I'm a big fan of Net Promoter and have used NPS surveys for the last eight years, doing surveys for my clients and helping my QuestBack customers implement NPS surveys in their businesses. So this post isn't a "ding" on NPS, nor should it be construed as a reason to not use it. In fact, in my opinion, quite the contrary almost every company benefits from NPS surveying. That said, on to the post....Benchmarks are a popular in management circles. They're used to defend performance versus competitors, compare performance against industry standards and to justify planned actions to improve the business. This isn't an argument against benchmarks, the have their place. I just think Net Promoter Score (NPS) should not be used to benchmark versus industry or competitors. Lots of folks use NPS benchmarks. I think they shouldn't. Or, at minimum should be really cautious about how they use them.
On its surface, NPS looks like a great candidate for a benchmark. It's based on a standard model. And, successful businesses tend to have high NPS scores, make larger profits and retain customers longer than those that have lower scores. So in theory, it should generally work well as a benchmark. I believe that, in practice, it tends to not work well as a benchmark. Here's why:..
- Customer Management Process. In my experience, NPS Scores as given by survey respondents are largely about person-to-person relationships. In my own use of NPS I've found that scores are almost always driven by how well a key relationship is working. Of course, other aspects of a customer's relationship with a company are contributing factors to NPS ratings, but they tend to be secondary. The key relationship tends to over ride the other stuff. This makes using NPS as a benchmark very tricky, because customer relationship management processes may differ substantially between companies. For example, hypothetically two competitors, company A and company B, where "A" has dedicated account and support people, but charges more money. and "B" has neither but charges less. Company A has high NPS ratings and Company B has lower ratings. Can we compare them both to the same NPS benchmark? Probably not. Unless CRM processes, product pricing and products/services are so similar as to be interchangeable, a NPS benchmark isn't insightful.
- Observed Promoter behavior and the definition of NPS for your company. This is a HUGE issue for understanding how to use NPS Survey data. Most companies don't understand that unless they correlate their NPS survey scales to observed promoter behaviors. they don't really have an optimal tool for utilizing it. Important promoter behaviors include referral activity, retention and openness to up / cross sell. For our hypothetical companies: "A" has very high retention for customers rating it a "10" on the NPS scale and a very low retention for those "6 and under". "B" has the same retention rate as Company A, but for customers giving them a "7 or higher" and low retention for 3's and under. Clearly the standard NPS survey scale needs adjustment for both of these companies in order for them to properly focus on their promoters, passives and detractors. Again, benchmarking either of these company's NPS scores to a standard would be comparing Apples to Oranges.
- Effectiveness of NPS Survey follow-up process. In my observation, effectiveness of Closing-the-Loop actions on NPS survey feedback varies widely among businesses. Some follow up every survey response, some only detractor responses and some no responses at all. Since it is proven that "closing the loop" actions tend to improve NPS scores, benchmarking NPS scores where a "loop closing" process is non-existent or not comparable to whatever the benchmarked loop-closing practices are means scores are comparable. In other words, as a benchmark NPS wouldn't be relevant, at least until loop-closing was done to the same extent and effectiveness as the population in the benchmarked group. Most companies hold closely their feedback follow-up-process data. So, its difficult to discern if your follow-up process is comparable to the benchmark. Another reason not to rely on NPS as a benchmark.
In my opinion, NPS Should be used as a benchmark. But, only internally (i.e. against itself and over time). And even then, it should only be used as a benchmark when the definitions of promoters, passives and detractors are well understood in their NPS context for your customers.
Stewart Nash
www.linkedin.com/in/stewartnash
