NPS: The Most Overrated Metric in Brand Tracking?

In the world of brand tracking, few metrics have achieved the widespread popularity of the Net Promoter Score (NPS). Developed nearly two decades ago, NPS has become a go-to tool for brands eager to gauge customer satisfaction and predict future growth. Its appeal lies in its simplicity, asking customers a single question: “How likely are you to recommend our product or service to others?” The responses are then distilled into a score that brands can easily track and benchmark over time.

However, as market dynamics grow increasingly complex, many experts are beginning to question whether NPS is truly the silver bullet it’s often made out to be. Despite its widespread use, NPS has significant limitations that may render it insufficient as a standalone metric for tracking brand health. While it offers a quick snapshot of customer sentiment, it often oversimplifies the rich and multifaceted relationships that customers have with brands.

In this article, we’ll explore why NPS might be overrated and examine its limitations in providing a holistic view of brand health. We’ll also suggest more comprehensive approaches that can help brands better understand their market position and customer loyalty.

UNDERSTANDING NPS

Net Promoter Score (NPS) is a customer loyalty metric that has become ubiquitous in brand tracking. Introduced in 2003 by Fred Reichheld, NPS was designed to simplify the process of measuring customer satisfaction and predicting business growth. The metric is built on a straightforward premise: customers are asked, “On a scale of 0 to 10, how likely are you to recommend our product or service to a friend or colleague?”

Based on their responses, customers are categorised into three groups:

• Promoters (9-10): Loyal enthusiasts who will keep buying and refer others, fuelling growth.
• Passives (7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
• Detractors (0-6): Unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

The NPS is then calculated by subtracting the percentage of detractors from the percentage of promoters. The result is a score that ranges from -100 to 100, providing a quick gauge of overall customer sentiment.

The Appeal of NPS

One of the primary reasons NPS has gained such traction is its simplicity. Unlike traditional surveys that might bombard customers with numerous questions, NPS boils everything down to a single, easy-to-understand metric. This simplicity makes it accessible to brands of all sizes and industries. Furthermore, the NPS question is perceived as directly tied to business outcomes, recommendation being closely linked to customer loyalty and future sales.

Another reason for its popularity is benchmarking. NPS allows companies to compare their scores with industry standards, giving them a clear sense of where they stand relative to competitors. This benchmarking capability has made NPS a staple in boardrooms, where executives often rely on it to make quick assessments of brand performance.

However, as we’ll explore in the next section, the very simplicity that makes NPS so appealing also contributes to its significant limitations.

THE LIMITATIONS OF NPS

While Net Promoter Score (NPS) is lauded for its simplicity and ease of use, this very simplicity can also be its greatest flaw. As brands increasingly rely on NPS as a key indicator of customer satisfaction and brand health, it’s essential to recognise the metric’s limitations. Below, we explore some of the most significant drawbacks of using NPS as a standalone metric.

1. Oversimplification of Customer Sentiment

One of the main criticisms of NPS is that it oversimplifies the complexities of customer sentiment into a single score. By focusing only on the likelihood of recommendation, NPS fails to capture the full range of emotions and experiences that influence a customer’s relationship with a brand. For instance, a customer might rate a brand highly on NPS due to one positive interaction but still have underlying issues with other aspects of the service or product. Conversely, a low score might reflect a single negative experience rather than an overall dissatisfaction with the brand.

This reductionist approach can lead to misleading conclusions. Brands may mistakenly believe they are performing well because their NPS is high, even though other crucial aspects of the customer experience are lacking. In today’s competitive market, understanding these nuances is essential for maintaining long-term customer loyalty.

2. Lack of Actionable Insights

NPS tells you how your customers feel, but it doesn’t explain why they feel that way. Without understanding the reasons behind a customer’s rating, it’s difficult for brands to take meaningful action. For example, if a brand sees a dip in its NPS, it can be challenging to pinpoint the exact cause. Was it due to poor customer service, product quality issues, or something else entirely?

This lack of specificity means that while NPS can alert brands to a potential problem, it doesn’t provide the actionable insights needed to address it. As a result, brands may spend time and resources attempting to fix issues that may not be the root cause of customer dissatisfaction.

3. Bias in Responses

NPS can also be skewed by response bias. Typically, customers who are either very satisfied or very dissatisfied are more likely to respond to NPS surveys, while those with neutral or moderate opinions (the “passives”) may not bother to provide feedback. This can result in a score that doesn’t accurately represent the broader customer base, leading to an overestimation or underestimation of customer sentiment.

