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Adjust NPS approach to reflect real customer behaviors? 

By Jeff Poole, Principal Advisor, Financial Services, KPMG in the UK

If you spend time on social media, you likely see more people complaining about companies than praising them. Since human nature tends towards criticism over compliments, it might be time for banks to adjust their approach to NPS research – which emphasizes a company’s happiest customers – to get a truer sense of ‘real world’ consumer behaviors.


In recent years, bank marketers have embraced the customer loyalty measurement tool known as the Net Promoter Score (NPS®), using it to track happy clients who may advocate their products and services. In fact, some banks use NPS research to support their strategic focus on delivering positive customer experiences, with the belief that happy customers are the best brand ambassadors thanks to word of mouth and social media comments.


Although NPS is one clear and simple measurement tool, it does have an inherent weakness: it’s based on the principle that happy customers will readily advocate for a company among friends and family. In reality, unsatisfied customers are far more likely to speak up, as we see on Facebook, Twitter, etc.


NPS however gives equal weighting to happy and unhappy customers (also known as promoters and detractors), which may present an overly rosy picture of customer attitudes. This is shown in the example below in which Bank A has a higher NPS despite its large pool of dissatisfied customers.

    What is NPS? The Net Promoter Score (NPS) is determined by asking customers if they would recommend a company or product and dividing those customers into Promoters (very loyal and eager to refer others), Passives (satisfied but unenthusiastic customers) and Detractors (unhappy customers). An NPS score is calculated by subtracting the percentage of customers who are Detractors from the percentage of Promoters.

NPS in action

  Promoters Passives Detractors(D) NPS score (Pr-D) Comment
Bank A 60% 20% 20% 40

Bank A appears to have more happy customers but also has a large # of unhappy ones.

Bank B 40% 55% 5% 35

 

Researchers also caution that NPS could mislead marketers since there are dangers in drawing conclusions from averages, which do not show individual customer preferences. And of course, NPS data are perception-based, tracking customer claims about their intended behavior, not actual behavior. Respondents can be influenced by trendy brands or media hype. Also, the data depend on the precise question you ask customers, which can reveal or conceal real insights.

 

For all these reasons, it might be wise to consider adopting an adjusted approach to NPS, as shown in the example below, where greater weighting is given to unhappy customers/detractors.  Organizations should then look closely at detractor issues and target the root causes of their dissatisfaction with service, processes and products.

Adjusted approach to NPS

  Promoters
(Pr)
Passives Detractors
(D)
NPS score
(Pr-D x 150%)*
Comment
Bank A 60% 20% 20% 30

By weighting the impact of Detractors more heavily, customer dissatisfaction at Bank A becomes more apparent

Bank B 40% 55% 5% 32.5

*author randomly chose 150% weighting to show greater –ve impact of Detractors.


Innovative marketers want as many complaints as possible, in order to gain information that helps them improve service. They may actually provide incentives to encourage customers to voice their gripes or invite detractors to participate in customer research or Crowdsourcing events. After capturing the detractor data, it’s crucial to act on it and demonstrate real improvement efforts to the detractor community.


At the end of the day, NPS is a helpful tool among an array of performance metrics, particularly since it enables one company to compare itself to its peers. Just don’t let it blind you to other perspectives. Instead of celebrating the number of happy customers reported by your NPS score, you might achieve more business growth by looking closely at your unhappy ones.


  • Have you considered the potential bias in your existing NPS research?
  • Have you reviewed ways to better balance the viewpoints you obtain from customer research?
  • How do you gather, analyze and respond to Detractor customer viewpoints?

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