Understanding The NPS Score

As a market research agency, we have experienced an increase in requests to conduct Net Promoter Score (NPS) surveys. Widely regarded as a simple and effective tool to gauge customer loyalty, NPS has become a staple for many organisations. However, there’s a common misconception that NPS is a direct measure of customer satisfaction. This is not entirely accurate, and it’s crucial to understand why NPS, while valuable, should not be viewed in isolation, nor considered to accurately reflect customer satisfaction.

What is NPS Score?

NPS is calculated based on a single question: “On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or colleague?” Respondents are then categorised into three groups: 

• Promoters (9-10): Loyal enthusiasts who will keep buying and refer others, fuelling growth. 
• Passives (7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings. 
• Detractors (0-6): Unhappy customers who can damage your brand through negative word-of-mouth. 

The NPS is derived by subtracting the percentage of Detractors from the percentage of Promoters. The result can range from -100 to +100, with scores below -50 considered to be very poor, and scores above 50 considered excellent. 

NPS vs. Customer Satisfaction

It’s easy to see why some might see NPS as a reflection of customer satisfaction. Both deal with customer feedback, but they measure fundamentally different things. Survey questions measuring customer satisfaction often delve into specific aspects of the customer experience, providing detailed insights into areas such as product quality, customer service, and overall satisfaction.

NPS, on the other hand, is more about customer loyalty and the likelihood of word-of-mouth promotion. The key factor to consider is that a customer might be very satisfied with a product but not necessarily willing to recommend it to others due to various reasons, such as personal preference, the product’s niche nature, or company reputation. In this case, a low NPS score may reflect customer perceptions of brand values or product versatility rather than satisfaction with a product or service.

The Incomparable Nature of NPS Across Industries

One of the pitfalls of NPS is the prescriptive nature of the score, with an implication that a score of 0 reflects poor customer service or a low-quality product. However, this is problematic because the likelihood of a recommendation varies drastically depending on the industry and its inherent characteristics. For instance, customers might be more inclined to recommend a delightful dining experience than their insurance provider, even if they are equally satisfied with both. Comparing NPS scores across industries is akin to comparing apples to oranges; it doesn’t account for these contextual differences. 

The Importance of the “Why” Question

An NPS score alone provides a limited view. To derive actionable insights, it’s imperative to follow up with an open-ended “why” question, asking respondents to explain their rating. This qualitative data reveals the underlying reasons behind a customer’s likelihood to recommend (or not recommend) your product or service and can clarify whether their score reflects their satisfaction with your products or customer service, or another factor altogether.  

A low score without context leaves you guessing about the cause of dissatisfaction and provides you with no direction for change to improve your score. Understanding that customers are thrilled with your e-commerce site because of its user-friendly interface or disappointed due to poor after-sales service can help you pinpoint specific areas for improvement.

NPS as a Longitudinal Tracker

While NPS might not be perfect for cross-industry comparisons, it excels as a longitudinal tool within the same organisation. Tracking NPS over time allows businesses to monitor changes in customer sentiment, loyalty, and the overall health of customer relationships. An upward trend in NPS can signal successful improvements, while a downward trend might highlight emerging issues that need addressing. 

Regularly surveying your customer base and analysing shifts in NPS, along with the qualitative feedback from the “why” question, can provide a dynamic view of how customer perceptions are evolving. This ongoing feedback loop is invaluable for making informed strategic decisions and fostering a customer-centric culture. 

Conclusion

While the Net Promoter Score is a powerful metric for understanding customer loyalty and potential for organic growth through recommendations, it should not be mistaken for a direct measure of customer satisfaction. It’s true value lies in tracking customer sentiment over time and understanding the reasons behind the scores. By recognising its limitations and leveraging it alongside other metrics and qualitative feedback, businesses can gain a more comprehensive understanding of their customer relationships and drive meaningful improvements.