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Net promoter score (NPS) is one of those must-have metrics for customer experience. It shows the loyalty a customer feels for an organisation and how many customers think this way. In addition, a positive NPS is always a good indicator of organisational health –your business is growing, there i
Net promoter score (NPS) is one of those must-have metrics for customer experience. It shows the loyalty a customer feels for an organisation and how many customers think this way. In addition, a positive NPS is always a good indicator of organisational health –your business is growing, there is enough market goodwill, and retention rates are sufficiently high.
Yet, in recent years, the use of NPS has come under scrutiny. Some argue that the metric is too broad and does not provide any insights on which we can act. Even though C-suite leaders believe NPS to be the “best indicator of loyalty” (Gartner) and consider it seriously when evaluating a firm, the metric alone is not enough.
According to Gartner, “over 75% of companies will abandon as a measure of success for customer service and support NPS measurement by 2025”. In its space, the recommendation relies on customer effort score (CES), customer satisfaction (CSAT), etc. So the challenge before the customer success leader is where it leaves them.
The first step to adopting this time-tested metric is understanding its role and what it indicates. Net promoter score is a calculation of the percentage of promoters of your business vs its detractors, without factoring in any customer who is neutral in their outlook. An NPS survey asks a simple question: what is the likelihood that you will recommend us to someone else?
The customer answers on a scale of 0–10, where 9 or 10 scoring customers are promoters, 0–6 are detractors, and 7 and 8 are considered passives. To arrive at the NPS, one calculates the percentage value of Promoters against the entire pool of respondents and repeats the same step for detractors. Net Promoter Score is a measurement of the share of Promoters minus the measurement of Detractors.
1. Human beings are generally polite and tend to give companies an above-median rating (i.e., more than 5), even if they do not feel very positively towards them. That is why only customers responding with a 9 or 10 are considered true loyalists.
2. Loyalists are an invaluable asset for a CS strategy, making NPS important. This group of customers will regularly renew their subscriptions, grow in value, forgive missteps in the customer experience, and act as a source of referrals.
3. A low NPS is a good sign that you are doing something wrong. While a simple net promoter score may not be particularly revealing or insightful, a low NPS indicates that you must urgently investigate each aspect of your CX funnel and find the weak link.
Gone are the days when customer success and CX outcomes were left only to the support and service professionals. Today, customer-centric organisations worldwide — and, indeed, most SaaS companies — prioritise CS as a top priority. However, if the customer or user does not derive enough value, they will not keep coming back, given a highly competitive market environment. As a result, NPS scores are a valuable barometer for wavering customer sentiment before they can damage the bottom line.
Instead of abandoning it altogether, there are several ways you can adapt this powerful metric for your CS strategy:
While simplicity is one of the main pros of NPS, it is worth compromising it slightly to ask a follow-up question that may garner real, actionable insights. For instance, you can append a second question to the survey that asks, “what is the reason for your score?” The customer responds with open and free-flowing statements that can be studied individually or passed through a sentiment analysis engine to pick up keywords and phrases.
Parallel to NPS, you can check the strength of customer relationships internally through a score assigned by the CS team. A disconnect between these two scores means that the company is lagging and unaware of its shortcomings. Many companies — particularly at the growth stage — misunderstand their CX success since there is insufficient market chatter or feedback. Internal benchmarking sets this straight and streamlines your path toward growth.
In my experience, calculating and comparing net promoter scores collected across multiple touchpoints can be very useful. It tells you the areas where your CX is stellar and where it could do better. For example, the same SaaS company can have a high NPS from website users but face challenges on the mobile app. By positioning surveys strategically, you can garner more profound insights into the omnichannel customer success ecosystem and maximise each touchpoint.
The era of NPS is far from over, but it is essential to admit that you cannot use it as a standalone metric or only for post-purchase customer service. The beauty of NPS is its flexibility, as you can send out surveys at different touchpoints, on other mediums, and at various stages of product adoption. Therefore, using it as part of a holistic CS strategy — and not as a standalone tool — is vital to maximising its power. Learn more about NPS by contacting me at Arvind@am-pmassociates.com.17
This story was originally published on “Medium” and has been republished here with permission.
Arvind Mehrotra is a well-known thought leader, Strategic Advisor, and Board Advisor helping start-ups and mid-size organizations to develop strategic plans, mitigate risks, develop platform strategies, and scale their business. You can connect with him on LinkedIn here.
Published January 04, 2023, Updated January 13, 2023
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