Authors: Olga Potaptseva - European Customer Consultancy, Founding Director
The article was written for CMSWire.com
Maximize what your CX team can do with Net Promoter Score to foster better customer experiences.
The Gist
Don’t solely rely on NPS. Although Net Promoter Score is an insightful metric, it should be used in tandem with other feedback benchmarks.
Utilize ML and AI. Take advantage of cutting-edge technology to better handle customer data.
Monitor business outcomes. NPS and customer feedback can help predict and improve CX business outcomes.
Many argue that a 20-year-old Net Promoter Score (NPS) system is becoming obsolete in today’s fiercely competitive business environment. However, there’s no need to retire this system if you’re following its latest innovationpel their growth, foster customer advocacy and unlock new possibilities for success.
Net Promoter Score: Data Sources and Usage
Traditionally, companies rely on questionnaires to obtain NPS data and focus on elaborate data analysis to identify root causes for promoters and detractors. Reporting is often too far removed from researched events and redundant for any sort of meaningful actions.
Let’s explore a real-life example of an organization that runs a Net Promoter Score survey every January. To comply with data processing rules, survey sample preparation starts in November, meaning the researched audience may have had their last interaction with the company in October. By the time the fieldwork is finished in February, three months have already passed since the last interaction. Data analysis and reporting take another month, while action planning and sign-off bring us well into the summer. Actions are put into next year’s objectives, and unfortunately, some of them are already redundant or severely delayed. This puts nearly a year’s gap between events that influenced the customer and the actions taken!
According to CX Panda, the emergence of AI technology, demand for business agility and a steady decline in response rates give rise to the top 10 trends relating to NPS:
2. Leveraging industry and out-of-industry benchmarks for sustainable success
3. Integration into a balanced CX measurement system
4. Greater emphasis on real-time feedback
5. Customization of NPS surveys
6. Greater focus on employee engagement
7. Greater focus on emotional engagement
8. Expansion to nonprofit and government sectors
9. Increased use of predictive analytics
10. Customer journey management integration
While all of these trends are vital to explore, in this article we will focus on the top three.
Adopting Machine Learning (ML) and Artificial Intelligence (AI)
AI streamlines data collection from sources like reviews, social media and surveys while ML predicts NPS scores and conducts root cause analysis. ML can also understand individual preferences to enhance personalization.
Let’s use another example to illustrate how this technology can be leveraged in companies of various sizes and capabilities:
Company A: Leveraging Rich Database to Enhance Net Promoter
Imagine a retail chain "A,” which has a widespread presence and sells a variety of products, including electronics, clothing and household items. “A” recognizes the importance of customer feedback but faces challenges due to customer survey fatigue. They decide to leverage their rich database — including point-of-sale data, customer interactions and online reviews — to enhance NPS with AI and ML.
They engage a specialist provider to create AI models that process all available data to calculate sentiment and identify patterns and key action points related to customer experiences. Their ML models are trained on historical NPS data alongside the comprehensive customer data. This company also uses techniques like neural networks to predict NPS scores based on customer behavior and interaction data.
These predictions provide insights into potential changes in NPS scores over time. A's AI system employs ML algorithms to identify factors contributing to high or low NPS scores. For instance, it discovers that delays in customer service responses during peak hours negatively impact NPS. This insight guides the implementation of targeted improvements within one month.
Company B: ML Techniques Predict Net Promoter Score
A smaller retail competitor, "B," faces similar NPS challenges but has a more limited database due to its size. B's resources for data collection and analysis are more constrained, and they have fewer touchpoints with customers. With a smaller dataset, “B” utilizes simpler ML techniques like linear regression and decision trees to predict NPS scores based on purchase history and basic customer feedback. While their predictions may not be as accurate, they still offer valuable insights. For example, their data helps them group customers based on purchase history and offer tailored discounts or recommendations.
Both “A” and “B” demonstrate how businesses with rich and modest databases can implement AI and ML solutions to enhance their NPS systems. A's larger dataset allows for more advanced analyses and personalized experiences, while B's more modest resources still enable valuable insights and basic personalization. Regardless of the database size, AI and ML can help improve NPS systems with an approach that can be tailored to available data and resources.
