The Benefits and Pitfalls of Using NPS

A metric commonly used in CX programs may be leaving value on the table

Net Promoter Score® or NPS is a metric commonly used across customer experience (CX) programs. It is based on a single question posed to customers: How likely are you to recommend this product/service to a colleague or friend? Both its elegance as well as its weakness are in its simplicity. Some organizations exclusively run their CX programs on this metric. In fact, companies seldomly mature their CX management programs without NPS. It has been praised for its correlation to business growth among other financial measures. However, NPS leaves value on the table and tends to focus the business too much on ‘efficiency’ and not enough on ‘advocacy,’ or other experience gains. To resolve these shortcomings, companies must re-evaluate the strength of any insights derived from NPS; reposition where and how they embed NPS within their client listening channels and mature their metrics to go after other mission critical feedback that goes beyond NPS.

In this white paper, we examine the benefits and pitfalls of NPS from the perspective of 7 key C-level personas.

NPS White Paper Summary:  CX Pilots highlights the main benefits and pitfalls of NPS based on the latest findings from research conducted by John Dawes of the Ehrenburg-Bass Institute of Marketing.

Net Promoter Score® or NPS is a metric commonly used across customer experience (CX) programs. In fact, companies seldomly mature their CX management programs without NPS. However, NPS ‘leaves value on the table’.  In addition, a new finding from John Dawes, has found a critical issue with NPS - the double penalisation effect. This is something we call the Secret Sauce of NPS.

This is an effect of the measurement process itself, which overinflates scores to make it seem like you are being successful, when in reality you are not.

In our paper we also cover the pros and cons of NPS set against 7 key C-level personas: CEO, CFO, Investor, Director of HR, Chief Operations Officer, Chief Marketing Officer, and Director of Insights.  In total we look at 26 areas. Some of the key ones being as follows:

Pros

1. A relentless focus on NPS provides a proven methodology for the business to grow.

2. NPS drives value.

3. NPS is a required sign of customer centric thinking for our shareholders and analysts.

4. It’s easy for executives and employees to understand.

5. NPS is motivational.

Cons

1. NPS does not link to growth.

2. NPS leaves value on the table.”

3. NPS is often just a box ticking exercise.

4. NPS is no different to Customer Satisfaction in its effect.

5. Statistical issues with NPS

Conclusion: To resolve these shortcomings, companies must re-evaluate the strength of any insights derived from NPS; reposition where and how they embed NPS within their client listening channels and mature their metrics to go after other mission-critical feedback that goes ‘beyond NPS.

Companies also must become aware of the double penalization effect and how to resolve issues with this simply and effectively.

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Download The Benefits and Pitfalls of Using NPS White Paper:

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