Net Promoter Score is a contentious measurement for CX teams. NPS can be thought of as a rear-view mirror metric, only giving insight into past performance rather than direction on where the organization is headed. When used correctly, however, NPS can provide that forward vision teams and departments demand. Product, support, marketing, c-suite and other departments can all benefit from NPS if the why behind that NPS is understood through deep and meaningful insights.
Companies that measure NPS and prioritize investment in customer experience have better revenue growth (59% vs. 40%) and higher profits (64% vs. 47%) than those that don’t. For companies looking to positively impact their future performance, NPS is an excellent method to understand where change needs to be made.
Before we get into why NPS is a leading indicator, though, let’s talk about some of the reasons why people may misconstrue it as lagging.
NPS as a rear-view metric
Metrics without meaning are nothing more than vanity metrics. NPS is no exception when used incorrectly. NPS is a lagging indicator when it’s used as a lagging indicator. If your goal is simply to increase your NPS, and that’s all you’re tracking, you won’t get many benefits from an NPS program.
What does an NPS of -4 mean to your team? How about +56? If you aren’t digging into the distribution of scores, analyzing the text responses, and cross-examining the behaviors of promoters and detractors, you’re only using NPS for the end score.
Vanity metrics might look good but they don’t help decision makers.
Delayed time-to-insight (TTI)
Lagging indicators hinder the delivery of change. Let’s consider the Product team as a use case for this statement. The team receives NPS results once per quarter. If the number is improving, great! If NPS is dropping however, then clearly something is wrong and focus groups and customer interviews should be conducted to see what changes can be made. Depending on how frequently customer feedback is collected, your NPS survey might not be actionable by Product for up to 45 days. Conversely, any changes made to the Product might not be seen for up to 45 days after the implementation of those changes. Reducing time-to-insight (TTI) is crucial because companies which add velocity to their feedback loop are always going to be more competitive.
Insights uncovered from NPS must be actionable. Companies who survey regularly and have enough curiosity to want to look at what is behind the number will inevitably get more out of their NPS program than those who don’t.
There are several factors you need to account for when creating a survey; population size, response rate, margin of error, confidence level and standard of deviation. With imprecise NPS, results become less meaningful and insights more distilled. Casting a wider net by expanding the population size can improve precision. Consider for instance the following graphic;
Without statistical relevance or accuracy, your survey will never be impactful enough to be deemed “leading.”
How could something that is only sent out once a quarter (or once a year!) be counted as a leading indicator? It’s always better to analyse data collected over a longer period of time. If you’re rarely surveying, expect to miss out on valuable insights.
NPS as a leading indicator
Don’t put all your eggs in the one basket. When we think about inputs and outputs, NPS should be just one of many metrics used to measure a single customer experience. Don’t dead end your data at NPS. Instead, carefully correlate with other key leading indicators to gain deep and meaningful insights. Let’s talk about what this looks like.
Revenue is king when it comes to lagging indicators. Almost all other metrics should track back to revenue in some shape or form. Linking NPS directly to revenue helps connect the dots between what customers are saying, KPIs and company goals.
For instance, Phillips Electronics tracked NPS for a sample of accounts over time and found that when NPS increased, revenue also grew by 69%. When NPS remained steady over a period of time, revenue only grew by 6%. In cases where NPS declined, the company’s revenue actually decreased by 24%. In this specific case, NPS was a leading indicator of revenue.
Traditionally, NPS has been viewed as a silo. NPS is measured over time but often in isolation from other datasets. NPS shifts from lagging to leading when it is compared to other datasets.
Understanding NPS in relation to revenue or customer lifetime value, rather than in isolation, makes it easier to surface deep and meaningful insights. You can see an impact on how the changes in NPS have affected other organizational KPIs and start to predict future movement. Measuring both qualitative and quantitative customer feedback at-scale can add an extra layer of insight that competitors might not have. All of this reporting is incredibly valuable for understanding how strategy is currently impacting customer loyalty. There’s also the added bonus of being able to take those deep and meaningful insights and pivot strategy accordingly.
Instead of setting a standard polling cadence, change up the frequency, timing, and even poll design for different segments. Test to see how receptive different groups of users are to being polled, and start to optimize the frequency of customer feedback polling. If you can survey some users more frequently, then do so. If others start to respond negatively or not at all, pull back the frequency.
With a bit of digging around, you’ll uncover some users more receptive than others and may even uncover customer preferences relating to how the NPS survey is conducted. Is a certain demographic more likely to respond to the open-ended question at the end of your survey while others get frustrated by having to complete a second step? Create customized NPS surveys to meet the needs of each user to gain increased statistical relevance from every response.
Take the time to respond
There is nothing more leading than an actual conversation about what a customer would like to see within your product. Set up a process or automation workflow within your company to make sure that if a user leaves a response, the right individual/team sees that feedback and is able to respond in a timely manner.
Is NPS a crystal ball?
When used appropriately, NPS can be one of the best ways to understand the current needs of your customer and build a better product. Keeping a finger on the pulse of leading indicators like this can help better predict how future CX initiatives may impact KPIs like revenue and churn. Survey frequently and iterate to ensure that you get enough recent responses for the score to be relevant.
Correlate NPS with slower-moving KPIs to understand where your leverage is and how the two impact each other. Lastly, invest time responding to customers. When you show interest in what they are concerned with, you open yourself up to hearing exactly what could make an impact on your metrics moving forward.
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- Strategic vs operational approaches to CX
- Where NPS can go wrong
- How to get the most from your NPS data
- How to find actionable insights in your data
- Building a business case for an improved CX strategy