Is NPS the ultimate question? As per my personal experience deploying “loyalty practices” at three firms (all targeting consumers and one reaching out to tens of millions of users) and after serving as advisor to over ten companies deploying a “profit-oriented loyalty practice”), my conclusion is that NPS is not superior than customer satisfaction as a metric to indicate future growth or to show a pulse on what our customer’s experience is.
A study published by Neil Morgan and Leotto Rego in Marketing Science compared NPS to other metrics and found no advantage for NPS. Timothy Keiningham and his colleagues followed up with a multi-industry test published in the Journal of Marketing and found that indeed NPS was not better than Customer Satisfaction (CS) in predicting growth
I agree with those findings, yet I am a strong advocate for using NPS as one key metric. The issue is not about NPS being a better indicator of future growth. The NPS question is a simple question to ask. By answering it, our customers are not only taking into account their experience but are involved in a process. It takes things to a deeper and emotional level: “Am I willing to link my reputation to a company by recommending this product/service to people I care about?” This demands more thoughtful answers as the response implies action, while being satisfied or not implies no future action, just a look at the past.
Just because it is a single question, it does not mean it is easy to implement. If we are not careful, we could end up collecting biased data. An enterprise software company I am working with was puzzled by the lack of correlation between product improvements and NPS. After studying their NPS implementation, we found that NPS data was collected only through post-service-call surveys. The input came from customers that had a problem with the software and needed support. While that is a valid input, they cannot base all their decisions on the vocal minority calling for support.
It is not the ultimate question, in the sense that we should never base business decisions on a single key-performance-indicator (KPI), but it is indeed a valuable KPI to establish a baseline & trend on our customer experience and do competitive benchmarking against. Just implement it properly by following five critical steps.