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Is NPS Working For You?

Creating a crisis management plan

Is NPS Working For Your Business? 

Is recommending your brand to your friends and family a normal thing to do?

I talk to my friends about things that are new and exciting to me. Holidays, cars, experiences or new gadgets. But am I likely to tell my friends about my weekly grocery shop or the car insurance I just bought? Unless something remarkable happened, it’s unlikely. 

Yet businesses, executives, researchers, CX professionals have become somewhat obsessed with measuring NPS.

The original research conducted by NPS founders Fred Reichheld and Bain & Co. clearly found links between businesses that can increase their advocates and financial growth. But, it wasn’t widespread across every industry, and even Reichheld now acknowledges there have been serious flaws in how NPS has been applied across the globe. For example, Reichheld says linking front line pay and bonus to Net Promoter is the fastest way to destroy credibility as it leads to gaming and manipulation of feedback.  

NPS can be successful in the right business context and if you have the right framework to support it. If you are selling a high priced item or a unique experience, NPS can be a good brand metric to measure. It can help you guide the business to make decisions that will be directly linked to company growth. But, in order to do this, you need more than just the number. You need to know what drives great experiences and then have an internal framework that helps the business makes decisions on the insights and promotes change and action. 

For sectors with high-frequency purchases or where the experience you offer is very transactional in nature, I would suggest NPS is probably not the right metric to use.  Customers just simply aren’t that likely to tell their friends about your business, therefore you are measuring something that in reality doesn’t happen that often. 

If NPS isn’t the right metric for your business, you may want to consider the following ways to measure customer sentiment: 

  1. Measure the Fulfillment of your Brand Promise. If your marketing teams are communicating a promise, it becomes the expectation. Measure that expectation to ensure you’re consistently delivering it. The most successful brands are not necessarily the ones delivering the best product or service but are delivering against their brand promise. Customers know what to expect and have confidence they will get it, so continue to come back for more. 
  2. Measure Customer Effort. If your customers have a high frequency of visits or you help them solve problems, reducing customer effort could be the best way to keep them loyal to the brand. For example, in a study of 75,000 customers who interacted with a contact centre, their findings show that delighting the customer doesn’t build loyalty. Reducing the work they were required to do to get their problem solved is the biggest driver of loyalty. Like NPS, if you decide to measure customer effort, don’t forget to also ask for customers for comments so you can diagnose the score.
  3. Measure Online Sentiment, If you were thinking about measuring NPS to support growth, you should consider measuring your online sentiment.  Most customer experiences are now starting online, so the better you look online the more exposure you have to potential new customers. Google ranks you better if your data is correct and you are effectively managing and responding to customer feedback.

At Reputation, we have developed a key metric called Reputation Score, that assesses your online presence. Your Reputation Score is an index based on your online presence. You can compare it to the industry benchmark and leverage it to boost your business’s financial performance. Most importantly, the Reputation score prescribes the action that directly influences your digital presence so you know exactly what to focus on.

Whichever metric you choose to monitor, make sure you are capturing customer sentiment. NPS is a good brand indicator but not always right for every situation and customer interaction.

If you’d like more information about any of the topics discussed in this article, feel free to contact me via LinkedIn.

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