MarketTools Blog

Guest blogger Karl Sharicz is Manager, Customer Intelligence at SimplexGrinnell, a Tyco International Company. SimplexGrinnell is a leader in fire and life-safety systems and services, with one million customers and150 local offices throughout the country – and a MarketTools CustomerSat customer.

The Net Promoter Score, or NPS*, has soared in usage over the past five years as a popular way to measure customer satisfaction.  Discussions of NPS as the “only” customer metric you need to measure in order to grow your business have been well documented and much debated.  Suffice it to say that those discussions have given NPS a higher level of visibility compared to the many other valuable customer metrics we may be measuring. 

But as we look at NPS from a reporting perspective, it becomes necessary to dissect and clarify this metric a bit further.

Pioneered by Fred Reichheld in a Harvard Business Review article published in 2003, the NPS approach prescribes just two customer satisfaction survey questions—one quantitative and the other qualitative:
-  “How likely are you to recommend our company to a friend or colleague?” and
-  “Could you please explain the reason why you rated us as you did?”
According to NPS theory, these are the only two questions you need examine in order to improve the customer experience and become more profitable as an organization.

For the “likelihood to recommend” question, a scale of 0 to 10 is used to score answers, where 0 means highly unlikely to recommend and 10 means highly likely to recommend. Answering that question with either 9 or 10 indicates you are a promoter, someone who who will advocate for a business. Answering with a 7 or 8 indicates you are passive or uncommitted. Answers from 0 through 6 indicate you are a detractor, or someone who is likely to dissuade others from engaging with a business. The percentage of promoters minus the percentage of detractors gives you your Net Promoter Score.

When NPS gets reported at a high level as a single metric, we tend to see it as indicative of the health of that business as seen from a customer perspective.  But when we hear, for example, that a particular auto manufacturer has earned a 76% NPS, we should still wonder exactly what that score refers to.  Is it an evaluation by car dealerships about the relationship they have with the manufacturer? An evaluation by consumers about their experience with the manufacturer?  Or an evaluation by consumers about their local car dealership?  We also need to know how that NPS number was derived: was it through a relationship-style survey or a transactional survey?  We can’t know any of this for sure unless we’re given the details. 

I believe that an NPS metric should be accompanied by the specific circumstances under which it was measured.  That way we can get a more definitive perspective on what is being evaluated and by whom. 

At SimplexGrinnell, we measure NPS within several targeted customer segments, and we use both relationship and transactional surveys to capture customer feedback.  We also measure and report NPS across multiple dimensions of the customer experience.  So when I’m asked, “What is your current NPS?” I answer, “Which NPS would you like to know about?”  The typical response I hear is, “You have more than one?”  We typically measure NPS for about 150 dimensions at any given time: by geographical location, by product category, by vertical market, by customer tenure, and by target customer.  And NPS is not the only customer metric we measure. 

We conduct transactional surveys of the end-users of our fire- and life-safety products from an inspection and service perspective.  We also survey contractors (distributors of our products) from a delivery and support perspective using a transactional survey instrument.  For our large national accounts, we conduct a hybrid relationship / transactional survey to measure across dimensions.  We also conduct surveys of our end-users to get their feedback from a pure relationship perspective.

Therefore when we report customer metrics, we have found it essential to specify the parameters around which the metric was derived. 

Overall, however, NPS is a calculated metric and by itself reveals very little unless you look at the three elements individually—promoters, passives, and detractors.  You need to look at how each component is trending over time in order to identify potential problems.  Then, in addition to the numbers, you need the verbatim commentary that accompanies high passive and detractor levels in order to obtain any degree of specificity as to what is helping to create those “less likely to recommend” customers. 

With that level of information, NPS measurements can better inform analysis of root causes of issues, and can support action management to resolve problems, as an extension of your NPS program.  Using NPS as actionable data, you give your NPS program the fuel to grow your business over the long haul.

^{* All trademarks are the property of their respective owners. Net Promoter, Net Promoter Score, and NPS are trademarks of Satmetrix, Inc., Bain & Company, Inc., and Fred Reichheld.}