Leveraging Industry and Out-of-Industry Benchmarks
Avoid the industry average pitfall in Net Promoter Score management. In today's empowered consumer landscape, address these key questions before striving to outperform industry norms:
Do we have the same view of customer needs as our customers? Industry norms may have become outdated due to newcomers or external factors.
Have recent newcomers or regulations disrupted our industry? What changes are on the horizon?
Should industry norms set our aspirations? Strive for excellence beyond the ordinary.
Consider UK banking. In 2014, top players held 83% market share. Notable NPS scores included First Direct (66), Nationwide (47), HSBC (7). A decade later, similar NPS trends continue. This begs the following question: Would mimicking First Direct and Nationwide be a winning strategy?
Open data rules and the pandemic introduced 20 new banks, reshaping UK consumer expectations. However, industry league tables tend to report the incumbents separately to digital-first banks, thus cutting off valuable intelligence. This keeps individuals within their peer group but outside the customer domain.
When using an industry benchmark for NPS performance, avoid settling into your peer group by creating a relevant comparison group that drives innovation and growth. To foster this within your sector, learn from better performing industries and apply them to your practices.
Integration Into a Balanced CX Measurement System
A balanced CX measurement system involves collecting and analyzing both customer feedback and process metrics, along with monitoring their impact on overall business outcomes. This approach ensures a comprehensive understanding of customer experience and its relationship to operational effectiveness and success.
To bring this to life, let’s explore an example of a global organization where NPS is at a healthy +40. But when looking at the Voice of the Employee (VoE) and Voice of the Process metrics (VoP) we see high employee churnover, burnout, low engagement and escalating operating costs. This indicates that high NPS is achieved at an excessive human and financial cost, meaning a process improvement effort is due.
After implementing relevant measures, we can report program success if the NPS score is maintained at +40 while achieving VOP and VOE improvement.
To ensure valid integration of the NPS measurement into the reporting suite, try exploring cultural variations that may impact your NPS scores, amongst other factors. While scores are typically crucial for clarity and leadership buy-in, understanding local cultures and building NPS action plans accordingly is even more important.
For this, we can draw a notable comparison between the United States and Europe. According to Lendscape, Europeans tend to rate company performances more conservatively and are less likely to assign the highest scores (9s or 10s). This rating behavior can be attributed to cultural differences; Americans are deeply embedded in a culture of excellence and achievement and tend to provide more extreme responses when rating on a 0 to 10 scale. In contrast, European respondents, influenced by education systems where achieving a perfect score is less common, exhibit a more reserved approach.
An extremely satisfied European respondent might rate an 8, whereas their American counterpart would likely give a 10. On a broader global level, NPS scores can vary even more significantly. Notably, Japanese and South Korean consumers tend to assign negative NPS scores even when they hold a positive view of a company.
Understanding these global variances is crucial for businesses operating in multiple regions because it underscores the need for localized strategies and cultural awareness to interpret and respond to NPS scores effectively.
NPS Is a Limited Metric With Significant Potential
In the realm of measuring customer loyalty and satisfaction, the Net Promoter Score has garnered both praise and criticism. According to the Harvard Business Review, NPS often lacks the necessary granularity to offer actionable insights for meaningful improvement.
Their article underscores the oversimplification of customer sentiments through the NPS's classification of respondents into three categories: promoters, passives and detractors. This categorization fails to capture the intricacies of customer feedback, hindering a deeper understanding of their experiences.
To overcome these limitations, it is critical to deploy a more holistic approach, combining NPS with other metrics and enhancing your insight processes with cutting-edge technology. This approach empowers companies to make well-informed and timely decisions and foster lasting customer relationships.
The Net Promoter Score continues to evolve and adapt to changing customer expectations, local variances and brand advocacy patterns. As we look to the future, we deepen NPS understanding and emphasize technology, emotional engagement and agile actions.