A few days ago I typed the following question into Google; “Is NPS® still relevant?” Somewhat surprisingly, Google found 3.2 million results. Apparently, NPS® remains a hot topic in the customer experience community.
However, I am not especially interested in debating whether it is still relevant or not. The Daniel Group uses NPS® in our research work because it is an easily understandable outcome measure of the customer experience. Additionally, over the years, we have conducted research to validate the relevance of this metric.
Here are a few things we have learned. All of these examples are from industrial, business-to-business environments:
- For one client, we compared the relationship between the NPS® and the gross margin of their top accounts (+85% of annual revenue in service and parts). We discovered a strong positive correlation between NPS® and gross margin.
- For another client, we compared the billing adjustments made for promoter, passive and detractor customers (e.g., goodwill credits, other similar adjustments). We found that, on average, the client made $404 of billing adjustments (reductions) when compared with promoter customers. The billing reductions were only slightly smaller for passives. It may not sound like much, but if this company could move just a small percentage of its passive and detractor customers to promoters, it was worth over a million dollars annually to their bottom line.
- In the case of another client, the manufacturer spent 53% more on warranty claims for detractors when compared with promoters. Promoter customers spent 8% more on average than detractors.
Is NPS® still relevant? Our research indicates that it is! While I am not certain about all of the claims by NPS proponents, but based on our experience, it is a valid measure of key outcomes important to our clients.
Consequently, we have also discovered that NPS® does not tell the full story. Additional questions (not many) help uncover the significant parts of the experience and those that need improvement. For example, we have found that 30% of promoter customers still express a negative sentiment about a service experience. Even a survey from a promoter customer is worth reading. You may learn a lot!
Lynn Daniel
Net Promoter, Net Promoter System, Net Promoter Score, NPS® and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.
