While Net Promoter Score (NPS) is a useful metric for measuring customer satisfaction, it is important to note that it does not measure real behavior. NPS only measures intention. In other words, it measures how likely customers say they are to recommend a company, not how likely they actually are to do so.
There are a number of reasons why NPS can be a misleading metric.
(1) First, customers may be more likely to give a high NPS score even if they are not actually satisfied with a company’s products or services. This is because they may feel obligated to give a high score, or they may not want to take the time to write a negative review. For instance, at Monetize.CX we experienced in various projects that in Hungary customers tend not to give lower marks, even if not really satisfied.
(2) Second, customers’ intentions can change over time. A customer who gives a high NPS score today may not be as likely to recommend a company in the future if they have a negative experience. So making individual-level statements or even decisions that “we will make ambassadors of those, who gave us 9-10 a year ago”, will have low validity.
(3) Third, NPS does not take into account the frequency of customer interactions. A customer who has only had one interaction with a company is just as likely to give a high NPS score as a customer who has had many interactions. That is why, when measuring inbound interaction satisfaction, we at Monetize.CX recommend switching NPS to Customer Effort Score (CES), which is not only more appropriate for the context but also can be asked even on a monthly basis.
(4) Also – according to our experience we´ve measured a less substantial correlation of NPS with recommendation (0.2 – on average) but a more substantial correlation of NPS with churn (-0.5 – on average, depending on market competitive situation and easiness to switch). Customers who consistently give low NPS scores are more likely to churn or switch to a competitor. Monitoring NPS trends over time can help companies identify at-risk customers and take proactive measures to retain them.
For these reasons and many other reasons, it is important to use NPS in conjunction with other metrics. Or, as we suggest, to deploy this trio: (1) at the transactional inbound level with Customer Effort Score CES, then (2) Customer Satisfaction (CSAT) at the product or service strategic level and on the top strategic level with more accounting-relevant metrics. (3) Such as Earned Growth Rate (EGR) to get a more accurate picture of customer satisfaction. This is more tightly connected with behavior and transactions such as customer retention rates, customer lifetime value, and customer churn rates. These metrics can provide more concrete evidence of customer satisfaction and loyalty.
Overall, NPS might be a metric for measuring customer satisfaction, but it is important to remember that it only measures intention. To understand the impact of improved Customer Experience on operational top and bottom line companies should switch to Earned Growth Rate as soon as possible.