The Importance of Net Promoter Score (NPS) Surveys in Building Products and the Limitations

The Importance of Net Promoter Score (NPS) Surveys in Building Products and the Limitations

Net Promoter Score (NPS) surveys have become a popular tool in understanding customer satisfaction and loyalty. However, their effectiveness in building products is often a topic of debate. While NPS provides a directional insight, it does not present a complete story. In fact, only 31% of organizations find NPS surveys helpful in this process. This is not surprising considering that NPS is often treated as a "single source of truth" within some organizations, when in reality, it is just one tool among many.

It is important to note that NPS is a numerical representation of qualitative data. It provides a snapshot of customer sentiment, but it does not delve into the reasons behind their opinions. To truly understand the customer, it is necessary to execute surveys that capture demographic information, competitive product usage, entertainment preferences, and more. NPS can be a helpful addition to this survey toolkit, but it should not be the sole focus.

Netflix, for example, collected NPS data but rarely looked at it. Instead, they found a better proxy metric for product quality – the percentage of members who canceled each month. This metric measures what customers do, rather than what they say. Similarly, at Chegg, an NPS survey showed a score of 60, which is considered very good for a startup. However, they soon realized that NPS alone was not enough to gauge customer retention and satisfaction accurately.

Interestingly, NPS can also vary across different regions. Netflix experienced this when they launched their service in South America. Despite receiving a high NPS score, they had poor retention during the first few months. It turned out that Brazilians were more generous with their ratings, while Australians and Germans were more critical. This highlights the limitations of NPS and the need for additional data points to gain a comprehensive understanding of customer sentiment.

While NPS provides an easy-to-understand signal, it is essential to remember that all data sources, except NPS, can be gameable. For instance, asking readers for more positive feedback can lead to inflated ratings. Therefore, it is crucial to dig into the qualitative data and form hypotheses for experiments based on the NPS score.

In conclusion, NPS surveys can be a valuable tool in building products, but they should not be relied upon solely. They provide a directional insight into customer sentiment, but they do not present a complete picture. It is important to incorporate other data sources and metrics, such as customer retention, to gauge product quality accurately. NPS should be used in conjunction with other survey tools to gain a comprehensive understanding of the customer and inform product decisions.

Actionable Advice:

1. Use NPS as one tool among many: Incorporate other survey methods to capture a complete picture of the customer, including demographic information, usage patterns, and preferences.

2. Look beyond NPS for proxy metrics: Consider metrics like customer retention to gauge product quality accurately. What customers do is often a better indicator than what they say.

3. Dig into qualitative data: NPS scores can be noisy, so it is important to analyze the qualitative feedback to understand the reasons behind customer sentiment. Use this information to form hypotheses for future experiments.

By following these three actionable advice, organizations can gain a more comprehensive understanding of their customers and make informed product decisions. NPS should be treated as a part of the larger survey toolkit rather than the sole source of truth.