The Net Promoter Score (NPS) has 5 drawbacks that must be considered when measuring customer satisfaction. These drawbacks do not detract from the NPS value, but they lead us to propose alternative solutions for our projects. These solutions aim at making satisfaction surveys real improvement levers and not just a mandatory part of the company’s operations.
- The Net Promoter Score does not provide data on what needs to be improved
- Net Promoter Score is a measure of loyalty, not acquisition
- NPS does not take into account competitive dynamics
- Passive customers do not exist
- NPS is inward-looking, not outward-looking
The validity of the Net Promoter Score (NPS) as a simple measure of customer loyalty is not questioned. What other customer satisfaction metric can boast such a correlation through a single question? Yet, NPS does not indicate what needs to be improved, as convenient as it is.
An NPS score is not an end in itself. It is just a reflection, at a given moment and for a customer, of his satisfaction. But what is behind this score? What did the customer not like or, on the contrary, loved? This information is much more critical than the NPS score because it allows us to act. Therefore, it is essential to complete the Net Promoter Score with other questions and with an open mind.
Advice on measuring customer satisfaction
In our customer satisfaction projects, we focus not only on the negative aspects (customer dissatisfaction). We insist on collecting information about what customers liked best. This will allow you to find objective elements to improve customer satisfaction.
We should keep the second weakness of the Net Promoter Score in mind at all times. The NPS is only valid for customers but does not give you any information about non-customers or ex-customers. However, among these two targets, you will find the best growth opportunities.
The NPS will allow you to assess the probability of keeping your current customer base but will not give you any indication of the possibility of growing it. Moreover, this focus on existing customers can be highly misleading, even deadly, as the Oldsmobile example reveals (see box below).
Oldsmobile: too much focus on customer loyalty can be deadly
Oldsmobile went bankrupt in 2004, more than 100 years after its creation in 1894. Yet, all their customer loyalty metrics were in the green. Oldsmobile measured customer loyalty based on 2 questions:
- “How likely are you to repurchase an Oldsmobile?”
- “How likely are you to recommend Oldsmobile to your friends and family?”Avec le temps, le pourcentage de clients fidèles augmentait. Pourtant les revenus diminuaient.
Over time, the percentage of loyal customers increased. Yet revenues were declining.
The customer loyalty metrics were masking a deeper problem: the erosion of the customer base. This shows that the Net Promoter Score is by no means a perfect indicator.
Because it is entirely focused on existing customers, the Net Promoter Score does not capture what is happening in the marketplace. Competitors’ offers and the value perceived by customers are not part of the NPS. Yet these are essential elements to anticipate customer loyalty. Even in the developer category, a customer is loyal up to a point. Their commitment ends when the competition’s value proposition exceeds what they are currently paying for.
Therefore, understanding the competitive dynamics allows you to anticipate movements that could affect your customer loyalty.
The Net Promoter Score is based on a division of customers into 3 categories:
- the passive ones
The promoters are the ones who will remain loyal, while the detractors have no desire to remain customers. But what about the “passive” customers. The term “passive” suggests that they are inactive and content with the status quo. This is a costly illusion. These customers passively look for alternatives and will defect at the first opportunity.
Finally, the Net Promoter Score is a metric that can be considered as being turned towards the inside of the organization. The spirit of NPS is to associate loyalty with the value extracted for shareholders. However, this conception of a company serving shareholders is reductive.
The Net Promoter Score is nothing more than measuring a by-product of perceived value. The company’s raison d’être is above all to serve the needs of its customers, who, if satisfied, will remain loyal to the company. Loyalty is, therefore, only an indirect consequence of satisfaction. This is why some people oppose the NPS system to the CVM (Customer Value Management) system, which is outward-looking, i.e., focused on the customer’s needs.
Tags: customer satisfaction survey