There has been significant debate about the merits of using NPS as a business performance KPI over recent years, much of which has focussed on the way that NPS is calculated and/or whether there is a direct link between NPS and business growth.
NPS attracts so much attention because it is a simple metric that everyone can understand. For this reason, most people have their own a Point of View about NPS; and its familiarity is now arguably its greatest asset. It is this familiarity that has driven strategy discussions which span the disciplines of market research, marketing, consulting and beyond. Reicheld’s article1
, meanwhile, catapulted NPS into the boardroom.
Its reach makes NPS unusual in the business world – as it touches so many different functions and levels within an organisation. Whether we like it or not, NPS is here to stay. The critical question is: how can we harness the reach of NPS to drive business growth?
NPS is one of many dependent or outcome variables we work with in the loyalty field – others include customer satisfaction, our own composite loyalty index (Loyalty Optimiser), as well as a range of client specific KPIs which reflect the characteristics of individual brands, categories and markets. All are valid metrics, and each deserves its own place in the range brand performance measures.
For the record – I like NPS. I like it because it is easy to understand, and because it is sensitive to changes in brand performance. On the index itself, I personally think the ‘promoter’ definition (those rating a brand 9 or 10 on a 0-10 scale) works well, but I find that the ‘detractor’ definition (those scoring 0-6) difficult to work with in some low involvement categories within financial services, such as long term savings, insurance and pensions. If a customer has a single product relationship with a brand where contact is restricted to once a year e.g an annual statement, is a score of 4-6 really something to be concerned about? For this reason, we sometimes focus on understanding the drivers of those who score 0-3 on relational NPS studies, as they are ‘true detractors’ – i.e they are the people who could actually harm a brand.
So, why is NPS brilliant? I think it’s brilliant because its the metric that is often focussed on by ‘C’ suite executives. The Harvard Business Review put NPS on the map, and because it is mandated from the very top of organisations, it gets the ‘buy in’ of employees throughout the organisation. This creates employee engagement and momentum around improving the NPS score – and once this momentum is generated, it is possible to stimulate real business change.
While NPS itself is easy to understand, the issues associated with choosing the ‘right’ NPS metric for an organisation can be the most challenging. Should we focus on a relational or touchpoint NPS score? What audiences should we choose: consumers, intermediaries, existing customers, and/or prospects? Do we / how do we weight the score? Which brands should we benchmark performance against? Making the correct decision on these questions is critical, and it involves a lot more than just asking the standard 11 point question on every research study.
Once the right NPS measure is selected though, a robust question structure can yield rich data that will enable any brand to identify very specific improvements in the way it behaves and communicates that will increase NPS, directly from research findings. While it is not always possible to directly correlate a higher NPS score with business growth, by focussing on improving the drivers of NPS, it is possible to make changes that will ultimately lead to into improved business performance and get the employee engagement required to implement them. And it is this ability to stimulate business change within an organisation that is the true power of NPS.
1Reichheld, Frederick F. (December 2003). "The One Number You Need to Grow". Harvard Business Review