NPS categorises customers based on their responses on a scale of 1-10 about whether or not they would refer a brand or product to other people. Those that answer 9 or higher are called promoters; those below 6 are detractors; and the ones in the middle are known as passives. NPS is the percentage of promoters minus the percentage of detractors. If 60% are promoters and 10% are detractors, the NPS is 50.

Many marketers and business leaders like NPS because it’s intuitive and gives them an immediate read on the health of the business’s relationships with its customers. NPS surveys are also easy to conduct; businesses can send the NPS question via text, email or chatbot to nearly every customer they interact with. Furthermore, an NPS can be tracked over time as a means of measuring improvement.

NPS—flawed and faddish?

Yet it’s far from perfect. In 2019, a Wall Street Journal article made waves by calling NPS ‘a dubious management fad’ and claimed that the results are easy to manipulate, whether intentionally or unintentionally.

NPS has certainly had enormous staying power for a fad, but marketers are also more keenly aware of its flaws:

• It doesn’t explain whysomeone would refer a brand to others (or why they would criticise it). As such, it offers little insight into what the company is doing well or where and how it can improve.
• NPS may encourage and incentivise undesirable behaviour—for example, a salesperson pleading with customers to give them a high ranking so they can stay in the boss’s good books.
• It’s an inward-focused metric that pays no attention to competitive dynamics. 
• Generally, NPS won’t help brands to understand more about how prospects feel about their products and services.
  
  

To ditch NPS or not?

While there are few management and marketing writers that advise ditching the NPS altogether, many agree that it’s not enough on its own to give companies insight into what really matters. As such, companies can get better results when they use alternatives that focus on customer retention rates and product experience, in addition to the NPS.

Some examples include:

• Customer Effort Score (CES): Measures how easy it is for customers to perform certain actions, like navigating through online check-out or contacting a customer service rep.
• Customer Satisfaction Score (CSAT): Asking customers how satisfied they are on a scale of 1-5 or 1-10.
• Customer Retention Rate (CRR): How many customers is a company is able to keep over time?
• Customer Lifetime Value : How much revenue a company has gained from its customers across the duration of the relationship?
  
  

Like NPS, each of these measures has its own benefits and drawbacks. But combining one or more methodologies—depending on the budget and nature of a business—can help a brand to form a more complete view of its performance with its customers. NPS is valuable, but it is not the only game in town.

References:

https://www.wsj.com/articles/the-dubious-management-fad-sweeping-corporate-america-11557932084