How Do Price Changes Affect Consumer Perceptions?
By Kara FinnertyJun 1
NPS is enjoying a boost in popularity right now, with some even going so far as to call it the “true North Star.”
In case you’re unfamiliar, a Net Promoter Score is calculated by asking the question that goes something like:
“On a scale of one to ten, how likely are you to recommend X to a friend or colleague?”
Those who answer 1-6 are known as detractors. 7-8s are known as passives, and 9-10s are known as promoters.
Your NPS is calculated by minusing your % of detractors from your % of promoters from the overall responses.
But not everyone sees the value in relying solely on this metric, especially when it can be combined with other data points for a more holistic view of what customers think of a brand.
Let’s talk about the pros and cons of NPS, one by one.
There are lots of reasons that the NPS is so popular. For example:
1. The beautiful simplicity of a single data point
There’s something so appealing about having a single score that says so much.
The simplicity of calculating a NPS is that it can be based on a single question, answered by scoring out of 10.
It’s appealing to answer because it’s easy. It’s appealing to measure because it’s simple.
2. NPS is known as a good indicator of growth
Back in 2003, Frederick F. Reichheld wrote an article in the Harvard Business Review titled ‘The One Number You Need to Grow‘. It’s a great, and pretty convincing piece that details how he came up with the Net Promoter Score, and how it seemed to be a good indicator of growth.
Here’s an example he used, on airlines:
“In airlines, for example, a strong correlation existed between net-promoter figures and a company’s average growth rate over the three-year period from 1999 to 2002. Remarkably, this one simple statistic seemed to explain the relative growth rates across the entire industry; that is, no airline has found a way to increase growth without improving its ratio of promoters to detractors.”
Since then, NPS has often been tied to business growth, to the point where NPS has become a big priority for many businesses.
3. It’s easy to set up
There are so many tools that can help you measure NPS, and the question can be asked while at an event or while someone’s browsing your site – as long as the question is standardized, the results will be, too.
All these easily stored data points can then be fed back to analysts who can report on all the results collected.
4. It’s adaptable to different aspects of a brand’s offering
You can ask the NPS question in regard to all kinds of things. For example, a customer’s experience with customer service, or with a particular product, all the way up to simply asking whether or not the customer would recommend the brand in general to friends or colleagues.
This simple metric can help businesses see which particular products or experiences are flying high or falling short.
5. It’s got weight
One of the reasons NPS has been so popular is because of its reputation. It’s tied to growth, executives are measured on it, and it’s something everyone can easily understand. NPS up? Good. NPS down? Bad.
There’s a lot of power in a metric that everyone can relate to, but it’s important to acknowledge that NPS alone can’t tell the full story.
So far, so good. But there are some real downfalls to relying solely on NPS. Here are a few:
1. NPS lacks context behind scores
What’s behind that single data point? Why do people choose not to be advocates? Did a particular campaign or change to a product drive an increase or decrease in your NPS?
With a single score, this information just isn’t there. It’s important to be able to dig deeper into what’s driving people’s scores, and there are lots of other data sources that can help you complete the picture.
2. Sample sizes are often small
Due to time or budget restraints, the number of people your survey gets in front of (let alone actually respond) can be limited.
Big scale NPS studies can take a long time and a lot of money.
3. The time between the survey and analyzing the results can be long
Like we said, large scale NPS studies can take time, and that means the results aren’t anywhere close to real-time.
Results can’t be actioned until they’re reported on, which means customers who give a low score a month ago could remain unhappy until all scores have been gathered. Even then, without context, it could be a while before things are fixed.
4. Some say NPS is liable to ‘gaming’
“The results are easy to manipulate, whether intentionally or unintentionally,” write Khadeeja Safdar and Inti Pacheco in the Wall Street Journal. Their report, which ran under the subheading “NPS—or net promoter score—is a measure of customer satisfaction that has developed a cult-like following among CEOs. It also may be misleading,” lays out a number of issues with NPS, including that employees of some brands might be encouraged to ‘game’ the results. These tactics might include only reminding the happiest customers to fill out the survey, for example.
The trouble with overstating the importance of a single metric, and balancing people’s compensation on it, is that it can be tempting to get creative with the methodology.
5. Feedback is solicited
There are pros and cons to asking people questions. The manner in which they are asked might alter their answer, and the timing can also affect things.
Ideally, for lots of research, you want as little influence from the researcher as possible on the results in order to get the response that is most true to the individual. When feedback is unsolicited, there’s no additional bias a company can add until it comes to analyzing those results.
6. NPS doesn’t account for the influence of each promoter/detractor
Let’s say you’ve got nine promoters and one detractor. Looks like you’re in for a healthy Net Promoter score!
But now imagine that one person is Oprah, and she’s ready to actively encourage her following not to trust your brand. Suddenly, things don’t look so good.
Measuring NPS alone means the ability of your respondents to influence others goes unchecked.
If it’s not obvious by now, the way to overcome the downfalls of NPS (while still enjoying the benefits) is to combine it with other data sources. That means you’ll get the additional context you’re missing, and more.
Our solution is to combine NPS with social data, which enables large brands to get unsolicited feedback on all aspects of the business from a massive sample of people, in real time. Social data can be a great addition to NPS, and you can even set up your own social NPS score which you can check whenever you like. Adding social means you can action insights faster, while having access to verbatim feedback that details exactly what’s going well or not so well.
Curious about combining NPS with social data, or even creating your own social Net Promoter Score?
Read our new guide to find out, step by step, how to do it yourself.
Find out what social data can add to traditional means of calculating a Net Promoter Score, and how you can do it yourself.