operator’s or any service company.
The NPS or satisfaction measured in terms of recommendation
Origin and definition
Introduced in 2003 by Frederick Reichheld in the Harvard Business Review, the Net Promoter Score is based on a simple principle: « If growth is what you’re after […], you simply need to know what your customers tell their friends about you. » [1]
Frederick Reichheld defined a single question which helps determine the propensity of a customer to recommend a brand: “How likely is it that you would recommend our company to your relatives, your friends or family?”
NPS calculation
The customer is invited to answer the question on a scale of 0 to 10, 0 in case he would not recommend it at all, and 10 in case he would be totally ready to recommend this brand to his entourage.
The scores segment the respondents in three distinctive populations:
- the Promoters, assessing their probability of 9 to 10;
- the Passives (commonly called the Neutrals), give a 7 or 8; they are satisfied without necessarily being very enthusiastic;
- the Detractors are the people who gave a score of 1 to 6; there are generally unhappy customers.
The NPS is obtained by subtracting the percentage of detractors from the percentage of promoters. Not asserting strong views, the segment of neutrals is not included in the score calculation.
Benefits of the Net Promoter Score
Several factors explain the craze of companies for this easy to measure and to understand indicator.
A measure correlated to the company’s growth
The NPS is one of the indicators valued for assessing a brand’s overall health. According to its founder, it is even correlated to the company’s growth.
The leaders in terms of NPS enjoy as a matter of fact an average growth rate twice as high as competition. Depending on industries, it varies from 20% to 60%.
This correlation is particularly strong in the following cases:
- when the customer is able to change companies thanks to the presence of a sufficient number of actors operating in the same business sector, enabling him to modify his choice
- when the industry is mature enough for ensuring minimal knowledge of the product or service and of its age on the market, and for developing the usages and habits which will be assigned to it
Its results are easy to interpret
The NPS is famous for its simple, universal and standardized use and defines common references.
The NPS makes benchmarks possible
As a standard indicator, the NPS results are comparable from one period to the next and to your competition’s. More than the result in absolute terms, the most important is to have a higher score or at par with your competitors.
An adaptable measurement
Whether applied to a group of companies or to an entity of the company, the NPS question gives the team an indicator that is easy to grasp. To know that 60% of the brand’s customers promote it is very meaningful.
The NPS helps thus federate the troops and aligns the organization around a KPI which assesses the collective performance.
Limits of the Net Promoter Score
In spite of obvious benefits, this indicator sometimes errs at the operational level. To be informed of the measurement limits is essential for ensuring a sustainable operation of it.
The NPS is more about the relationship than about the transaction.
To ask a person to recommend a company or a brand is more related to ‘relationships’ [2]. This is the limit often mentioned.
When assessed some time after an interaction with the brand or a specific transaction, getting answers which have little to do with the experience of the month or the related period of observation is frequent. A need for framing is necessary.
Isolated, the NPS lacks precision
The NPS does not always generate actionable levers if measured alone. You indeed have to understand the reasons which lead the customer to give a good or a poor score.
It is recommended associating an open question, to ask « why? », to the recommendation question and using the NPS as a complement to the usual satisfaction questions (quality criteria, customer service, expectation issues, etc…).
Furthermore, the category of detractors is large since it includes scores of 0 to 6. But do the customers who attribute the score of 0 behave the same way as those who give a 6?
Thanks to the recommended questions above, the operator will be able to define more precise segments of detractors depending on various criteria such as:
- the level of dissatisfaction
- their tendency to openly complain online
- their capacity to influence the other customers and prospects.
The NPS may provide the same score for very different contexts
The score obtained may be similar in spite of results nevertheless very different.
Here is an example:
Company X registers 60% of promoters, 0% of passives and 40% of detractors.
Company Y registers 20% of promoters, 80% of passives et 0% of detractors.
In both cases, companies X and Y have a NPS score of 40.
Even though the NPS is the same, it is obvious that the relationships between the customers and each company are quite different:
- in the 1st case, the company generates extreme perceptions. On the one side, it has a very good basis of promoters. It may rely on the latest if they become ambassadors. But it also has a high proportion of detractors who may harm its image.
- in the 2nd case, the company does not create any dissatisfaction but does not impress its customers either. We may conclude that the majority of its customers are probably not loyal. The customers are likely to leave the company for a competitor proposing a more aggressive communication, price or service.
As a consequence, both companies will have to roll out different strategies in response to these results.
Likewise, the operational teams must get familiar with the score, especially as the benchmark cannot give an accurate analysis for all situations.
The NPS does not work on all the markets
The NPS does not apply when in a quasi-monopoly situation or when the number of actors is very limited.
Furthermore, the 0 to 10 scale may lead to different interpretations. In certain cultures, it is rare to give 9 and 10 scores.
Some companies modify then the rating scale defining promoters and detractors. They may also adapt the question in order to agree more with the usages and the local culture.
The downside to this approach is that any comparison with other companies is no longer valid.
How to efficiently use the NPS then?
- Focus your efforts on the growth of your own NPS
Since the same NPS may hide very different realities, it is more useful to work on improving it than comparing it.
- Compare yourself with your own sector at the national level, or on the same scope in similar methodological conditions
- Set up a « close the loop» process
According to the Harvard Business Review, « Closing the loop” consists in contacting customers expressing negative opinions. The aim of these contacts is to identify the root causes and to address the structural problems or those which may degenerate. Of course, closing the loop is also an excellent way of inferring the enchantment levers of the customers and to turn them into promoters. [3]
As for all satisfaction surveys, the NPS implies a « close the loop » approach and an action plan to make the most of the promoters, convert the neutrals, and soften the pains of the detractors.
We will, for example, define 1 aim for each customer category:
| Segment | Detractors | Passives | Promoters |
| Aim |
Transform into passive or promoter Identify the key aspects of dissatisfaction, what is irritating |
Transform into promoter
Understand why there is no enthusiasm for the brand |
Transform into ambassadors |
| Actions | Return to the basics with a positive event
=> If we only return to the basics, we convert the client into a passive => If we create only one positive event without returning to the basics, the customer may be enchanted at once (emotion) but it will not be enough later (rational) and the customer will remain a Detractor The sub-segments defined within the detractors will enable the setup of differentiated action plans. |
Create a positive event
In proactive mode, offer an adapted solution, a piece of advice, a commercial gesture |
Maintain the basics Create positive events (proactive) How to renew oneself in order to gain loyalty? |
In conclusion
The Net Promoter Score is a powerful growth lever. Simple to implement, it measures the customers’ attachment to the brand and compares it to the competitors. If the structure of the indicator fits for widespread use in numerous situations, it is nevertheless much less appropriate in others. To make it part of a holistic approach centered on the customer needs and the quality of experience will enable the Telco operators to make the difference via growth drivers/ levers (enriched connectivity of the average data flow, mobile financial services, digitalization of the customer relationship, energy…). The new role of the NPS will guide the entire actions of Telco operators and also inspire the internal culture: listen and focus actions on the essentials.
Sources:
[1] article “The One Number You Need To Grow”, Harvard Business Review, 2003
[2] Rob Markey, partner and global leader of the customer strategy and marketing practice at Bain & Co., and co-author of The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World.
[3] Introducing: The Net Promoter System®, By Rob Markey and Fred Reichheld, December 2011
More on this topic: The customer Effort Score, complement or an alternative to the NPS?