Moreover, cultural differences can affect how customers respond to NPS surveys. In some cultures, people may be more conservative in giving high scores, while in others, they may be more generous. These variations can further distort the accuracy of NPS as a universal measure of customer satisfaction.

4. Context Matters: The Importance of Industry and Demographics

NPS doesn’t account for the context in which it is used. Different industries have different norms and expectations, which can significantly impact NPS scores. For instance, an NPS of 30 might be considered excellent in one industry but below average in another. Similarly, NPS doesn’t consider customer demographics, such as age, income, or location, all of which can influence how customers perceive and recommend a brand.

Without accounting for these contextual factors, NPS can lead brands to make inappropriate comparisons or set unrealistic benchmarks, ultimately skewing their understanding of brand health.

5. Overemphasis on Promoters and Detractors

NPS focuses heavily on the extremes, promoters and detractors, while largely ignoring the “passives,” who fall in the middle of the scale. These passives are often overlooked, even though they represent a significant portion of the customer base. Ignoring this group can lead to missed opportunities for growth, as passives can be converted into promoters with the right strategies.

Furthermore, by concentrating only on promoters and detractors, brands may neglect to understand and address the concerns of passives, potentially leading to their defection to competitors.

WHEN NPS IS USEFUL

Despite its limitations, Net Promoter Score (NPS) isn’t without value. When used appropriately and in conjunction with other metrics, NPS can offer meaningful insights into customer sentiment and brand performance. Here are some scenarios where NPS can be particularly useful:

1. A Quick Check of Customer Sentiment

One of the key strengths of NPS is its ability to provide a quick, high-level snapshot of customer sentiment. If your brand needs a straightforward way to gauge how customers feel about your products or services, NPS can serve as an effective tool. For instance, if a company is launching a new product or service, NPS can be used to quickly assess the initial customer reaction. A high NPS might indicate that customers are satisfied and likely to recommend the product, while a low NPS could signal potential issues that need to be addressed immediately.

2. Benchmarking Against Competitors

NPS is particularly useful for benchmarking purposes. Because NPS is widely used across industries, it allows companies to compare their scores against those of competitors. This benchmarking can provide valuable insights into where your brand stands in the market. For example, if your NPS is significantly higher than the industry average, it suggests that your brand is performing well in terms of customer satisfaction and loyalty. Conversely, if your NPS is below average, it might indicate that your brand needs to improve its customer experience to stay competitive.

It’s important, however, to benchmark within the same industry, as NPS expectations and standards can vary widely across different sectors. Understanding your NPS relative to industry peers can help identify areas for improvement and opportunities to differentiate your brand.

3. Tracking Changes Over Time

NPS can be a useful tool for tracking changes in customer sentiment over time. By regularly measuring NPS, brands can monitor trends and identify shifts in customer loyalty. For instance, if a brand sees a consistent increase in its NPS over several quarters, it may indicate that recent improvements in customer service or product quality are resonating with customers. On the other hand, a declining NPS might signal emerging issues that need to be addressed before they impact the brand’s reputation.

Tracking NPS over time also allows brands to assess the impact of specific initiatives or campaigns. For example, if a brand implements a new customer loyalty program, a subsequent increase in NPS could suggest that the program is effectively enhancing customer satisfaction and loyalty.

4. Complementing Other Metrics

Perhaps the most effective way to use NPS is in combination with other metrics. While NPS alone may not provide a complete picture, it can be a valuable component of a broader brand tracking strategy. For example, pairing NPS with Customer Satisfaction (CSAT) scores can help brands understand both overall loyalty (NPS) and specific areas of satisfaction or dissatisfaction (CSAT). Additionally, integrating NPS with qualitative feedback can provide context to the scores, offering insights into why customers are promoters or detractors.

By combining NPS with other metrics, brands can develop a more nuanced understanding of customer sentiment, which in turn can inform more targeted and effective strategies for improving brand health.

ALTERNATIVE METRICS FOR BRAND TRACKING

While Net Promoter Score (NPS) offers a useful snapshot of customer sentiment, relying solely on this metric can leave significant gaps in understanding your brand’s overall health. To gain a more comprehensive view, it’s essential to incorporate additional metrics that provide deeper insights into different aspects of customer experience and brand perception. Here are some alternative metrics that can complement or even surpass NPS in offering a fuller picture of brand health.

