Net Promoter Score: Pros and cons

Net Promoter Score: Pros and cons

Retail

STOrai Magazine

STOrai Magazine

11 Mar 2020, 12:30 — 5 min read

Background: The idea of Net Promoter Score (NPS) was first introduced sixteen years ago by Frederick F. Reichheld in an article ‘One Number You Need to Grow’ published in the Harvard Business Review. Since then, NPS been arguably the most favoured customer loyalty metric used by more than two-thirds of Fortune 1000 companies.

Several studies and research reports call attention to the effectiveness of NPS as a single data point to gauge customer satisfaction and predict revenue growth. Having said that, off-late, there has been some criticism against it.

Here, I present the pros as well as the cons to give you a balanced view of NPS. I will also share with you some best practices to employ NPS as a key metric to measure customer loyalty.

Also read: 4 unconventional ways to measure customer satisfaction

First, the pros

Easy to deploy

The fact that NPS usually acts as a voluntary KPI and has no obligations to be integrated with advanced customer surveys or questionnaires, makes it a very prompt, cost-effective and user-friendly tool for getting customer insights.

Easy to engage with 

We don't need to think beyond the obvious to figure out why NPS always wins the race when it comes to response rate. Instead of asking customers 5-10 minutes of their time, brands prefer to stick to just one simple straightforward question.

"On a scale of 0 - 10, how likely are you to recommend X to a friend or a colleague"

It hardly takes any effort or time, which is why customers tend to engage with it more often than not, resulting in a higher response rate.

Easy to measure

NPS gives a very explicit view of a customer's satisfaction with the brand by automatically segregating them based on their feedback. You don't have to be ‘captain statistics’ to set up, manage and measure it. It works on a simple formula.

NPS = % Promoters - % Detractors

Easy to adapt 

The same question can be asked for a wide range of products/services offered by a brand yet it provides distinct business intelligence. For example, a customer may have different experiences while shopping online vs. shopping at a retail store but the NPS methodology for both would remain the same.

Also read: Experience explained

Now, the cons

Ambiguous

I agree with the fact that NPS alone doesn't provide a holistic view of customer loyalty towards a brand. It doesn't highlight the unprovoked sentiments that a customer might have for some hidden grey areas which require a quick fix.
 

Deceptive

Brands often get deceived by the high response rate that NPS offers in customer surveys. They eventually end up spending more money on surveys instead of investing in their loyalty programs.

Make the best use of NPS

Use it as an activation tool

Try not to label NPS just as a standalone customer loyalty metric. Instead, use it as a trigger to initiate the customer feedback cycle. Once identified, establish continuous engagement with your Promoters, Passives, and Detractors by spending less on dedicated NPS surveys.

Make a follow-up plan of action 

We may have all the business intelligence from NPS but it is worth nothing until there’s no robust plan of action. Act swiftly on feedback, address individual touchpoints using the mobile-first approach to reach out to your customers.

Discover the right channels

Static feedback forms are not interactive. Similarly, traditional channels like SMS and e-mail are less effective if compared with OTT apps like WhatsApp and Messenger. One of our partners achieved a 4X increase in consumer insights that include NPS when they replaced static feedback forms with interactive chatbots.

Personalise

This is the holy grail for brands these days. All the intelligence captured from the feedback surveys must lead to personalized offerings and flexibility in redemption. Customers that offer better lifetime value deserve greater attention for being loyal to the brand.

Article by Udit Kumar in STOrai Magazine. Udit is a marketing specialist in the B2B and SaaS space at ValueFirst Digital Media. He has over six years of experience in conceptualising and deploying go-to-market strategies for products like AI chatbots, digital engagement solutions, and running thought leadership programs.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.

Recommended articles for you

Got an inspiring story?
Get featured on SME inspirations

Already a member?

Log in

Other articles written by STOrai Magazine

Designing the new normal

27 Jul 2020, 12:00

Videos: The next big thing

14 Mar 2020, 12:30

View All

UnionBank GlobalLinker - GET THE BIG BUSINESS ADVANTAGE

Visit mobile site