The Problem with Net Promoter Score (NPS)
Updated: Mar 17, 2023
Net Promoter Score (NPS) is a commonly used measure of customer satisfaction and a supposed predictor of growth rate. The idea revolves around a scale with numbers ranging from 0 to 10, followed by the question, “How likely are you to recommend us?” Then, depending on how they answer this question, people are categorized as “detractors,” “passives,” or “promoters” depending on what number they selected.
Those who give a rating of six or less are called detractors,
Those who give a rating of 7 or 8 are called passives,
Those who give a rating of 9 or 10 are called promoters.
Finally, to get your NPS, you subtract the percentage of detractors from the percentage of promoters.
Easy, right? Almost too good to be true? This is why NPS has enjoyed widespread adoption— it is an incredibly simple solution to a very complex challenge; focusing on one number makes it easy to manage a business and hold people accountable.
The problem is that it is too good to be true.
Consider the following scenario: you are thirsty and Mike sells bottled water. Mike happens to be standing right beside you, so you give Mike a dollar and he gives you a bottle of water. It is cold, refreshing, and quenches your thirst, leaving you thoroughly satisfied. The next day you receive a phone call from the consulting firm Mike has hired to build client loyalty, and they ask you how likely you would be to recommend Mike to a friend.
Satisfied with the water you received from Mike, you rate him a ten. Does this mean you are loyal to Mike? Sure, if Mike is nearby the next time you are thirsty, you will gladly buy water from him again. But will you walk an extra block to buy water from Mike instead of someone else? If Mike had a line in front of his water stall, would you feel guilty about going to someone else instead? Probably not.
Compare this example to stories of Starbucks clients who routinely walk past one store to get to another from the same chain. Why walk further to buy a commodity item like Starbucks coffee? In a word: relationships. If you are going to walk a block further to buy a cup of coffee, it is probably because you have a relationship with and are loyal to the person serving it.
Now imagine the same dynamic at work in a B2B relationship. The risk of non-loyal behavior is not just losing one dollar, but millions of them. The weight placed on personal relationships is exponentially higher in a B2B partnership, so while the fallout from client churn is larger, so is the benefit of retention. If your clients are truly loyal, they will go out of their way to call you first for new pieces of business, give you inside information about competing offers and pricing, spend a larger share of their book with you, and spread positive word of mouth.
Ultimately, that one question does not tell the entire story, particularly if you are asking it in a B2B marketplace. Net Promoter creates a benchmark— an average. In the B2B world, treating people like averages is not a proper use of time and money because B2B clients are individuals with vastly different values. However, in a B2C business where customers do not generate enough revenue to treat them as individuals, it would be perfectly appropriate to ask for a one-question survey.
Net Promoter has its place, but it is subservient to the need for a bigger relationship assessment. That is because client loyalty, particularly in important B2B relationships, is a big deal. It is emotional and more than satisfaction; it is more than the answer to one question. Moreover, It is time for something better. It is time to measure sales equity.
What are your opinions on NPS? Do you think it is an outdated unit of measurement, or useful for your business? Let us know down below! After that, follow us on Linkedin at “Encompass-CX” for more blogs and other updates.