1. Brand Awareness and Consideration

Brand awareness is a fundamental metric that measures how well your brand is known among your target audience. However, awareness alone doesn’t guarantee success, it must translate into consideration, where consumers actively think about purchasing your product or service. Tracking both awareness and consideration helps you understand the effectiveness of your marketing efforts and your brand’s position in the consumer’s mind.

For example, if awareness is high but consideration is low, it may indicate that while people know about your brand, they don’t view it as a viable option compared to competitors. This insight can guide you to refine your value proposition or improve your brand messaging to better resonate with your target audience.

2. Customer Satisfaction (CSAT)

Customer Satisfaction (CSAT) scores provide a more granular view of how satisfied customers are with specific aspects of your product or service. Unlike NPS, which focuses on the likelihood of recommendation, CSAT asks customers to rate their satisfaction with particular experiences, such as a recent purchase, a customer service interaction, or a product feature.

CSAT is highly actionable because it pinpoints exactly where your brand is meeting or falling short of customer expectations. For example, if customers consistently rate their satisfaction with delivery times poorly, you know where to focus your efforts to improve the overall customer experience. By regularly tracking CSAT, brands can identify areas for improvement and ensure that their offerings meet or exceed customer expectations.

3. Customer Effort Score (CES)

Customer Effort Score (CES) is a metric that measures how easy it is for customers to interact with your brand. It’s based on the idea that the easier it is for customers to accomplish a task, whether it’s resolving an issue, making a purchase, or finding information, the more likely they are to remain loyal.

CES is particularly valuable because it directly correlates with customer loyalty. Research has shown that reducing customer effort is a more effective way to increase loyalty than simply delighting customers. If your CES is high, it may indicate that customers are encountering friction in their interactions with your brand, which could lead to frustration and churn. By identifying and addressing these pain points, you can enhance the customer experience and boost loyalty.

4. Brand Loyalty and Retention Rates

While NPS gives a sense of potential loyalty through the likelihood of recommendation, actual loyalty can be better measured through retention rates and repeat purchase behaviour. Tracking brand loyalty involves understanding how many of your customers return to your brand over time and how frequently they make repeat purchases.

High retention rates indicate that your brand has successfully built a loyal customer base, which is essential for sustainable growth. Conversely, if retention rates are low, it might suggest that customers are either dissatisfied or being lured away by competitors. Understanding the factors that drive loyalty, such as product quality, customer service, or brand values, can help you develop strategies to retain customers and encourage repeat business.

5. Qualitative Feedback

While quantitative metrics like NPS, CSAT, and CES provide valuable data, they don’t always capture the full depth of customer sentiment. This is where qualitative feedback comes in. By collecting and analysing open-ended responses from customers, you can gain insights into the underlying reasons behind their ratings and behaviours.

Qualitative feedback can be gathered through customer interviews, focus groups, or open-ended survey questions. This feedback allows you to explore specific issues in more detail, uncovering nuances that might not be apparent from numerical scores alone. For example, if a customer rates their experience poorly but provides detailed feedback about what went wrong, you can address those specific concerns and improve the overall customer experience.

6. Market Sentiment and Social Listening

While not directly mentioned earlier, another powerful complement to traditional brand tracking metrics is market sentiment analysis, often gathered through social listening tools. This involves monitoring online conversations about your brand to gauge public opinion and identify emerging trends or issues. Understanding market sentiment provides a real-time view of how your brand is perceived in the broader market, beyond just your customer base.

A HOLISTIC APPROACH TO BRAND TRACKING

While Net Promoter Score (NPS) offers a quick snapshot of customer sentiment, it’s clear that relying on a single metric can lead to an incomplete understanding of your brand’s health. A more comprehensive approach, one that integrates multiple metrics and considers various aspects of customer experience, provides a fuller picture of how your brand is truly performing.

1. Combining Metrics for a Comprehensive View

To capture the complexity of customer interactions and brand perceptions, it’s crucial to combine several key metrics. For instance, while NPS might give you a broad sense of customer loyalty, integrating it with Customer Satisfaction (CSAT) and Customer Effort Score (CES) provides deeper insights into specific areas of the customer journey. These metrics together allow you to understand not just whether customers are likely to recommend your brand, but also how satisfied they are with particular touchpoints and how easy they find interactions with your brand.

