High Net Promoter Scores are certainly better than low ones. They indicate that a company has earned more promoters than detractors. But how do we interpret the scores these companies are reporting? What is a good score? How should we set goals and targets for improvement?
To begin, we should make sure we look at the right sort of Net Promoter Score. Seasoned practitioners of the Net Promoter System gather feedback from their customers in three different ways:
- Touchpoint. Net Promoter System practitioners ask for feedback from their own customers after selected touchpoints, experiences or episodes. For example, they might do so after the purchase of a product or an interaction over the phone. This type of feedback focuses on understanding how customers’ experiences at those touchpoints influenced their overall loyalty so you can figure out ways to improve those experiences.
- Relationship. Net Promoter System companies regularly contact a sample of their own customers, asking them how likely they would be to recommend the company to friends or colleagues, and why. Feedback like this provides an overall assessment of the relationship between company and customer. It provides input to account teams, relationship managers and others so they can make decisions and take actions to improve selling, servicing, product design, pricing or other policies, based on what they learn.
- Competitive benchmark. Finally, leading practitioners of the Net Promoter System sample all target customers for their products or services. They seek feedback not only from their own customers but also from their competitors’ customers. Competitive benchmark Net Promoter Scores provide an objective and fair basis for comparing your company’s feedback to the feedback your competitors earn. Done right, they can provide the basis for goal setting and prioritization at the highest levels of a company.
The competitive benchmark Net Promoter Score is often overlooked or undervalued. Yet it adds an important level of information the other two are likely to miss. It allows a company to learn what respondents think about an entire value proposition, not just their relationship with one particular company.
Touchpoint and relationship Net Promoter Scores fuel continuous improvement. Competitive benchmark scores inform a different set of decisions. They tell a company how it is doing, not just against direct competitors but against every competing alternative in the marketplace. That knowledge helps leaders know where the major threats and opportunities lie. It helps them determine strategic priorities, such as where and how aggressively to invest. The feedback can also provide valuable specifics. For example, you may find that competitor X has suddenly become popular with customers because of a new product or pricing system. Then you can ask whether it makes sense to try emulating or leapfrogging the innovation.
Competitive benchmark surveys are a form of traditional market research. Researchers, usually from a third-party firm, ask respondents which companies in a given category they patronize. They ask how likely the respondents would be to recommend each one, and they probe for the reasons. In most cases, they gather data about the respondents’ purchases so they can estimate their economic value as customers. They also ask demographic or psychographic questions to locate the respondent in a particular customer segment. The methodology is almost always double-blind: the respondents don’t know which company is asking the questions, and the customers remain anonymous to the company. As with most market research, the surveys can take 15 or 20 minutes and are designed to provide true comparisons between a company and its competitors. A higher score than the competition, even if it seems low in absolute terms, is a reliable indicator of future growth. The opposite is true as well.
Competitive benchmarking eliminates the responder bias that’s likely to crop up when you survey only your own customers. In your own surveys, people who don’t like doing business with you may decide that it isn't worth their time to participate. With a third party doing the asking, you’re equally likely to hear from everyone on the love-you/hate-you spectrum.
Competitive benchmarking also eliminates the built-in difficulty of comparing absolute Net Promoter Scores from one geographical region with another. Say your operations in Asia score lower on the Net Promoter zero-to-10 scale than your other operations. A third-party survey will help you establish your performance relative to other companies operating in the same market, eliminating the worry about whether Asian customers are less likely to hand out 9s and 10s than customers in other regions. When you look at your performance relative to competitors in the same market, cultural bias becomes irrelevant. Learn more about key issues in benchmark design.