NPS (Net Promoter Score): You Manage What You Measure
We have a new revolution in brand measurement mentality – making this decade forever known as the Net Promoter Score (NPS) era. Are there any marketing professionals that haven’t heard of NPS (invented by Fred Reichheld of Bain Consulting)? If you haven’t, it’s time to get educated: http://www.netpromoter.com/np/calculate.jsp
NPS is a fantastic measurement for any company to use! 📷It is truly a revolutionary concept, consolidating lengthy brand survey results into a single trackable KPI that is easy to understand and intuitive. Companies who focus on NPS improve the customer experience in order to enhance customer retention and increase brand reputation. Because of this, NPS is an attractive metric for executives and helps our business decision makers quickly incorporate business analytics into their decision making.
NPS is Everywhere
One friend of mine told me his company even displayed NPS scores for the employee benefits hotline, separate from the NPS score for HR as a whole. I see NPS-driven signs at hotels, at restaurants — even on the phone when calling my health insurance, they tell me that “a score of 8 is not good enough and if I can’t give them an 9 or higher, please contact their management so they can attempt to change my mind.” NPS is absolutely everywhere!
So, if NPS is so wonderful, what’s the problem? NPS is everywhere on everything, and has become synonymous with brand equity. When having a conversation with people about brand health or brand reputation, NPS and brand are used interchangeably. For example, take this question I got last week: “Can you tell me what I can do to improve my business’s NPS? I really want to improve the brand reputation this year.”
NPS is a great indicator of brand, but it is not actually brand – it’s simply one way of attempting to measure brand. It is extremely popular due to its intuitive, straight-forward nature and how easy it is to track – but it is only one indicator of brand reputation and not brand itself.
Other Measurements of Brand
Before NPS and after NPS, there are hundreds of other ways of measuring a 📷company’s brand – including many other types of survey methods that are still used today. (Particularly noteworthy is that NPS is solely based on existing customers, where other metrics may capture potential customers who still can have a word-of-mouth influence on your brand — despite having never been your customer. These potential customers would be reflected in other brand awareness studies, but not in NPS.)
We can’t leave out the long-famous pricing test, discrete choice conjoint analysis — taking your product and put a competitor’s label on it, asking customers what they would pay for it versus the correctly labeled version.
There are even financial estimates of brand value, such as Top 100 Brands which attempts to quantify a company’s brand equity from financial evaluations.
Lastly, just like survey results, brand equity measurements can be surmised from social media analytics.
My point is that valuing a brand is difficult and complicated, and multiple approaches exist. The multitude of methods may provide differing results at the same time. No one single method of measuring brand is right — all are attempting to give a company indications of an underlying brand value that is very difficult to measure — and NPS is just one of those indicators. Understanding what is really happening is where skilled analysts come in, to help business decision makers get a clear picture.
For example, even companies with the exact same NPS score may have widely different brand values by other metrics — in 2008, Amazon and Google had the same NPS score (73), but in Interbrand’s Top 100 Brands for that year Google was ranked 10th and Amazon was way down the list at 58th.
Optimizing NPS is not optimizing Brand
Sales compensation is often an indication of revenue or profit margin numbers, yet sales compensation is not perfectly correlated with revenue or profit margin numbers — as most sales managers know all too well. Changes in sales compensation plans are managed very closely because individuals can game the system, using unintended means of maximizing their sales compensation number that don’t result in a matching increase in sales for the company.
This can also be applied to NPS — there are methods of optimizing NPS scores that may not increase the overall brand equity of a company.
When a window installer says, after finishing, “In a few days, you’ll be given a survey and if you can’t give me 9 or 10s on all the questions, would you allow me to change your mind now?” is he really going to make a difference to the company’s brand? Do you think that hanging up a sign in your hotel or dry cleaners that says “Giving us a 8 on our survey is not good enough. Talk to our management if you can’t give me an 9 or better” is optimizing your brand? Really? How is this impacting your brand any more than hanging up a sign that says – “Not fully delighted with your experience? Talk to management so we can help”? The first sign, which calls out survey numbers specifically, will indeed have a much greater impact on your NPS score — but it won’t impact your brand equity any more than the second sign.
In addition, NPS is more heavily weighted📷towards customer service metrics than other brand measurements. My research showed that NPS is more heavily correlated to (and therefore likely influenced by) customer support than the other brand metrics measured. If you choose to use NPS as your company’s only method of measuring brand equity, it could result in your emphasizing customer service over other factors. If an upscale jewelry company only measures NPS , it may work to further improve its already fantastic customer service – but may overlook billing issues that are keeping some customers from returning. Even more so, these billing issues could be relatively easy to mitigate, providing a larger ROI than improving the already great customer service.
Finally, looking only at NPS could also limit you to only considering your existing customer pool –which may be acceptable for some mature businesses that already own a large piece of the market, but could be extremely limiting for others.
So, the plan to improve brand reputation may be different than the plan to improve NPS. Don’t get me wrong – it is a good idea to attempt to improve NPS – just remember NPS isn’t the same thing as brand equity. NPS is just one of many ways to measure it.