I’ve seen a lot of companies brag about their Net Promoter Score (NPS) - either the static score or the improvement of the score over time – and I’ve spent time wondering why. There are some really good reasons to reference NPS, and there are some more dangerous reasons that might have a cynical motive. I thought it would be useful to highlight the benefits and dangers of staking a position on NPS. It starts with a simple story…

Recently, my daughter and I walked out of a store with an offer on the receipt saying we could win a shopping spree by completing a survey. I was driving but she had her phone so she conducted the interview:

  •  Was the store clean and the aisles uncluttered? No.
  •  Were sales staff available to help? No.
  •  Did you easily find what you were looking for? No.
  •  Was the layout and organization easy to understand? No.
  •  Were the check-out lines short and fast-moving? No.

This went on for a while until we got to the final question:

 Would you recommend the store to a friend? Yes!

I got a funny look from my daughter when I answered the last question. After all, it was clear our store experience wasn’t a particularly good one so why would I recommend the store to a friend? My answer related to the store contents and competition. I told her that if I want the things the store offers, I really don’t have much choice. There are no other options within a half hour drive.

You’ve probably figured out the point. My answer to the NPS question would make me appear to be a promoter, though I’m actually far from being so. If a competitor opened a store nearby, not only would be I be gone – maybe for good - but so would my friends. On the company’s internal NPS report, things look pretty good, and I’m confident there is some serious back-patting going on. “NPS scores are solid (maybe even improving) and we should get our incentive compensation.”

In fact, in this case the NPS would only look good due to the lack of competition. This company should be looking hard at the answers to the other questions and making sure to address them appropriately. A better analytical model would clearly indicate that I was a flight risk, and that, depending on my level of influence with friends and colleagues, I could have a serious impact on my local store’s performance.

If this company’s behavior seems familiar to you or the behavior resembles that of your company, it’s probably time to talk about better performance-management analytics and their impact on customer relationship management.

On the other hand, if your company uses NPS data as part of a predictive model on customer risk, retention and profitability; teases out the deeper insight from all the data; and then applies these insights to its customer interactions, you probably see NPS as the tool that it is – a guide for improving customer relationships. If your company has demonstrated the correlation between NPS and growth, profitability, customer lifetime value or another economic measure, then NPS can be very valuable. As a proxy for profitability, if you know the levers that move NPS, you can, by extension, drive company profit. Which, of course, makes management—and investors—happy.

Jim Rees

Insurance Practice Lead at Comet Global Consulting

Jim has spent 25 years in financial services in a variety of roles from sales and relationship management to infrastructure product management.His knowledge of customer experience allows him to help clients leverage real time information management (decisioning) to improve customer relationships.