Why Is NPS So Important?
Posted by Kim Walsh at April 23rd, 2013
It may be time to reconsider the Net Promoter score (NPS) as a useful metric of customer experience. Many companies today are doing both external and internal NPS scores. What really comes out of those surveys? I have seen companies compile and create very complex excel sheets based on customer feedback. But what do they do with this data? Maybe one company will adapt and change a feature in the product because of a median analysis on one specific data-set. There are a lot of discussions happening currently on the changes that could and should take place to a NPS. Is it outdated?
Benchmarking your performance is the second most fundamental aspect of Net Promoter success. To understand your Net Promoter Score, you must compare that score within your industry and against direct and indirect competitors. Companies with scores higher than their competitive set grow faster and are more successful. Currently Net Promoter asks this question: “Would you recommend this company to someone you know?” After reading an article. Paul remarks that NPS is “based on intent not advocacy or action,” which makes it “not useless just not useful.” While I agree with this statement, I think that companies today can get excel with their customer communications. What if you could trigger a workflow or send a message to an account manager based on a certain NPS score? What if this message was also tied into customer usage data? What if the data told you that for every customer that scores in the “-“ negative, you should invite them to a local user group. Maybe your company should put more human capital or resources towards this customer set? There could also be a correlation between a segment, for example, maybe the customer segment with over 500 employees score higher on their NPS than the small business segment. What should companies today do with this data? How should they execute?
Companies with the most efficient growth engines operate with an NPS of 50 to 80. The average firm sputters along at an NPS of only 5 to 10 — in other words, their Promoters barely outnumber their Detractors. Many firms — and some entire industries — have negative Net Promoter Scores, which means that they are creating more Detractors than Promoters day in and day out. These low scores explain why so many companies can’t deliver profitable, sustainable growth – no matter how aggressively they spend to acquire new business.
Marketing automation assists with segmenting leads, visitors and prospects and we all know that all leads and prospects should not receive the same communication. The same idea transfers to the management and engagement of your CUSTOMERS.
An interesting article suggests replacing Net Promoter with a four questions, advocated by professor V Kumar, that reflect customer lifetime value and customer referral value:
1. Would you recommend this company to someone you know?
2. Did you recommend this company to someone you know?
3. Did they become a customer?
4. Were they a profitable customer?
Image credit: http://www.checkmarket.com/2011/06/net-promoter-score/