Since its release in 2004, the Net Promoter Score (NPS) has turned into one of the most used metrics by companies when measuring the performance of a product, service, or brand.
As we’ve mentioned in other articles, we can state that the NPS's success is directly related to its simplicity. It’s a metric that arises from a unique question our clients must answer: On a scale from 1 to 10, how likely are you to recommend our company?
In this way, the index helps you have a rapid view of the consumer’s opinion and has been widely accepted in the market and drafted on countless online questionnaires. That’s why almost all of the top companies in the world have incorporated them into their operations. If you haven’t done it yet, we invite you to create NPS surveys to measure it right now!
Questioning the NPS
The NPS has been the target of criticism as it only shows the big picture and doesn’t provide enough granularity.
It is generally associated with a compass, indicating to companies if the path is right. However, sometimes companies need a map with more details. Something that provides, not only the way but allows them to discover the features of the area.
Some specialists propose the need to take the NPS up a notch, as suggested by Christina Stahlkopf, Manager of Global Consumer Insights in Hasbro in the Harvard Business Review article “Where Net Promoter Score Goes Wrong”.
In this way, apart from including on your online questionnaire the standard NPS question on the likelihood of people recommending your brand, Stahlkopf also proposes two other questions for the users to answer: “Have you recommended the brand?” and “Have you talked someone into choosing this brand?”.
Therefore, the aim is for you to understand what consumers want to do in the future and what they would have done. The investigation suggests that the intention isn’t a trustworthy metric, as the intentions aren’t portrayed in concrete acts.
Stahlkopf states in this article that the NPS supposes that someone can’t be both a promoter and a detractor, but humans are complex and often contradictory.
Our minds always work on multiple levels, where facts, feelings, and experiences are placed inside contextual and subjective structures. A simplified model as the NPS tends to leave aside this natural human condition.
In fact, the article unveils information on a study that showed that 52% of the people who talked others out of using the brand also recommended it. In all the NPS scales there are consumers who promoted and criticized the same brand.
It was also discovered that, by commenting on the good features of a brand, the users bear in mind the right combination. For example, young people may recommend Spotify to their friends because it’s easy to use and customized, but at the same time, they discourage their parents from using it as it might be too complicated for them.
Three approaches to NPS
Therefore, the tendency on which the NPS is aimed to be analyzed entails including the context needed to the number provided by the research. It’s not enough to classify clients as promoters, neutrals, or detractors, but to analyze the surrounding.
How should companies interpret the scores? What is a good score? How should companies establish goals and aims to improve?
The consulting firm Bain & Company, which has created and patented this metric, states that there are three different approaches to using the NPS. In this frame, we can collect data with the following objectives:
1. Relationship
According to this approach, companies who use the NPS get in touch regularly with their own clients to ask them the likelihood of them recommending the company to their friends or colleagues and why.
The results will provide them with a general evaluation of the relationship between your company and its clients. It will also show information to the account teams, relation managers and others so that they can make decisions and take action to improve the sales, the service, the product design, and the prices, among others, according to what they gather from the data recollected.
2. Experience
In this case, companies seek their clients’ opinions on the structure of an NPS after certain experiences, transactions, or episodes. For instance, you might achieve this through online surveys sent after a purchase of a product or an exchange through the phone.
This approach focuses on understanding how clients’ experiences influenced their loyalty towards your brand in those moments so that you can find better ways of improving them.
3. Competitive benchmark
According to Bain & Company, you need to know not only your clients’ opinions but your competitors’. The benchmarking concept refers to the fact that you look at other products, services and work processes that belong to organizations that showed good practices, with the objective of putting them into practice in your own company.
This type of NPS helps you understand what the interviewees think about a full value proposal and not just the relationship with your company in particular.
Towards a comprehensive approach to the NPS
Assuming each perspective provides different information, which is the right strategy a company should put into practice regarding the interpretation of the NPS information?
According to the article, companies should apply the three approaches to be able to have a more comprehensive view of the situation the business is in.
Putting into practice the Experience and Relationship NPS leads to constant improvement. The NPS competitive benchmark scores provide information on several decisions. They tell companies how they are doing, not regarding direct competitors only, but regarding the different alternatives in competition in the market.