For example, tracking both NPS and CES might reveal that while customers are generally satisfied (as indicated by a decent NPS), they find certain processes cumbersome (as shown by a high CES). This combination of metrics can highlight specific pain points that need addressing, which NPS alone might not identify.

2. The Importance of Contextual Insights

Metrics like NPS and CSAT are most valuable when contextualised within your specific industry, market conditions, and customer segments. Understanding how your brand’s scores compare to industry benchmarks provides clarity on whether your performance is truly competitive or if there’s room for improvement.

Moreover, the impact of customer demographics and regional differences should not be overlooked. For instance, a brand might perform well in urban areas but struggle in regional markets due to different customer expectations or cultural preferences. By considering these contextual factors, you can tailor your brand tracking and marketing strategies to better meet the needs of diverse customer segments.

3. The Role of Qualitative Feedback

Numbers can tell you how your brand is performing, but they often fail to explain why. This is where qualitative feedback becomes invaluable. By gathering detailed, open-ended feedback from customers, you can uncover the specific reasons behind their ratings. This could involve exploring customer comments from surveys, conducting in-depth interviews, or analysing social media discussions about your brand.

For instance, if a dip in NPS is observed, qualitative feedback might reveal that a recent change in product packaging is unpopular with customers. Such insights allow brands to take precise corrective actions that align more closely with customer expectations.

4. Insights from the Australian Pie Market Case Study

In our recent case study of the Australian pie market, we observed how integrating multiple metrics provided a clearer picture of brand performance. While NPS indicated overall customer loyalty, deeper insights were gained by also examining brand awareness, quality perceptions, and customer satisfaction. Brands like Four'N Twenty not only had high awareness but also succeeded in converting that awareness into preference and loyalty, a nuance that NPS alone might not have fully captured.

These findings underscore the need for a multifaceted approach to brand tracking. By considering a range of metrics, these brands could better understand their strengths and weaknesses, allowing them to refine their strategies for sustained success.

5. Implementing a Holistic Brand Tracking Strategy

To truly benefit from a holistic approach to brand tracking, consider the following steps:

• Integrate Multiple Metrics: Use a combination of NPS, CSAT, CES, and brand awareness to gain a well-rounded view of your brand’s health.
• Seek Contextual Understanding: Benchmark your performance against industry standards and adjust your strategy based on the specific needs of your target market.
• Leverage Qualitative Feedback: Regularly gather and analyse qualitative feedback to understand the deeper reasons behind customer ratings and behaviours.
• Continuously Monitor and Adapt: Regularly review your metrics to track progress and respond to emerging trends or issues.

By moving beyond the limitations of a single metric, you can develop a more nuanced, data-driven understanding of your brand’s health, enabling more strategic decisions that drive long-term success.

FINAL THOUGHTS…

As the market becomes increasingly complex and customer expectations continue to evolve, relying solely on Net Promoter Score (NPS) to gauge your brand’s health can be a risky oversimplification. While NPS offers a quick and easy snapshot of customer loyalty, it fails to capture the full breadth of customer sentiment and brand performance. By focusing too narrowly on a single metric, brands may overlook critical insights that could be vital to their success.

To truly understand and improve your brand’s position in the market, a holistic approach to brand tracking is essential. This means integrating a range of metrics, such as Customer Satisfaction (CSAT), Customer Effort Score (CES), brand awareness, and qualitative feedback, that together provide a comprehensive view of how customers experience and perceive your brand. By doing so, you can identify specific areas for improvement, understand the underlying causes of customer behaviour, and develop targeted strategies that enhance customer satisfaction and loyalty.

The lessons from our recent case study on the Australian pie market further illustrate the importance of this approach. Brands that succeeded in turning high awareness into strong customer loyalty did so by paying close attention to a variety of factors, including product quality, customer satisfaction, and effective brand messaging. These brands leveraged a multi-metric approach to gain deeper insights, allowing them to adapt and thrive in a competitive market.

In conclusion, while NPS can be a valuable tool in your brand tracking arsenal, it should not be used in isolation. By embracing a broader set of metrics and continuously seeking to understand the context behind customer feedback, your brand will be better equipped to navigate the challenges of today’s marketplace and achieve long-term success.

Are you ready to move beyond NPS and adopt a more holistic approach to brand tracking? At Brand Health, we specialise in providing tailored brand tracking solutions that give you a complete picture of your brand’s performance. Contact us today to learn how we can help you optimise your brand strategy and drive lasting customer loyalty.