8 common mistakes companies make with NPS (and how to fix them)
Net Promoter Score. Do you use it? It’s one of our top recommendations to clients who, like us, are obsessed with service. In 2003 Fred Reichheld wrote his seminal HBR article ‘The One Number You Need to Grow’, where he launched NPS into the world. Since then, it’s grown to become one of the best metrics for customer engagement out there. It’s simple, easy to implement and effective. Better still, it will predict your business’ organic growth.
Back in January, I interviewed Fred for our Melting Pot podcast – a conversation that’s well worth a listen. He told me that the difference in NPS of two competing companies explains 85% of the migration between suppliers in an industry. That’s a significant predictor! He’s also set up the FRED Stock Index, which tracks the total shareholder return of companies that achieve the highest NPS in their industry. These companies earn the love of their customers and consistently beat the stock market with returns of triple the stock market average over the past decade.
NPS is a powerful tool – no doubt about it. So why do so many businesses fall at the first hurdle when introducing it? NPS is the most misunderstood of all the business growth tools we recommend. Only last week, I read about a business that quoted their NPS as 41.6. Another quoted it as a percentage. Both of these are plain wrong. They smack of lazy ignorance and a total lack of understanding.
So what are the most common mistakes we see with NPS?
1. Lack of background reading
NPS may be simple, but it’s a carefully calibrated system. Before introducing it, read about how it came into being and its principles. You need to understand how it works and the best way to implement it.
Fred has written two books – ‘The Ultimate Question’ and its follow-up ‘The Ultimate Question 2:0’. He’s also behind an excellent podcast – The Net Promoter System Podcast – that gives revealing NPS case studies. Learn from businesses that have used it effectively. At the very least, read his article in the Harvard Business Review and our blog on why you need NPS to grow your business. Listen to our podcast episode too.
2. Changing the survey structure
If you’ve read enough about NPS, you’ll understand the careful wording of the central question and its scoring. It needs to be succinct.
The other day, I was chatting to a client who said, ‘Dom – you have to help us with our NPS’. ‘OK’, I replied. ‘Send me your survey’. When it arrived, I realised they’d changed the structure of the central question and its scoring. Instead of a simple scoring of 0-10, they’d made the whole sentence longer. It read, ‘Would you recommend us to a friend or colleague: 0-5 You wouldn’t 6-8 You might 9-10 You would.’ Why did they do this? It made no sense. If you mess about with the structure, it will change the calculation and the survey results.
3. NPS scores aren’t stratified
Too often, NPS is rolled out across the customer base in one go – like any other customer satisfaction survey. This makes it very unwieldy. You don’t need to do this – NPS is entirely flexible. Break the surveys into manageable chunks and do some aspects of your customer base over time. In the past, we’ve measured a fixed number of clients weekly to get a 3-month rolling average.
Recently, a client told me that 60% of his company’s total revenue came from just ten clients. ‘So’, I asked him, ‘What’s the NPS for this group’? He didn’t know. You want all your most profitable customers to give you 9s and 10s, so the focus should be on keeping these people happy.
4. Giving up because of a low response rate
A massive mistake. Don’t give up because the response rate is too low. It’s a fact of life. People are busy, and the response rate to an emailed survey will be low. But that doesn’t mean that NPS doesn’t work as a metric!
Get on the phone. Pre-warn clients that the survey is coming their way. Call them if they don’t respond and take their answers down over the phone – particularly if they’re one of your most profitable customers. These are the ones that you want to be sticky.
5. Lack of attention to pre- and post-survey comms
People are bad at communication around NPS. Do you send surveys out with no explanation? Do you give any feedback? Tell your clients what you’ve learned from previous NPS surveys and what you’ve fixed. Make it clear that your goal is to be the best supplier they work with, regardless of what they buy. And that you actively seek criticism.
After you send the survey, do a wrap-up. Thank your customers for their comments and summarise what you’ve learned. And the next time you survey them, include this feedback to show you’ve listened and acted. Then you’ll make the exercise meaningful for your customers. They’ll feel it’s worth their while taking time out of their busy day to do your NPS surveys.
At Rackspace, one of our directors would call any customer who’d left a text comment. A great way to make the customer feel valued and build momentum.
6. No separation between transactional and relationship NPS
Often NPS is restricted to a transactional survey of people who are using the service or product. The client that I mentioned earlier was doing this. His NPS surveys were on the back of support tickets, but there was no NPS of the views of decision-makers responsible for supplier selection. Another big mistake! In our experience, the transactional score is 10 – 20 points higher than the relationship score. So, it can give a distorted NPS picture.
Make sure you have a balance between the two. Survey the person or people that signed the contract regularly. They will decide whether they renew or spend more money with you. Do this every six months to have time to rectify any problems before renewal.
A transactional NPS score can be on the back of sales proposals, support tickets or even invoices. Look at the various teams that touch your customer in a more transactional way. Send surveys on the back of every interaction to ensure a steady stream of data.
7. Fiddling with the NPS scores
Fred touched on this in our podcast chat. It’s common for people to fiddle with their NPS numbers to improve their overall score.
It takes me back to when I was part of an NPS study group in the UK. The group included insurance, car rental and telecom businesses. I was deep in conversation with the Head of Customer Success at Colt Telecom. She told me their NPS would be good if they stripped out feedback about late BT deliveries. You can’t do that! Customers don’t care if it’s BT’s fault. They’re unhappy – end of. And that’s your accurate NPS score. She looked at me as if I was mad. ‘But I can’t impact any of that,’ she said. She hadn’t grasped NPS at all.
Fred has developed a nifty solution for any business that tries to massage their NPS—measuring the proportion of revenue earned versus bought. It’s a method your finance team can administer, so it’s harder to fiddle. When new customers come on board, they’re asked, ‘Why did you sign up with us?’ They can choose a) we were referred b) because of your reputation c) because they saw an advert or d) because you rang and sold to them. The first two are earned revenue, and the last two are bought. It’s a simple calculation that gives more weight to your NPS.
8. Reluctance to accept the brutal reality
NPS will tell you things that might be difficult to accept. I read a great article recently. The CMO of Coca-Cola was addressing an event bringing together hundreds of digital agencies. ‘You all say you’re different,’ he told them. ‘You all say you have amazing people and a unique process. But I can tell you; your people are all the same. They move from one agency to another. All your processes are the same. There is no difference.’ Most companies argue they have a unique proposition. Then they start tracking NPS and realise they’re average.
Your NPS will continue to be average unless you’re a CEO obsessed with customer service. Service needs to be in your DNA. Every decision you make should ensure the customer experience is as good as possible.
- NAVIGATING AND COMMUNICATING CHANGE
- BUILDING COMPANY CULTURE
- CHOOSING THE RIGHT OPPORTUNITIES
- ORGANISING YOUR A-TEAM