The Myth of Net Promoter Score (NPS) and the Importance of Actionable Data

The Myth of Net Promoter Score (NPS) and the Importance of Actionable Data

Net Promoter Score (NPS) surveys have long been hailed as a valuable tool in building products and gauging customer satisfaction. However, the truth is that NPS is like a compass — it provides a directional indication but does not present the complete story. In fact, only 31% of respondents in a recent survey found NPS helpful. This is not surprising when we delve deeper into what NPS truly represents.

Many organizations place NPS on a pedestal, treating it as the "single source of truth" because it presents a single number. However, NPS is not truly quantitative data; it is a numerical representation of qualitative data. To truly understand the customer, we need to employ a range of survey tools that capture various aspects of their preferences, demographics, and usage patterns.

Netflix, for example, collected NPS data but rarely looked at it. They found that monthly customer retention, rather than NPS, was a much better proxy metric for product quality. Retention measures what customers actually do rather than what they say. At Chegg, an NPS survey yielded a score of 60, which is considered excellent for a startup. However, it is essential to note that NPS can be influenced by cultural differences. Netflix experienced this firsthand when they launched in South America. Despite a high NPS score, they faced poor retention in the first few months. It turned out that Brazilians were generous with their ratings, while Australians and Germans were more reserved.

While NPS can provide an easy-to-understand signal, it is crucial to remember that all data sources, except NPS, can be manipulated. For example, if we aggressively ask readers for more positive feedback, we are likely to receive it. Therefore, it is essential to view NPS as just one piece of the puzzle and dig into the qualitative data to form hypotheses for future experiments.

The power of stories and examples cannot be understated when it comes to bringing ideas to life. While NPS may seem noisy with a small sample size, it is vital to analyze the qualitative feedback to gain a deeper understanding of the "Why" behind the scores. Additionally, it is important to acknowledge that if we already have a high NPS score, we are more likely to love NPS axiomatically.

In light of these insights, it becomes clear that relying solely on NPS surveys for product development may not be the most effective approach. Instead, we should focus on actionable data that goes beyond a single number. Here are three actionable pieces of advice to consider:

1. Diversify your survey toolkit: Look beyond NPS and incorporate a range of survey methods to capture different aspects of your customers' preferences and behaviors. This will provide a more comprehensive understanding of their needs and allow for targeted product development.

2. Prioritize retention metrics: While NPS can offer a directional indication of customer satisfaction, it is essential to prioritize retention metrics as a proxy for product quality. Track the percentage of customers who cancel each month to gain a clearer picture of your product's performance.

3. Don't discount qualitative data: Qualitative feedback from NPS surveys can provide valuable insights into the "Why" behind the scores. Take the time to analyze and understand the stories and examples shared by your customers. This will help you form hypotheses for future experiments and drive meaningful product improvements.

In conclusion, while NPS surveys can provide a glimpse into customer satisfaction, they should not be treated as the ultimate measure of product success. By diversifying our survey toolkit, prioritizing retention metrics, and embracing qualitative data, we can gain a more comprehensive understanding of our customers and make informed decisions that lead to product improvements. Remember, NPS is just a number, but actionable data is the key to building successful products.