Customer loyalty and satisfaction are critical to business success, but measuring these important metrics can be a challenge. Since its introduction in 2003, the Net Promoter Score (NPS) has become a widely used tool to assess the likelihood that a customer would recommend a company to others. Its simplicity—a quick 1-3 question survey—makes it appealing, but is it enough to fully understand customer relationships?
More than two-thirds of Fortune 1000 companies use NPS as a key performance metric, but many businesses find themselves facing gaps when it comes to understanding actual customer behaviors. A Gartner study found that only 30% of companies believe NPS provides a complete picture of customer loyalty. So, where does NPS fall short, and how can organizations adopt a more holistic approach?
NPS in Action: A Real-World Example
I recently conducted qualitative interviews with a niche market of manufacturing customers. When asked how likely they were to recommend our client, one respondent said, “I wouldn’t—the only people I could recommend to are my competition, and your client is my secret sauce against them!” We heard similar feedback from other customers, forcing us to carefully assess the implications of that question.
What this response reveals is something NPS alone would miss: strategic secrecy and market dynamics. NPS measures intent but doesn’t account for broader context that influences customer decisions. If we had relied solely on NPS, we might have misinterpreted these customers’ loyalty.
This issue is not uncommon — clients sometimes don’t recommend a company because the only people who could benefit are competitors, or they don’t have anyone to recommend to. In cases like these, relying exclusively on NPS paints an incomplete picture.
NPS and Behavioral Insights
While NPS does a decent job of explaining customers’ likelihood to refer others, it often falls short in explaining other critical behaviors like spending habits, retention, and price sensitivity. Organizations measure customer relationships not just to get referrals, but to understand why customers behave the way they do and how to influence that behavior.
Consider the following data from a client program:
|
Segment |
Promoters | Passives |
Detractors |
|
Referrals/year |
5.3 | 2.4 |
0.2 |
|
Share of spend |
37% | 33% |
32% |
|
Retention |
87% | 78% | 75% |
| Price sensitivity | Moderate | Moderate |
Moderate |
While NPS does a great job explaining referrals, it doesn’t effectively explain share of spend, retention, or price sensitivity—all of which were equally important to this client. Why? Because NPS focuses narrowly on a single behavior—recommendation—leaving other key factors that drive loyalty unexplored.
Harvard Business Review reports that 45% of businesses encounter discrepancies between their NPS and actual retention rates, further underscoring NPS’s limitations.
Expanding Beyond NPS: Looking at Loyalty
To truly understand and enhance customer loyalty, organizations must adopt a more comprehensive approach that includes multiple metrics and qualitative feedback.
Loyalty metrics offer a richer view of customers’ long-term commitment and overall relationship with the brand. By asking a few targeted questions, businesses can better explain customer behavior and learn how to influence it in meaningful ways. These questions go beyond “Would you recommend us?” to explore how and why customers remain engaged with a brand.
While asking multiple questions can generate a more comprehensive view of the customer relationship, sometimes time and space are limited. If this is the case, studies published by the American Marketing Association show that value is a far better tool than recommendation for understanding behaviors. However, when combined with metrics like recommend into a loyalty metric, the result for the company can give enormous insight.
For example, looking at a similar chart to what we looked at earlier, we can see that migrating Loyalty segments has a much bigger impact for the example firm:
|
Segment |
Loyals | Neutrals |
Vulnerables |
|
Referrals/year |
8.2 | 4.5 | 1.3 |
|
Share of spend |
45% | 31% |
17% |
|
Retention |
97% | 81% |
64% |
| Price sensitivity | Low | Low/Moderate |
High |
Analyzing behavioral data such as purchase history, usage patterns, and service interactions can show not only the impact of loyalty on the bottom line, but also illustrate how fixing problems with the relationship will foster organic growth within the organization. When combined with company performance metrics on key drivers of the relationship, this data becomes a powerful tool for understanding customer needs and changing future behavior.
Finally, one of the most impactful metrics for assessing customer relationships is performance relative to competitors. A customer may seem “loyal” to your firm, but if they perceive a competitor as offering superior value, that relationship is vulnerable. By incorporating competitive benchmarking, businesses can gain critical insights into how they stack up against the competition—one of the key shortcomings of relying solely on NPS.
A recent Bain & Co. study (the creators of NPS) highlighted this gap, noting that many organizations fail to account for how their performance measures up to competitors in the eyes of their customers, leading to misinformed decision-making.
Conclusion: Moving Beyond NPS
NPS can be a useful marketing tool and starting point, and if recommendations are the only behavior important to your organization, NPS may be the best measure. However, it typically does not provide a complete picture of customer relationships or how to improve them. By incorporating additional metrics such as loyalty measures and competitive benchmarking, along with qualitative feedback, organizations can gain deeper insights and take more targeted actions to enhance the customer experience. This holistic approach ensures that every aspect of the customer journey is considered, leading to better decision-making and ultimately more loyal customers.
To truly drive customer loyalty, companies must evolve beyond NPS and embrace a more comprehensive toolkit. Start by layering additional metrics and qualitative insights to uncover the real drivers of satisfaction. Only by considering the entire customer journey can businesses make informed decisions that lead to lasting loyalty and growth.
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