Net Promoter Score – it is basically a number what shows the surplus or dominance of the promoters. When this idea was created? With what goal? How the calculation works? Why and how to use it?
What was the purpose of developing the Net Promoter Score?
NPS calculation has devised more than 20 years ago in the United States by Frederick F. Reichheld. Many companies worldwide have adopted it. The goal was to forecast the future to be able to respond to business growth needs. It is logical to expect that if you have a significant number of active promoters (supporters, endorsers, advocates, spokesman), then the business will grow. Of course it is wise to prepare to the growth of tomorrow and not miss it.
Question, scale, and calculation formula?
The Net Promoter Score question is phrased as follows: “How likely are you to recommend [company name] to your friends, acquaintances, and colleagues? Rate on a scale from zero to ten, where “0” means “not at all likely,” and “10” means “extremely likely.”
An 11-point scale is in used. It will group active positive promoters, active negative detractors, and passive customers.
The result is got with subtracting detractors from the promoters. In the 11-point scale, detractors are those who chose 0-6, and positive promoters are those who chose 9 and 10. Responders of 7 or 8 are excluded from calculation. It is because the goal is to find the proportion of actual promoters, not just the number of likers or satisfied customers. Thus, the results range from -100% (if everyone were detractors) to +100% (if everyone were promoters). Result above 0 is positive because that means there are more active promoters than active detractors and we can expect the growth from thes “satisfied salesman”.
Trendline survey for “Estonian customer service” (as of August 2023). There are 20% of “green” (positive promoters) and 43% of “red” (negative critics). Therefore, the Net Promoter Score for Estonian customer service is (20% – 43% =) -23% (minus 23%). Result of the “gray” (37%) is ignored in the NPS formula.
Feel free to participate in Trendline’s sample survey and share your thoughts. Respond through this link here (after reading the article to the end).
Weaknesses of the Net Promoter Score?
The 11-point scale can be challenging for respondents to navigate. Deciding whether to rate a recommendation as 7, 8, or 9 can be particularly difficult. Of course many people avoid giving a score of 10 because “there is always room for improvement.”
2. Different Understanding of the Scale
Respondents and askers might not interpret the scale in the same way. For instance, those giving a score of 8 might think they are providing positive feedback and recommending, but the NPS calculation treats them as detractors or passive respondents.
3. Inappropriate Use of Net Promoter Score
If the true purpose of NPS is forgotten, it will be mistakenly applied in illogical contexts. For example in some Non-Competitive Environments. Some organizations, like the Tax Office or Fire Departments, have high NPS scores, but it may not lead to actual business growth as there is little to no competition in their domains. (I definitely would recommend calling the Fire Department when necessary even if You dont like them. I am not so sure with Tax Office).
4. Exclusion of Satisfied Customers
NPS is not a satisfaction index because it ignores the opinions of satisfied customers. This can lead to confusion when the question about satisfaction is used, but the NPS formula calculates the score based on recommendations.
5. Non-Synonymous Nature of Recommendation and Satisfaction
So, recommendation and satisfaction are not synonymous.
6. Lack of Real Actions from Detractors
A customer may be very unsatisfied but will not speake about this out loud. He will not actively fight against the service (detractors), or conversely, a satisfied customer may not actively recommend (promoter). Respondents who give scores of 0-6 may not necessarily strike or rally or take any actions against the company. The question of NPS was about the likelihood of recommendation, not active opposition or recommendation. A critical post or review can be likely given by those who have marked 1 or 2 but not by those who gave 5 or 6.
The Net Promoter Score system and formula has its limitations and may not be suitable for all situations. It is essential to understand its purpose and context before using it to make decisions about a company or its services. And if no desicions will be made then why to disturb customes just for fun?
The willingness to recommend is not the same as an actual recommendation! Recommendation would be measurable if the question sounded like: “How many friends, acquaintances, or colleagues have you recommended our service to?” And equally important would be the question: “How many friends, acquaintances have you advised to stay away from our service?” And their net score would be objective. In the conditional speech, “would,” “could,” “should,” (and before that, the word “probably”), are not actions, but secret inner thoughts. If years ago, I had asked my spouse, “How likely would you be to marry me if I proposed?”. I think such an uncertain roundabout talk would have seemed quite odd. She would have responded with dignity, “Well, I would probably give you an answer if I were considering it.”. It wouldn’t have provided much clarity to either of us.
The whole game with the Net Promoter Score is only at the level of thoughts and not at the level of actions taken. We rather can not make decisions that truly impact the company based solely on this. However, if we assume that recommendation is genuine, then both the “red” (dissatisfied critics) and the “green” (promoters) sides should express their views in reality and actively. The result of the Net Promoter Score would show who ultimately prevailed. I suppose that such a constant public debate and argumentation between these sides (in social circles, groups of friends, neighborhoods) would be quite rare. It would be quite uncomfortable if such discussions about different service providers, recommendations, and non-recommendations were present in a circle of friends. This could lead to disputes among friends.
Companies do not rely on customer recommendations in practice.
Do you know any companies in Your country that have made any actual expansion decisions based on the Net Promoter Score in the last 10 or 20 years? Or has the business been objectively influenced more by regular crises and the ability to react to them? Has the company’s success primarily come from strong marketing and quality sales and customer service, or from external (NPS) predominance of loyal promoters who are fighting against distractors? It would be a great job for some Busines University graduate to thoroughly investigate these connections in the context of Your country.
The link between NPS and customer real loyalty and its correlation with future growth has been well researched. You can read a comprehensive article and analysis based on studies conducted in 2018. Some companyes nvolved in this study are Twitter, Burger King, American Express, Gap, Uber, Netflix, Microsoft, Airbnb, Amazon, and Starbucks. Study held by Christina Stahlkopf from C Space. You can read about it in the Harvard Business Review. It will be interesting to digg deeper.
Strengths of the Theory:
NPS data collection helps understand customer sentiment. It provides a glimpse into what goes on in the customer’s mind. Certainly, communicating with customers and conducting surveys can keep a finger on the pulse of the customers. And this even in indirect or abstract way.
Regularly seeking feedback from customers also moderately disciplines employees. They try harder. It is beneficial to receive specific free-text information, which can provide valuable additional insights. However, this question is not related to NPS theory or its calculation formula. Adding a open-text question is suitable when the number of respondents is small. Also it demands available and competent workforce to go through individual text comments.
The question “Why?” may not be very useful for dissatisfied respondents if the survey is anonymous. Then it is not possible to follow up or to regain their trust. Furthermore, if the survey is not anonymous, many respondents may hesitate or refrain from giving feedback. Additionally, in anonymous surveys, there is no guarantee that the feedback comes from genuine customers. There could be pranksters or fake responses at the party.
Service provider Trendline’s recommendation:
Always ask what customers think! Knowing customer experience and receiving customer feedback is invaluable. Decide what you want to know and why before formulating questions. And then choose calculation formulas (i.e., what you intend to do with the collected data). If you genuinely want to understand the score of active promoters after the damage caused by detractors, then NPS question fits well. If you want to understand the level of customer satisfaction, consider feedback from all respondents and analyze the satisfaction level. In addition to the Net Promoter Score question, ask specifically formulated questions about product and/or service satisfaction. Make answering as easy and straightforward for the customer as possible. Trendline Analytics uses as NPS formula, but also other forms to understand the customer’s attitudes. Welcome to ask more!
Trendline Analytics, CEO