Your NPS Score – What Else Do You Need to Consider?
As a B2B Marketing Director or C-Suite executive, you're likely familiar with Net Promoter Score (NPS) as a key metric for measuring your brand strength and customer loyalty. While NPS has become ubiquitous across industries for good reason, our experience reveals that interpreting these scores requires nuance and additional context to drive meaningful business decisions. We wanted to point out a couple of things that you should consider when reviewing your NPS data, and how to optimize moving forward.
Understanding NPS Volatility
NPS scores can have significant volatility year over year. Brand A and B both experienced notable NPS declines year over year; however, the change in each brands NPS metric tells a very different story. Brand A experienced a significant shift from promoters to detractors, while Brand B saw a significant shift to promoters to passives. Brand A needs to understand what is driving this significant change in perception for its brand, what has happened that people are actively not promoting their brand anymore and address the situation. Brand B does not have as much to be concerned about with its decline in NPS score. While it did see a decline, it was a shift to the more passive rating.
NPS Doesn't Always Predict Usage
NPS ratings do given one metric on brand performance, but customers ratings do not always correlate with actual brand usage patterns. Just because a respondent gives a brand a strong – promoter rating – does not always translate to sales. In the example above we were able to track customer purchases over an 18-month period. After 18 months those that had initially given a 1 and a 4 promoter rating actually spent more than the 9/10 brand promoters. Remember NPS is one tool in the brand tool box.
The Full Picture: Our 20+ Years of Insight
At IMI, we've measured B2B brands across assorted industries including manufacturing, medical device, industrial, life sciences, grocery, banking, investments/wealth management, insurance, and travel. Our database shows NPS scores ranging from an impressive +91 to a concerning –49, highlighting just how wide ranging NPS metrics can be.
So does that mean we are saying don’t use NPS, far from it actually. NPS is a good metric to measure your brands performance, but you need to use it in context and balance it with other brand metrics.
The Pros and Cons of NPS
Advantages:
Simplicity: Easy to calculate and understand
Familiarity: Widely recognized by executives and boards
Comparability: Allows you to directly compare across different products and competitors
Limitations:
Volatility: As a "net" metric, scores can fluctuate dramatically
Lack of Context: Often fails to explain "why" your NPS scores change
Inconsistent Predictive Value: Doesn't always correlate with actual loyalty behaviors
Category Relevance: Not all categories naturally generate "recommendations"
The Recommended Approach
The reality is that NPS remains valuable, however should be used with other metrics for a balanced and insight driven approach. Combining NPS with additional metrics provide context and actionable insights for your brands and products vs simply data. It accentuates the data with insight to help optimize your brand and fuel growth moving forward
Consider this:
Open-ended Questions: Gather rich, qualitative feedback that explains the "why" behind your NPS scores, and allows you to adjust
Competitive Standing Assessment: Understand who your customers consider best-in-class and why – you can learn from what they are doing
Satisfaction Metrics: Allows you to distinguish between recent customer experiences and perceptions of your overall value proposition – it is a more stable long-term metric.
Ease of Business/Effort Scores: Measure how easy you are to work with—a factor that significantly impacts customer sentiment
The bottom line
NPS is not going anywhere, companies will continue using it as a key performance indicator. The key is using NPS wisely, with appropriate context and supplementary metrics that tell the complete story of your customer relationships.
By enhancing your NPS with these additional measures, you can develop a more strategic understanding of customer loyalty that drives more effective strategy and measurable business growth.