NPS is Broken and why is it Leading You Astray
Everyone loves a high Net Promoter Score (NPS), right? It’s a corporate favorite. Companies proudly flaunt their NPS scores as if they’re a sure path to growth. But here’s the hard truth: NPS is broken. Despite its popularity, NPS doesn’t directly drive customer retention or acquisition. In fact, it might be leading your business strategy astray. Let’s break down why NPS isn’t the game-changer it’s made out to be—and explore better ways to understand and improve customer loyalty.
The Problem with NPS
1. No Proven Link to Customer Loyalty or Retention
Why are we saying NPS is broken, in the first place? Many companies rely on NPS, thinking it predicts customer retention or acquisition. According to a 2020 report by Gartner, only 29% of NPS users stated that they can directly link their NPS score to improved financial performance. But there’s no proven direct link between a high NPS score and customer loyalty. NPS offers a snapshot of customer sentiment, but it lacks the depth needed to guide key business decisions. Customers might rate your brand highly today and leave tomorrow for reasons unrelated to the score.
2. Oversimplified Customer Feedback
NPS reduces complex emotions and experiences to one question: “How likely are you to recommend us?” But customer loyalty is far more complex. A customer might love your brand but still be unhappy with aspects of your service. These nuances get lost in a simple NPS score. As a result, companies make decisions based on incomplete data that doesn’t provide actionable insights.
3. The Inaneness of Follow-Up Surveys
After the NPS question, companies often bombard customers with long, irrelevant surveys. Most customers don’t complete them, and those who do might feel like their feedback goes nowhere. The reality is, companies are missing out on valuable insights because they’re asking too much without focusing on what truly matters. Interestingly, a SurveyMonkey survey in 2018 showed that that 60% of respondents felt that surveys were too long, leading to lower response rates.
A Better Alternative: Contextual and Actionable Insights
To improve customer loyalty and business outcomes, companies need to go beyond NPS. Here’s how:
1. Customer Journey Metrics
Track customer satisfaction across different stages of the customer journey. From awareness to post-purchase, each touchpoint matters. Instead of one general question, measure satisfaction at key moments. This provides actionable data and highlights problem areas more clearly than a single NPS score.
2. Transactional and Behavioral Feedback
Rather than asking customers how likely they are to recommend you, track actual behavior. Use short, targeted surveys after key interactions—like purchases or customer service calls. Behavioral data, such as repeat purchases or interaction patterns, often reveals more about customer loyalty than NPS ever could.
3. Real-Time Feedback Loops
Incorporate real-time feedback tools such as in-app surveys, chatbots, or social media monitoring. Capturing customer sentiment in the moment gives you the chance to address issues before they escalate. Real-time insights also help you improve the overall customer experience quickly. A Zendesk report showed that 90% of consumers say they’re more likely to purchase from a brand that responds to their feedback, showcasing the importance of real-time insights and interaction with customers.
4. AI-Powered Feedback Analysis
Ditch the long, drawn-out surveys. Instead, use AI-powered text analytics to scan open-ended feedback from customers. Whether it’s comments, reviews, or social media posts, AI can process large volumes of data quickly. It identifies recurring themes and sentiments, providing deeper insights into customer needs. McKinsey estimates that companies using AI-driven analytics can improve their marketing ROI by 15-20%, providing a compelling case for using advanced technologies to analyze customer feedback instead of relying on traditional methods like NPS.
NPS may be the industry’s favorite loyalty metric, and that of the business schools. But, in reality, NPS is broken and far from perfect. It lacks the depth and context required to drive meaningful business outcomes like customer retention or acquisition. By focusing on customer journey metrics, real-time feedback, and AI-driven analysis, companies can finally unlock insights that lead to real growth. It’s time to move beyond NPS and adopt smarter ways to measure—and improve—customer loyalty.
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