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The Disadvantages of using NPS: Eight Major Pitfalls

Feb 18, 2023 | Blog, Net Promoter Score

The Net Promoter Score (NPS) from Bain & Company, has become a widely adopted metric as a measure of  customer loyalty and satisfaction. The better news is that Opiniator has an NPS question within our repertoire of question types. It is considered by many an easy and reliable way to assess customer experience. However, as with any metric, NPS also has its drawbacks and limitations. This is putting it mildly – as some say the use of this metric is dangerous because it is so misleading.
This blog post takes a closer look at some of the main disadvantages associated with NPS and explores why it may not necessarily be the best approach for measuring customer loyalty and satisfaction. The main purpose of this post is to provide a comprehensive overview of the disadvantages of NPS, including its limited scope and lack of actionable insights.
By the end of this post, readers should have a better understanding of the challenges and limitations of using NPS as a tool to measure customer experience. Additionally, readers should be able to identify other methods and tools to measure customer loyalty and satisfaction that may be more suitable for their business context.
We think there are at least six major problems – but first let’s first define NPS

NPS Defined

The NPS is based on customers’ ratings of the question:

“How likely are you to recommend us to your friends/colleagues?”

Based on their rating (from 0 – not at all likely to 10 – extremely likely), customers are segmented into three groups:

  1. Detractors (customers who give a rating of 0-6),
  2. Passives (customers who give ratings of 7-8) and
  3. Promoters (customers who give ratings of 9-10, loyal customers).

A company (or group) can calculate its Net Promoter Score by simply subtracting the proportion of Detractors from the proportion of Promoters:

NPS = prop(Promoters) – prop(Detractors)

NPS Viewed

The Opiniator program output is shown as both an absolute score AND a score over time

Net Promoter Score - Time Series Chart

OK SO Far But What are the Disadvantages

NPS has its place and is a widely used customer satisfaction metric, but it has some limitations. Some of these include:

1) Too Simple: NPS is ONLY based one a single question

This means it is unlikely provide enough information to fully understand customer satisfaction.

It is based on one question! While this single question may provide a general overview of customer satisfaction, it does not provide enough information to fully understand the customer experience. It is a one dimensional metric without color or substance. Moreover there are many facets that must be taken into consideration. These include:

  • Customer value
  • Customer loyalty
  • Customer engagement
  • Customer experience
  • Where in the customer journey
  • And position over time

These are critical  components that should be taken into account in order to accurately measure customer satisfaction. We therefore believe that only through the use of multiple metrics, companies can gain a better understanding of the overall customer experience, and can adjust their response and strategies.

2) Lack of context: NPS does not take into account the context of the customer’s experience

In other words, the NPS does not factor in a customer’s individual interactions with a company, such as the quality of customer service they received or the reasons behind why they gave a certain score or even which part of their individual interaction. This means that while it is a useful tool for measuring customer loyalty on a larger scale, it is not as effective when it comes to understanding the nuances or the drivers of customer experiences.

Moreover it does not account for changes in competitor dynamics. After all, competitors’ offers and the value perceived by customers are not part of the NPS. Yet these are essential elements to anticipate customer loyalty. Companies should take this into account the context of customers’ experiences when interpreting the results of their NPS scores. By doing so, they can gain a better understanding of what drives customer loyalty and satisfaction — and, in turn, be better equipped to address customer pain points, increase customer retention, and ultimately improve the customer experience.

3) Biased towards certain industries: NPS may not be as useful in certain industries, such as B2B or Government

Net Promoter Score (NPS) is a commonly used metric in the business world, especially in the B2C and retail industries. However, it may not be as useful in certain industries, such as B2B or Government, where the customer base is different – it becomes more challenging. The base question after all is asking whether the professional buyer would recommend to friends and family. It is most unlikely a response would be delivered. These industries have different needs and expectations, which makes it difficult to measure customer satisfaction using the same metric.

NPS is biased

Furthermore, the customer relationship in B2B and Government industries is generally more complex and less transactional than in B2C and Retail. This makes it especially difficult to quantify customer satisfaction using a single metric. Additionally, we have seen that B2B customers are not be as willing to give feedback on their experience, making it harder to capture accurate data. In fact one study claimed that the NPS question would need to be altered if it were to apply to Government agencies.

For this reason, alternative metrics, such as customer feedback surveys or customer experience scores, must be used.

4) Limited longitudinal validity: NPS scores may not be consistent over time

Tracking changes in customer satisfaction over time can be difficult, as NPS scores may not remain consistent. Most businesses suffer from external impacts hence it would be crazy to assume there would be consistency in NPS. Specifically, customer feedback and satisfaction can change over time, making it difficult to accurately measure changes in customer satisfaction using NPS scores. This is because NPS scores may not be indicative of customer satisfaction at all times, and may not accurately reflect the customer’s current feelings. Additionally, customer’s feedback may be influenced by outside factors, such as changes in a product or customer service, or staffing shortages and these changes may not be reflected in the NPS score.

