Myth Busters: Net Promoter Score is Broken
The Net Promoter Score (NPS) has been a popular metric for gauging customer loyalty and intent for over a decade now. Top Revenue Leaders rely on NPS as their primary gauge of success. Companies swear by it, relying on it to forecast success and determine their overall strategy.
But what if NPS is not the right metric? What if it's actually leading these leaders astray? Data shows that this is, in fact, the case - using NPS can often result in surprises such as churn and expansions that fall through the cracks.
In a study of NPS across multiple organizations, involve.ai found that while 80% of companies use NPS in some way, shape, or form, the metric is often skewed.
This may be for the following reasons:
Customers may be answering based on an idealist state that aligns with your company’s vision but isn’t a significant part of today
They may be in their "honeymoon" period of the onboarding process
They may just have a hard time giving negative feedback.
More likely than not, customers just chose not to give feedback
With a sparse data set where MOST users don't like giving feedback, an average response rate of 15 to 30% creates an untrue image of your customer base if that’s the only data set you’re relying on.
NPS, as it turns out, may not be the best way to gauge customer loyalty or satisfaction if being evaluated individually. A key driver of churn study by involve.ai found that of NPS scores from active and churned customers for one organization on average, there was no difference in NPS score between the two groups. The NPS as a North Star Metric philosophy had failed the organization thoroughly.
The study also found that when we singularly look at the just NPS score, we miss multiple other facets of what the NPS data can provide, such as:
Frequency of the same user providing NPS
Correlation of the customer lifecycle to NPS
NPS Trends of Positive influencers vs. Users NPS
NPS comments - existence vs. not
NPS comment keywords,
Standardized Objections and Highlights
Can all these above-listed factors directly apply to your business? The short answer is NO. Every company and its data is a snowflake. One company's key drivers of churn and expansion can not be replicated for another. NPS might apply to you thoroughly, partially, or not at all.
But NPS can never be the only driver of churn; it should always exist in combination with other data elements. What data elements, you may ask? Until you don't evaluate your data, you'll never know.