Is NPS a good metric for customer loyalty?
Net Promoter Score (NPS) is a simple way of measuring customer loyalty that’s become a staple in businesses of all sizes. But is it actually a good indicator? In this post, we dive into the hard truths about NPS and what else should go into how you measure customer loyalty to ensure a truly accurate satisfaction rating.
NPS is calculated by asking customers how likely they are to recommend a company or product to their friends and family, and then dividing that number by the total number of respondents who were asked. For years, it’s been considered one of the go-to metrics for assessing customer satisfaction and loyalty, but what else can be done to really help improve the metrics' effectiveness?
What is NPS?
NPS is calculated by subtracting the percentage of promoters from detractors, and then dividing by total respondents. The result is a score between -100 and +100, with negative scores indicating disloyalty and positive scores indicating loyalty.
A business can calculate its own NPS score by asking customers if they would recommend a business to others, on a scale from 0-10 (0 being not at all likely and 10 being extremely likely). The responses are then categorized into one of three groups: detractors ("0-6"), passive ("7-8") or promoter ("9-10").
So, how can you go about collecting NPS data?
The easiest way to get NPS data is to set up a multichannel survey that gives your customers a chance to provide their feedback at any relevant customer touchpoint. This could be in-application, over email or after a customer support communication. When setting up your survey, you can calculate NPS using two questions:
- How likely is it that you would recommend our company/product/service to a friend or colleague?
- What do you think of the quality of products and services we provide?
When setting up your survey. Think about ways to use survey questions or skip logic to follow up with users to ask them to share more specific examples about why they love or dislike your products or services. Adding an open-ended question to your survey to capture this information is a great way to do this.
Does NPS have any flaws or shortcomings?
While it's true that NPS is a leading indicator of customer loyalty, this metric has some shortcomings that we want to be straight up about.
- It's a lagging indicator. You won't know how loyal your customers are until they've already left you--and even then, you'll have to wait until they come back or refer others in order to see if their loyalty has improved or not. This means that you should be proactive with your customers wherever possible, capturing feedback to know what you can do to improve before their NPS scores drop.
- It doesn't measure customer satisfaction. While NPS does give businesses an idea of whether their customers feel positively about the brand at present (and therefore may be more likely to stay), it doesn't tell us anything about how satisfied those customers were with the experience overall and whether there were any issues during their last interaction with you that affected their perception of our company positively or negatively--or both! When in doubt, talk to your customers to see how their experiences are trending over time versus at one interaction. Or even better, ensure you setup an NPS solution that tracks metrics over time, and across customer interactions.
- It doesn't predict growth (or decline). The higher your Net Promoter Score is today doesn't guarantee future growth; nor does having a low score mean certain doom for tomorrow's sales figures. This means one simple thing: Don't get complacent. Asking for feedback and continuously optimizing your feedback process is a major step in using as many opportunities as possible to see how your customers are doing.
Is there a better way to measure customer loyalty?
There are many different ways to measure customer loyalty. One of the most common is NPS, but it's far from perfect. To be fair, the Net Promoter Score was never intended to be a standalone metric; it's more of a tool for gauging how well your company is doing at creating loyal customers. But there's more.
There are many ways to measure customer loyalty and NPS is only one of them.
NPS can be used to measure customer loyalty, but it's not the only metric that can be used.
You should also consider other metrics that measure loyalty and satisfaction, such as:
- Customer Satisfaction Index (CSI)
- Customer Satisfaction Score (CSAT)
- Net Promoter Score (NPS)
- Net Promoter System (NPS)
Find tooling to collect customer feedback for both NPS and other satisfaction metrics.
NPS is only one way to measure customer loyalty. There are other metrics, such as CSI or CSAT which can also be used to determine how satisfied customers are with your product or service. If you’re looking for a super easy way to stand-up NPS and other satisfaction feedback mechanisms, consider Voiceform. Our multichannel survey software makes it easy to launch NPS and customer satisfaction surveys across any channel in minutes. With Voiceform, you'll be able to easily track customers across channels and over time to ensure you're getting one total view into your customers satisfaction across interactions. Get started today!