The Problem with NPS – and What You Can Do About It

NPS is a metric that has become a standard for measuring customer loyalty and satisfaction by many companies. Built on the power of one simple question — how likely is it that you would recommend [my product] to a friend or colleague? — it’s now used by companies of all sizes in virtually every industry all over the world.

The Problem with NPS

NPS is easy to measure. It produces a number you can track over time. It feels ‘legitimate’ because it’s based on customer feedback. So what’s not to like about it?

In reality, NPS has all the earmarks of a vanity metric.

That’s because the data is taken out of context and, more importantly, you can’t take action on it as a stand-alone metric, so it’s simply not useful. Even worse, it can be a major distraction from improving your company’s top-line metric (which, hopefully, isn’t NPS!).

At one of the companies I worked for a long time ago, we bought into NPS so much that we built our own survey tool and integrated it into our app to measure NPS. The problem we ran into, however, is that the metric by itself didn’t help us identify WHY someone might not recommend our product. We would usually monitor our NPS score after a big software release and, if the number increased, would say “Wow, that was a great release!”

Unfortunately, our software releases were pretty monolithic, meaning there were a lot of new features, UX improvements and bug fixes going into each release. Yes, I was grinding it out in a Feature Factory. We couldn’t point to any one thing we did that could be attributed to the increase in the NPS score. I could talk more about the dangers of monolithic software releases and how to deploy software in smaller, more frequent cycles, but that’s a whole ‘nother article. You should focus on the smallest, incremental improvements based on a framework like the lean startup methodology by Eric Ries.

lean-startup-methodology_diagram
Lean Startup by Eric Ries

 

Sidenote: Want to learn more about the dangers of Feature Factories? Check out John Cutler’s great article on the topic here

How to derive outcomes from NPS

If your company is committed to measuring NPS, here’s a tip that you can use to understand the ‘why’ behind your NPS score and potentially increase it.

Follow up the standard NPS question with one additional question, “What would it take for you to recommend my product to someone you know?”, and target the people who are not your promoters, which means they rated their likelihood to recommend your product an 8 or lower. You can then do an analysis of those open-ended responses to identify key trends in the data.

Screen Shot 2018-10-04 at 8.29.00 AM

Perhaps you work for a SAAS business that charges a monthly subscription fee and a large number of people say the price is too expensive and that’s why they won’t recommend to a friend. Using the lean analytics model, you could conduct pricing experimentation to see if there is a lower pricing model that results in driving up your referrals (and growing your company’s business).

Want to know more about measuring key outcomes? Click here!

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