Are Rising NPS Scores a Red Flag?
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Are Rising NPS Scores a Red Flag?
Reports that track NPS scores across a range of sectors—recently reported that NPS scores in the enterprise software sector have increased across the board – most vendors have seen an uptick in their scores. While good news, it raises some questions about the accuracy of NPS scores.
Glass Half Full – Rising NPS Scores Reflect Overall Improvements
Bain created the NPS approach to help companies gain a better understanding of how well they meet customer needs and to provide a structure for addressing areas in need of improvement. The approach has gained widespread use since popularized in the book The Ultimate Question. Like other management approaches that made material improvements to the way businesses operate—LEAN, Six-Sigma, Agile—NPS may have cultivated a genuine shift in executive recognition of the importance of listening, and responding, to customers. If so, this explains the industry-wide increase in NPS scores – by responding to the insights gained in NPS programs, businesses are turning Detractors into Promoters.
We’d like this to be true, but have some concerns.
Glass Half Empty – Increases May Reflect Data Collection Issues
The systematic rise in NPS scores may indicate a methodological problem with data collection – ironically, one that NPS was designed to address. Back in 2009, Bain and Fred Reichheld identified two failures of typical customer satisfaction programs:
- The average customer satisfaction survey had become an arduous experience for customers due to survey length and minutia covered. This resulted in low response rates and a bias towards happy customers who were motivated to take the survey.
- Many customer satisfaction programs had become rote: An annual program that executives reviewed once a year and then put on a shelf, with the results never making it to frontline employees.
The NPS approach addressed these problems by proposing a very short survey 3-5 questions and delivering the results in real time (or close to it) to front line employees so they could make the needed changes.
Unfortunately, NPS may be a victim of its own success. The Ultimate Question, did indeed become the ultimate question – every sector asks it. And with the rise of easy-to-use, inexpensive online survey platforms the average person gets NPS surveys weekly (if not daily) from a range of companies they interact with personally and professionally: Their banks, hotels, enterprise software vendors, doctors, auto repair shops, energy providers, restaurants, etc. Combined with the other online surveys they receive, people are now bombarded with surveys. As a result, overall response rates to online surveys continue to decline. No single survey causes the problem, but in a classic tragedy of the commons, the abundance of surveys has lessened their value overall for everyone.
With decreasing response rates the same challenges of traditional customer satisfaction creeps in – happier customers are more likely to take the survey, increasing the ratio of Promoters and raising NPS scores.
Online survey platforms make data collection easier than ever so companies move forward with the survey side of the NPS equation (the easy part) without operationalizing how they will use the data (the hard, and according to Bain, more important part). In many businesses, NPS is run the same way as customer satisfaction surveys used to be – it’s just a metric tracked quarterly or annually, reviewed by management, and never operationalized on the front lines.
NPS remains a useful metric, but may have lost some of what differentiated it from the previous ultimate questions – loyalty, affinity, future purchase intent, satisfaction, etc.
Regaining the Value of NPS
If NPS programs are at risk of providing false positives and therefore losing value as a management tool, what can be done to reinvigorate them? We see two potential solutions.
Find the detractors: When NPS scores are going up, but response rates are trending down, it’s possible detractors are dropping out of the respondent pool. Companies can adjust their data collection efforts to ensure they get a more representative mix of customer experience, by adding a telephone survey to their data collection efforts and having managers, product marketers and executives reach out to random customers as a reality check.
Change the NPS calculation: In the six years since NPS was developed the dynamics around recommendations may have evolved. Social media and online commerce may be lowering the threshold required for the average person to provide a recommendation. Almost every online purchase asks you to provide a rating or review, LinkedIn daily suggests colleagues you can recommend, retweeting and Likes are binary endorsements, etc. The constant rating of experiences may be leading to a de facto grade inflation effect. If that’s the case, changing the NPS criteria for detractors from 0-7 or 0-8 instead of 0-6 may provide a more realistic view of the health of the customer relationship.
In the past six years NPS programs have changed the way companies think about, and measure, their relationships with customers, largely for the better. But as with any tool or approach, it shouldn’t be followed blindly. All good techniques evolve with changes in conditions and circumstances and it may be time to consider refinements to NPS programs.