The importance of a competitive Benchmark
The NPS competitive Benchmark tends to be underestimated by companies. Nevertheless, the knowledge it provides helps leaders to know where the main threats and opportunities are.
Besides, it helps them determine the strategic priorities and know-how, when, and how much to invest. According to Bain, for example, the NPS competitive Benchmark is able to discover that competitor X has suddenly become popular among clients due to a new product or price system. Then, it may ask whether it makes sense to try to imitate or surpass the innovation.
The NPS competitive Benchmark study is similar to the traditional market research surveys where the consultants ask the interviewees what companies they are “promoters” of. Plus, they investigate the chances the interviewees recommend each of the companies and consider the reasons.
In most cases, they collect data on the respondent's purchases to estimate their economic value as clients. They also make demographic or psychographic questions to place the respondents in a segment of clients in particular.
The methodology is “double-blind”: the interviewees don’t know the company is making the questions and the clients remain anonymous.
Important factors to bear in mind
One of the biggest challenges when working with NPS competitive Benchmark is understanding the distinctive features. That’s why, when comparing two companies, it’s important that the investigator carries out normalizations for the results of the methodology to be effective.
In this sense, the average net scores of the promoters vary depending on the industries and countries. Therefore, Rob Markey, one of the partners of the NPS parent company, states that there are at least four factors affecting them:
1. Experience and accumulated skills in a certain industry
According to Markey, “when the leader of an industry achieves great progress in a certain area, its competitors follow it or never recover from it”.
Bain & Company’s partner exemplifies it with the video rental services stores, which used to lead the movie renting market, but people hated the charges for falling behind with the payments, which were pretty standard in the industry. Then Netflix came along, eliminating the charges for falling behind with the payments by changing it into a subscription and allowing people to keep a DVD the time they wished. This completely changed the industry.
In this way, companies are constantly looking for ways to offer a better experience to their clients through innovation, and these changes may clearly affect the industry’s competitive Benchmark.
2. Exogenic forces
Whole industries may be affected due to factors that can’t be controlled. The NPS can change depending on the economy, politics, and current events.
The COVID pandemic has affected the traditional functioning of certain industries, and therefore, their NPS. That’s why, almost every sector in tourism (hotels, airlines, online travel agencies) has been struck as well as their operations, which was reflected in the industry’s NPS.
3. Competitive intensity
According to Markey, the supply and demand in a region or country can play an important role in the NPS. That’s why, if there are more competitors who fight for the same clients, it’s therefore, an industry in which the focus is on winning relations with clients and, in turn, on improving the NPS.
4. Basis of the competition
Lastly, the regulatory environments of a country can change the basis of the competition for whole industries.
For instance, departments such as public service can count on companies whose price fixing is tied to the government regulations. This occurs in natural monopolies (water, gas, electricity) as well as in other areas such as pay television or cellphones. The ups and downs of the regulations of the area impact the client’s experience and the “willingness to recommend” the company.
Cultural differences are not a factor
An interesting fact to bear in mind when normalizing the competitive Benchmark is that, according to Bain & Company’s partner, cultural differences aren’t a factor that affects the NPS. It’s about a revealing element that goes against what is usually upheld.
According to Markey, the consulting firm has analyzed millions of observations over a period of 20 years, and “the cultural differences use answer scales in a different way, but it’s a fact that most of the people exaggerate, most of the people underestimate”.
What does that mean in practice? “If a multinational company sees that France’s scores are lower than Canada’s, the divergence will probably be due to the business having a worse performance in France and French clients aren’t satisfied; not because Canadian clients are “nicer when scoring”, states the executive.
Design your NPS competitive Benchmark survey
Every NPS survey requires a series of decisions on who to interview, what to ask, and how frequently to carry out.
Some questions every company should ask when managing the development of an NPS competitive Benchmark are:
- Who are the main competitors?
- What other alternatives should be considered?
- Should all market clients be surveyed or just certain segments? And, in that case: Does everyone agree on the definition of our segments?
- How deep should we go?
It’s a great challenge since all these elements may influence the utility of the comparisons. Companies probably need to carry out samplings or other analytical adjustments to obtain precise and useful data.
Bearing in mind these tools will help you know your clients’ opinion and at the same time, they’ll improve your business.