The metric was useful in simpler times, when companies were beginning to understand the importance of customer experience. But it’s time to replace it. by Matt Egol
The Net Promoter Score (NPS), which has long been used to measure the loyalty of firms’ customers, is under fire for becoming the false god of corporate America. In a searing article, the Wall Street Journal last week labeled NPS “a dubious metric” — one that is routinely cited by CEOs in earning calls and that somehow, magically, never declines.
“Much of Corporate America is obsessed with NPS,” declared the article, before going on to list many of the activities the measure is used to justify, from employee bonuses to executive compensation. NPS hasn’t been useless, though. We can thank it for underscoring the importance of customer satisfaction ever since it was introduced in 2003. But in 2019, executives should question its efficacy and seek something better and broader. There are at least three big reasons why. 1. NPS misses the employee connection.NPS says nothing about employee experience. What good is a figure that shows how many customers would recommend your company versus how many are unhappy if your employees — your prime ambassadors to customers — are unhappy themselves? If you’ve ever encountered a surly store associate or a hostile customer-service rep (and I know you have), you intuitively get the connection between customer experience (CX) and employee experience (EX). True, there are plenty of companies that also track employee engagement and recognize that CX and EX regularly trend together. Yet both are lagging indicators, often visible only after sentiments have begun to stick. And because they’re tracked separately, top executives measure their investments and outcomes in one part of the business without really knowing how they drive outcomes (or don’t) in other parts of the business. 2. NPS is obsolete because so much has changed. Since the introduction of NPS, customers’ expectations have soared and companies’ access to information about them has increased dramatically. Today, consumers expect next-day delivery of online purchases — with tracking and free returns. They use social media to publicize their favorite companies and brands, and excoriate those that deliver bad experiences. And increasingly, customers expect personalized and socially conscious experiences — meaning that CX initiatives are becoming far more critical to a company’s long-term success than they have ever been before. Also, companies have access to not just their own data, but also so-called big data, sourced from, well, everywhere. They can use any number of proven analytical tools to glean insights from that data, and they can tap the rapidly growing ranks of analysts and data scientists to do so. NPS neither captures the broad and nuanced expectations of customers, nor capitalizes on the sophisticated tools companies now have at their disposal. 3. NPS is a backward-looking “point in time” metric. Today, we have the tools to run dynamic, “living” metrics that spin up virtuous circles of benefits and keep them spinning. Companies that figure out the connections between the CX moments that matter and the critical few employee behaviors that enable such customer experiences can then rapidly analyze and experiment to see what adjustments might yield better results. And that model becomes a kind of flywheel to power continuous improvement. NPS neither captures the broad and nuanced expectations of customers, nor capitalizes on the sophisticated tools companies now have at their disposal. More and more, companies are starting to see beyond NPS and other static, siloed management measures. Increasingly, executives are rethinking their organizations’ approaches to CX and reviewing the links between CX and EX. There will come a day when most companies connect CX and EX, and think and act in terms of a unified “return on experience.” They will have the data, the tools, and the expertise to understand which customer experiences to focus on when and where, and which specific employee behaviors can best elevate those experiences. For those companies’ shareholders, that will be a very good day indeed. Matt Egol is a leading practitioner in digital strategies for Strategy&, PwC’s strategy consulting business. Based in New York, he is a principal with PwC US.