Is Net Promotor Score still the best metric for measuring Customer Satisfaction?

Is Net Promotor Score still the best metric for measuring Customer Satisfaction?

Kumaran ShanmuhanBy Kumaran ShanmuhanVice President, Industry SolutionsUniphore
7 min read

go digital by designDeveloped and first introduced in 2003 by Fred Reicheld, Bain and Company and Satmetrix, Net Promoter Score® (NPS1) has become somewhat of the definitive metric for gauging customer satisfaction and loyalty. Consistently in use by over 66% of Fortune 1000 companies and tens of thousands of customer-centric organizations worldwide, NPS has certainly had a profound influence on global marketing, business strategies, tactics and techniques. But that said, it begs the question: Is NPS still the most effective tool to measure true customer satisfaction and loyalty, accurately and reliably?

In its most basic form, the NPS methodology or system simply poses customers with an almost universally standardized question: “How likely is it that you would recommend [Company, Organization, Brand, Product or Service] to a friend or colleague?” Customers are asked to score their sentiment relating to this question on a scale of 0 to 10 with 0= Not likely at all and 10= Very likely.

Respondents scoring either 9 or 10 are categorized as “Promotors.” These are fiercely loyal and enthusiastic customers; they fuel growth by referring others and by increasing their own usage of the product or service, as well as taking up many of the company’s cross-sell and up-sell offerings. Promoters are the epitome of the Customer Advocate.

Respondents returning a 7 or 8 score are categorized as “Passives.” These are the ambivalent customers. They are basically satisfied but they are also unenthusiastic and can be easily swayed by a competitive offering, and in all probability, they will ‘jump ship’ in a heartbeat, should they encounter the slightest negative experience with the organization or with its products or services.

“Detractors”; those respondents scoring 0 to 6 are the distinctly unhappy customers who can wreak havoc and severely damage the organization and its brands, products, or services. Detractors are dangerous to the organization. Their negativity, spurred-on by word-of-mouth and (Heaven forbid!) Social Media can seriously impede growth and profitability.

To arrive at a Net Promoter Score or index2, one simply takes the total of all “Promoters” and subtracts the “Detractors.” For purposes of NPS, “Passives” are deliberately excluded from the equation.

Why is NPS important?

In a nut-shell, NPS is rather like the doctor’s finger on the pulse of the patient. When deployed systematically, diligently and supported by the most appropriate technologies and analytical techniques, NPS provides the organization with an accurate picture of prevailing customer loyalty, and accurate feedback relating to reasons why customers may be unhappy (and therefore disloyal or vulnerable). Appropriate analytics will also provide exceptionally valuable insights into the root cause of such dissatisfaction. This information provides the organization with the ability to craft appropriate solutions rapidly. These might include process re-engineering, product or service refinements, and training or up-skilling of customer-facing staff.

The Economics of NPS

It stands to reason that an organization’s potential for success is largely dependent on finding and managing the successful balance of “Promoters” and “Detractors.”

At the positive end of the scale, a high NPS is a clear indicator of satisfied, loyal customers; those who fuel economic benefits such as the reduction in the cost of new customer acquisition, reduced cost-to-serve, increased spend, increased take-up of up-sell and cross-sell offerings, and ultimately, predictable Customer Lifetime Value (CLV). These positive economic factors make music in the boardroom!

On the other hand, low NPS gets the economic alarm bells ringing! From a marketing perspective, acquisition of new customers becomes significantly more costly, as does the increased spend necessary to eke out increased market share and incremental customer purchasing. Servicing dissatisfied or unhappy customers requires far more infrastructure, management, and customer-facing headcount. These factors represent serious economic penalties and threats to the organization.

What other metrics are needed?

While NPS will definitely provide the organization with an accurate representation of customer perceptions and behavior, the true value of this metric is realized when a number of other metrics are overlaid in a data matrix.

A hybrid Customer Loyalty Index (CLI) with NPS as the base, will incorporate another measure to provide additional insights into customer propensity to repurchase and the probability of take-up of up-sell and cross-sell offerings, as well as clear indicators of Customer Lifetime Value. In this derivative of NPS, probe questions could well include: “How likely are you to buy from us again in the future?” or “How likely are you to try out other of our products or service?”

