Could a KPI misdirect business behaviour – an unintended consequence of NPS

20Apr11

Many businesses are driven by Key Performance Indicators (KPI’s.) These often include a refinement of traditional customer satisfaction, a Net Promoter Score (NPS) that provides a simple calculation of customer loyalty.

The Net Promoter Score is obtained by asking customers a single question on a 0 to 10 rating scale, where 10 is “extremely likely” and 0 is “not at all likely”: “How likely is it that you would recommend our company to a friend or colleague?”

Based on their responses, customers are categorised into one of three groups: Promoters (9–10 rating), Passives (those who are neutral, 7–8 rating), and Detractors (0–6 rating). The percentage of Detractors is then subtracted from the percentage of Promoters to obtain a Net Promoter score (NPS).

NPS can be as low as -100 (everybody is a detractor) or as high as +100 (everybody is a promoter). The NPS is not a percentage but some people wrongly put a “%” sign after it, instead of correctly using “+” or “-” to show the result. An NPS that is positive (i.e., higher than zero) is felt to be good, and an NPS of +50 is excellent.

Companies are encouraged to follow this question with an open-ended request for elaboration, soliciting the reasons for a customer’s rating of that company or product. These reasons can then be provided to front-line employees and management teams for follow-up action

Many businesses have realised that it’s difficult to change the mind of Detractors – the people who reject your brand. And that consumers who are already Promoters, supporters of your brand who are already loyal, may offer limited additional return on any further investment. I guess you may interpret this as ‘don’t try to hard with those who already love you most’.

In which case it’s the neutral Passives, the currently uncommitted consumers, that businesses may target most heavily with improvements or innovations; in their service, marketing, product performance or pricing offer.

Does this make sense? I ask this as those consumers uncommitted to your business (Passives) also include amongst their number a group who don’t feel particularly committed to your business sector, or your competitors – they are disengaged.

To clarify, I am classifying Passives as including people who are customers of a brand operating within any given sector, but they are Passive because they don’t prioritise the product or service as important in their mind – often they find the category simply isn’t compelling or relevant, so they don’t feel motivated enough to care and be loyal.

Passives also include another group – those consumers that have been taught to be disloyal to brands through the benefits and rewards of being promiscuous when it come to repurchase; changing their brand due to reasons such as poor availability (distribution), offers representing better value for money, or short-term promotional reasons. However these are seperate drivers of Passive NPS behaviour that I won’t go into further here.

So while the idea of improving the performance of the NPS of a business holds appeal in the boardroom (and bonus schemes of staff), is it really fostering a healthy approach to brand building, addressing consumer needs or inspiring competitive performance?

If the NPS is the driving focus of a business, will it change the brand for the better? Will it hold on to what makes a brand distinctive and valuable? Or will it focus too much attention on changing the opinion of a proportion of the most uncommitted consumers?

Will the ambition of the brand become too modest if it doesn’t try to persuade rejecters to reevaluate their perception of the brand; by addressing consumer needs better and promoting reappraisal, trial and preference?

Will the ambition of the brand become too focused on the apathetic consumer, rather than the existing customer, if NPS promoted success more readily by filling a leaky bucket with customers who now like the brand, rather than keeping more of the long term customers who love the brand – but increasingly feel ignored, undervalued or that the brand they through they loved no longer feels as relevant to them?

NPS is a valuable tool and a relevant KPI for businesses. But I wonder if it is always being applied as a suitable record business performance, rather than misconstrued as a doctrine to champion customer service behaviour around apathetic consumers?

It’s difficult to make people love something they dislike. But I thought brand advertising was all about changing perception, encouraging reappraisal and trial. Maybe NPS needs to work within a wider framework of Brand KPI’s, rather than simply being ‘the one number you need to grow.’

Perhaps if additional emphasis was placed in the calculation of a relevant Promoter score metric related to further reduction of Rejectors, forcing the brand to compete and command reappraisal. And if the maintainance of existing Promoters was prioritised over the value of the uncommitted Passives who aren’t engaged by the sector. Then the performance of the brand and its customer service might improve more effectively in the longer term?

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Tags: brand building, Brand Strategy, Key Performance Indicator, KPI, Net Promoter Score, NPS