We rely too much on NPS!
Let’s start with the NPS – the Net Promoter Score. Perhaps the most well known score in recent time, we have determined that this score can be highly inaccurate. And it’s not just us, this was substantiated in a recent Wall Street Journal article published this past May 2019. Bottom line, NPS has been overused and over relied on.
If you are a company that competes in an semi-oligopolistic industry such as Financial Services, Healthcare, online retail giants like Amazon, or even major SaaS companies like Salesforce, the question is asked incorrectly, ”how likely are you to recommend…”. What do I mean? Companies with powerful brand recognition and/or few competitors can expect to be in every customer’s consideration set – regardless of how those customers perceive the company or judge its performance. So, asking the likelihood that those customers would recommend your highly recognized brand reveals more about how consumers value familiarity than actual customer sentiment. An enormous disparity may exist between the resulting NPS and actual dissatisfaction levels that would be uncovered at a more granular level.
Consider the difference between these two questions:
What’s the likelihood that you’d recommend Bank of America to a friend or colleague?
What’s the likelihood that you’d select Bank of America over other major national banks?
In the first question, customers are very likely to recommend the brand simply because Bank of America is a successful institution with tens of millions of customers across the country. In the second question, the respondent must evaluate their perception of the brand and past experiences to decide whether the bank’s competitors could offer better options.
So the question is fundamentally flawed, and even more so for B2B than B2C, where competitor sets tend to be more oligopolistic. Had you asked how likely you are to renew, how satisfied are your, or how well your expectations have been met, you very likely will get a different response.
To calculate NPS, you take the percent of those that give you a 9-10 (promoters) and subtract the percent that give you a 6 or less (detractors). If you consider the fact that the question is often used and interpreted incorrectly, coupled with the biases found via the Gallup study referenced above, it is extremely difficult to depend on NPS as a reliable metric to determine how your customers truly feel. As a result, you may find yourself formulating unsubstantiated conclusions that can give you a false sense of security. Namely, your customers are happier than you think.
My firm learned this first-hand in the last 24 months when we asked over 5,000 B2B customers the NPS question; but we also dove deeper to ask what was most important to each customer together with how well our clients were delivering on their needs. What happened?
We found a very high percentage of respondents that had a high NPS score also stated their needs were not being met.
How could this be, if these clients were truly dissatisfied with aspects of the product or service they were receiving? The answer…NPS is the wrong question with the wrong scale.
...so stay tuned for The Death Of Traditional Market Research - Part 3 of 5
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