Similarly, the well-proven Customer Satisfaction index (CSAT) is another valuable contributor to the overall NPS-based customer experience (Cx) matrix, as is data reflecting Customer Engagement. (Activity Time, Visit Frequency, Core User Actions, etc.)

Customer Effort Score. (CES) The new(er) kid on the block.

Rapidly coming to the forefront in the art and science of Customer management or Customer Experience (Cx), is what has become known as the NetEasy Score3 (NES). Simply put, the NetEasy Score measures the ease (or the effort) required by customers to do business with the organization; to have problems resolved; to obtain required information or actions or to achieve the satisfactory outcome to any interaction.

Easy is the new Loyalty

In a recent global survey conducted by UK-based CallCentreHelper, “74% of customers surveyed stated that they would do repeat business with the company if their experience is easy”. In today’s fast-paced, highly mobile customer environment, where instant gratification and immediacy are watch-words, “Easy” is certainly the key to significantly increased loyalty. This factor alone is an incredibly important strategic consideration for professionals involved or influencing the design or deployment of digital channels, platforms, and interfaces. Unless the user finds it quick and easy, the solution offering will almost certainly be rejected outright.

Correlating Effort with Loyalty and Predictable Spend

The boardroom desperately needs to know the good news about long-term, highly predictable increased customer spending; the much-hallowed Customer Lifetime Value index4. And there’s a great deal more to that particular metric than meets the eye. The size of the customer base, the share of the market, the rate of growth, customer retention statistics and the predictable Lifetime Value will have a profound influence on factors such a stock value, executive remuneration and bonuses. Not to mention how these factors influence acquisitions and mergers.

Implementing NPS

It will be appreciated that in order to gather accurate, reliable and meaningful NPS and related data, it is imperative that appropriate strategies, processes and systems are designed and deployed in a manner that will be attractive and enthusiastically embraced by a significant percentage of the organization’s customer base; and this on an on-going basis.

During the past few decades Interactive Voice Response (IVR) technologies have been extensively used as one of the primary methods for gathering NPS and related customer sentiments. Where this technique has been remarkably successful has been a combination of astute and mature strategic thinking, (with strong customer centricity) dictating systems design, in that the entire process of engaging with customers is fast, intuitive, and exceptionally easy. In cases of a combination of IVR (or ACD, auto attendant or routing engines) and live agent service, successful implementation is a matter of well-designed call flows, appropriate technologies and exceptionally good agent training.

Enter Visual IVR

The fairly recent introduction of visual IVR technology is having a significant impact on Customer Experience management techniques throughout the world. Typical IVR’s aren’t a lot of fun. Often they are plagued with complex and confusing menu trees and long-winded and ambiguous instruction and selection options. It’s not at all surprising that the vast majority of customers regard IVR systems with contempt. Is there a solution? Yes, indeed there is. Enter visual IVR.

Scanning, swiping and clicking a smartphone screen is infinitely faster, more intuitive, and easier than listening to instructions. Visual IVR lets customers quickly and easily select the appropriate information or routing options by simple point and click response; for example, to a specific department, business unit, suitably skilled agent or to a NPS question. NPS and all related customer data perception probes just go a whole lot easier and they are much more reliable.

When it comes to NPS, Visual IVR has the ability to persuade more customers to become promoters and provides organizations with the ability to continuously measure this metric on a more frequent and accurate basis.

[About the author]Dylon headshot Dylon Mills is the Director of Marketing Content Strategy & Development at Uniphore. As such, Dylon’s main responsibilities are to strategize, create and deliver content for Uniphore’s product portfolio that align with the global Go-To-Market strategy, corporate positioning, and marketing campaigns. Dylon’s prior work experience includes Product Management at one of the top Fortune 500 Technology companies, Symantec Corporation. Outside of work, Dylon enjoys problem-solving and any project that includes building/tinkering with tools. Dylon holds a BS Consumer Economics from the University of Georgia.

1 Net Promoter Score ® is a customer loyalty metric developed by Fred Reichheld, Bain & Company and Satnmetrix. Net Promoter Score is a registered Trade Mark. 2 3

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