This confirms why additional and more inciteful metrics also be used.

5) Limited demographic representation: NPS may not be representative of all customers

NPS is a useful tool to measure customer satisfaction, but it can be limited in its ability to capture the opinion of all customers. For example, it may not be representative of all demographic groups, such as people from different age, gender, or racial backgrounds. This is because the sample size used to generate an NPS score is usually small – particularly if the customer journey is more complex. Consider the complexity of measuring the satisfaction of a shopper when they purchase groceries. You see many touchpoints, many steps, many interactions – so where to apply NPS?

The Retail Journey of a Shopper

Additionally, customers who have a positive experience with a company may be more likely to respond than those who have had a negative experience. As a result, the NPS score may not accurately reflect the opinion of all customers. This means that even if data is collected – it must be used with caution before driving major changes.

6) One Dimension of Loyalty: NPS Only Represents One Loyalty Dimension

Customer loyalty is multidimensional; it is not a single thing. This means that the NPS question itself is likely flawed in what it is actually measuring. Recent research suggest there are really three different types of customer loyalty. Specifically:

1. Retention Loyalty is the extent to which customers remain customers and/or do not use a competitor and leads to long-term customers who are easier to service.

  • How likely are you to switch to another provider?
  • How likely are you to renew your service contract?

2. Advocacy Loyalty is the extent to which customers advocate your product and/or brand and leads to the acquisition of new customers.

  • How likely are you to recommend us to your friends/colleagues? (NPS)
  • Overall, how satisfied are you with our performance?

3. Purchasing Loyalty is the extent to which customers increase their purchasing behavior and leads to increases in the average revenue per customer.

  • How likely are you to purchase different solutions from us in the future?
  • How likely are you to expand the use of our products throughout your company?

These three types of customer loyalty questions were predictive of different types of business growth. Moreover, different loyalty questions were predictive of different types of objective business growth metrics:

  • Retention loyalty questions were the best predictor of future churn rate
  • Advocacy loyalty questions (including the recommend question) were a good predictor of new customer growth
  • Purchasing loyalty questions were the best predictor of Average Revenue per User growth

By using only the NPS question, you are limiting your understanding of the health of your customers which means that NPS is an insufficient loyalty measure. Selecting the right customer loyalty questions for your survey requires careful thought about your customers and your business. Think about how your customers are able to show their loyalty toward your company and include loyalty questions that reflect those loyalty behaviors you want to manage and change.

7) Some People Simply Don’t Understand the Question!

Some say that NPS is a simple question. We disagree! There are some common errors delivered by customers who simply don’t understand the question:

People do not understand the NPS question

  • The rating system is simply too wide. Most Likert scales are 1-3 or 1-5, whereas the NPS is 0-10. This means a choice of 11 possible scores. For many people this is simply too many and leads to confusion, anxiety or a refusal to answer.
  • This is particularly so in an out of home or offline setting where attention span is short. In this environment, context and clarity is everything.
  • ‘How Likely Are You To Recommend” – is the key component. Unfortunately some recipients take a view that they ‘NEVER’ recommend anything to anyone, no matter how satisfied they are. This means they will never give the NPS their true rating.

8) Limited actionability: NPS does not provide specific information about what a company can do to improve customer satisfaction

So what is the point of feedback if it cannot lead to action? This is huge. NPS does not provide any specific information about what a company can do to improve its score so it is impossible for companies to take action based on their NPS score.

How do they know which areas to focus on or  what changes to make?

An NPS score is not an end in itself. It is like a balance sheet ie. a single snapshot of performance and attitude at one moment and for one single customer. But what is behind this score? What did the customer not like or, on the contrary, loved? – hopefully enough to tell others

This information is more critical than the NPS score because it allows the business to take appropriate action. Specifically fixing the issue and connecting with the unhappy customer. Therefore, it is essential to complete the Net Promoter Score with other questions from which an action can be taken. Ultimately, to help companies make the most of their NPS score, they must have access to specific information on what is driving satisfaction and thus what leads to a high NPS score.

Conclusion

No doubt NPS has its place within the range of existing customer satisfaction surveys. It does offer value, but needs assistance. Customer health is tricky to measure at best and NPS is not a silver bullet. So business owners need to be cautious about the use of a single score. After all we have found eight significant pitfalls in its use. Without guidance and at least one follow-up question, companies can be left with a high-level score but little insight into the areas that need improvement. Moreover, without a clear path to improvement, companies are unable to take advantage of the potential benefits of higher customer satisfaction levels. As a result, many companies struggle to leverage the NPS metric, hindering their ability to make meaningful changes to increase the number of happy customers.

Simply put – without a clear opportunity for action, one must question the use of the tool to provide value.

 

 

 

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