NPS: Using It Correctly

By David Ensing

Introduction

In 2003 Fred Riechheld introduced the Net Promoter Score (NPS) as the “one number you need to grow” within the customer experience field. Since that time, many companies have adopted this measure. At MaritzCX we are often asked about our perspective on the use of the Net Promoter Score (NPS) versus other customer experience metrics, its advantages and disadvantages, and its proper uses. Here we will provide a brief perspective on NPS.

The NPS Calculation

As a review, NPS uses a standard question, a standard response scale, and a standard scoring technique. The question is:

How likely is it that you would recommend Company X to a friend or colleague?

The response scale ranges from 0 (labeled as “Not at all likely”) to 10 (labeled as “Extremely likely”). The NPS Score is calculated at the aggregate level and is the percentage of respondents who select 10 or 9 (defined as Promoters) minus the percentage of respondents who select 6 or below (defined as Detractors). Therefore, an NPS score can range from +100 to -100.

NPS quote

Advantages of the Net Promoter Score

The promise of the Net Promoter Score was that it is the best predictor of company growth (not customer loyalty as is commonly assumed – see side bar) across industries. However, since the publication of Reichheld’s HBR article and subsequent book, many studies have disputed this claimi. Presently, most customer experience practitioners seem to view NPS as similar to many other customer experience metrics such as Overall Satisfaction, the Customer Effort Score, or the traditional “Big 3” index of Overall Satisfaction, Likelihood to Recommend, and Likelihood to Return/Repurchase.

Probably the biggest advantage of using NPS is that it has gained wide acceptance within the customer experience industry. Therefore, it is often used as a benchmarking measure for companies, both within and across industries.

Cautions When Using NPS

As mentioned above, the greatest advantage of using NPS is that it can be used as a benchmarking measure. However, for NPS scores to be comparable, consistency in asking the question is key. Not only do the question, response scaling and scoring need to be consistent, other factors need to be consistent as well.

  • Who is responding: NPS is generally used to measure a company’s current customers’ perceptions of the company. Scores from respondents that contain other consumer groups (e.g., lost customers, consumers who know of but are not customers of the company) are not comparable.
  • Context in which responses are gathered: NPS is usually considered to be a customer relationship measure. Therefore, the NPS question should be used in customer relationship surveys rather than transaction-based surveys. If the NPS question is asked in transaction-based surveys, the outcomes of the individual transactions will affect the NPS score.
  • Cultural Factors and Other Biases: The NPS question is not immune to factors that affect other survey measures. For instance, cultural differences in the propensity of respondents to give top-box scores will affect the NPS measure. Therefore, comparing NPS scores across cultures is discouraged. Placement of the question Go to the full article.

    Source:: Business 2 Community

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