I remember when the Net Promoter Score, also known as NPS, came into view in 2004. As a marketing research firm specialized in customer loyalty measurement, my clients were asking if we were familiar with this new metric and how they can use it in their loyalty measurement processes.
“You already have it in your survey, we have been asking this question since the beginning.” I said. Then we looked a little closer to the process, and decided there was much more to it than met the eye.
For the uninitiated, NPS is one question, scaled from 0 to 10: “How likely are you to recommend X to your friends or colleagues?” From the resulting data, a simple difference is determined by subtracting the percentage of respondents who answered the question with a 6 or lower (called “Detractors” from those who answered with a 9 or 10 (called “Promoters”). The resulting “Net Promoters” is what is left. Note that this can be a negative number, if your Detractors outnumber your Promotors.
It was all at once an insignificant, uninteresting part of many existing surveys that became, almost overnight, an accessible, well-understood gauge for the overall health of a company’s brand and/or products.
But something was wrong. No additional information came with this number, and while the researchers who discovered this correlation were quick to point out there were other steps needed, the masses focused on the name of the article that kicked it all off: “The One Number You Need to Grow”. Too many people substituted the word “Only” in place of the word “One”.
As we began receiving significant numbers of calls telling us we needed to shave down our customer loyalty surveys, we began to work on how best to use this number to our client’s advantage. Honestly, the answer is relatively simple, or at least as straightforward as your relationships are with your customers, and the processes you use to serve them. (This blog is meant to be a summary; to go beyond the blog article, please follow the links at the end of the story.)
Making NPS Actionable Part I: Your Customers and Your Competitor’s Customers
The first step to using NPS to your optimal advantage is to determine if your customers are someone else’s customers too. I am not referring to you not knowing if your customers have moved on and no longer do business with you (which is still important), but rather, are they using your products and services as well as those from one or more other companies in your market?
There are certainly a number of situations in which needs are met by utilizing just one company for a product or service, but all too frequently, you have more than one provider for a need. This is especially true in B2B environments and in-service provider categories, where it is not hard for a company to use maybe 4 or 5 vendors for a range of products in a category.
It is here, coupled with a share of wallet question, where NPS can be used to your advantage. Consider the following three questions:
“Which of the following companies do you purchase products from in your category?”
“How are the dollars you spend allocated among the companies from which you purchase these products?”
“Please rate your willingness to recommend each of the companies to a friend or colleague:”
Through this series of questions, significant amounts of intelligence can be gleaned from the resulting data:
- Differences in loyalty between high-share-of-wallet vs. low-share-of-wallet accounts;
- Loyalty differences between your company and your competitors;
This does not account for other segmentation of the data that results in statistically significant differences between the categories.
Making NPS Actionable Part II: Knowing Where to Change the Business to Increase Loyalty
The second step in using NPS to your optimal advantage is to understand which attributes of your business are tied most closely to loyalty. If you understand which activities or components of your business have the biggest effect on loyalty, you can conceivably make changes to these business activities in order to improve their performance and thus, overall loyalty.
If you have designed customer satisfaction and loyalty surveys in the past, you will recognize this as the language behind importance-performance mapping.
For a simple example, suppose you were interested in asking about an experience at a local store with a rental kiosk:
- Product selection
- Product freshness
- Product price
- Assistant willingness to help
- Assistant professionalism
- Assistant knowledge and recommendations
- Overall satisfaction
In this situation, NPS is most useful as an index score that is used as an individual performance metric in analysis. This allows for a multiple regression comparing the independent variables of product and service attribute performance to be compared to the NPS score, and to find which service attributes are most closely correlated to NPS.
After mapping the results of the analysis, we may find the following result:
Importance-Performance Map for Airport Terminal Kiosk
Here we see a strong connection between the kiosk assistant’s knowledge and recommendation and the customer’s willingness to recommend the kiosk to a friend or colleague. On the other hand, we find the product “freshness” to be rated at less than the average value for the other attributes, but it is still on average more closely correlated to the NPS score than other attributes. This means that in order to optimally help to improve NPS among these respondents, it is best to improve product “freshness” and product selection.