Back in October I was invited to speak at the #CXDay in Birmingham on a panel of industry experts and CX-er’s ‘at the coal face’ (so to speak). (I was definitely in the ‘coal face’ camp!) I was talking about the customer experience journey at the organisation I work for, the Chartered Institute of Personnel and Development (the CIPD), the membership body for the people profession (Human Resources, Learning & Development and related disciplines).
I talked about how NPS had been a useful tool for us. I knew that NPS (or ‘Net Promoter Score’ to give it its full name) has its limitations, but I didn’t realise just quite how marmite* it was. The hugely engaging Dr Laura Chamberlain of Warwick Business School (one of the experts on the panel) was very much of the opinion that NPS was a flawed metric, and wasn’t a helpful measure for many industries for whom ‘recommendation’ wasn’t a useful measure of loyalty. And she’s right. But it’s also, in some circumstances, a useful tool to engage the C-Suite with your CX programme, as long as you understand and compensate for the NPS’s inherent flaws.
But first, for those of you who aren’t familiar with NPS, let me briefly explain. The Net Promoter Score is a management tool that can (in theory) be used to gauge the loyalty of an organisation’s customer relationships. Developed by Fred Reichheld, et al. it’s been around now for 15 years, and is been so successful that it’s reckoned that more than two thirds of Fortune 1000 companies use it.
How does NPS work?
The score is calculated based on responses to a single question: on a score of 0 to 10 How likely is it that you would recommend our company/product/service to a friend or colleague? Those who respond with a score of 9 to 10 are called Promoters; those who respond with a score of 0 to 6 are labelled Detractors; responses of 7 and 8 are labelled Passives. The NPS is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. NPS can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter). An NPS that is positive (i.e. higher than zero) is felt to be good, and an NPS of +50 is considered excellent.
Launched with a bang, the original HBR article on NPS called it ‘the one number you need to grow’, a much contested claim, but as you can imagine it caught the attention of a lot of CEOs!
NPS and Professional Bodies
In the quarterly Brand Perception Survey that we send out to our members, we ask: ‘How likely are you to recommend CIPD membership and services to a colleague or friend in the HR and L&D Profession?’ We’ve had to tweak the original question, because membership isn’t relevant to those outside of the people profession.
NPS doesn’t work as an indicator of future company growth for the CIPD or I’d argue for many professional associations because membership is only appropriate for people with a certain level of knowledge and expertise working in a particular profession, therefore even if a member felt they received an excellent service, they may not have anyone to recommend membership to. Maybe they’re a lone people professional working in a small business, or maybe everyone else in their team is already a member. Therefore in some contexts it may well be an irrelevant question.
Nor is NPS a very reliable indicator of loyalty for the CIPD, or for other professional associations. There are some parallels with the UK’s privatised services (think the water companies or train companies, for example) because you’re pretty much ‘locked in’ to membership once you become a member. If you’ve worked hard (and paid money) to gain your qualification and/or accreditation, you are likely to pay your subscription each year to ensure you keep your membership valid and up to date. (That doesn’t mean that we can be complacent about our customer experience, nor does it mean that professional bodies shouldn’t work hard to stay relevant whilst the world and the workforce rapidly changes around them. But that’s another post for another time…)
In fact the CX team and I were so sceptical about NPS, we didn’t originally include the score in our ‘brand scorecard’, but rather introduced a follow-up WoMI (Word of Mouth Index) question to counterbalance the overstatement of detractors that using NPS alone can introduce. WoMI is calculated by subtracting the percentage of True Promoters (i.e. the 9s and 10s from the NPS question) from the percentage of True Detractors (i.e. the 9s and 10s from a follow up ‘how likely are you to discourage’ question).
No CX KPI is useful without understanding the ‘why?’
It’s critical that you understand the story behind the numbers. So as part of the CX questions in our quarterly Brand Perception survey we ask a couple of open ended ‘what is the reason for your score?’ questions.
Analysing the open-ended feedback is a time-consuming task. (Experience at the CIPD tells us that textual analysis tools aren’t yet sophisticated enough to understand the complexity of the context and sentiment involved in this type of feedback.) However the analysis is critical. Don’t ask for feedback from your customers if you’re not going to take the time to analyse it and really understand what lies behind the score. And then of course you need to act on it.
Why NPS is a useful metric
Where NPS is useful is that it acts as a simple ‘temperature check’ of what customers think of a brand that is recognised and readily understood by the C-Suite. And because it is used so widely across different organisations and sectors it also works as a useful benchmark against your competitors or comparators. For the CIPD we had a benchmark score from Sue Froggatt’s excellent 2017 Membership Benchmarking & Research Report against which we could measure our own NPS. Let’s just say our current NPS doesn’t compare favourably.
And that made senior stakeholders take notice.
NPS has been a catalysing metric for the CIPD. It has brought Customer Experience and our CX efforts to the top of the agenda. Unhappy customers are a warning sign for any business, however ‘locked in’ they might be. Membership bodies can’t be any less complacent of the threat from potential disruptors to their business model than any other sector.
The warning sign was heeded. So much so that we’ve moved away from an earlier phase of ‘skunk work’ incremental improvements to the customer experience, to a re-evaluation of the membership value proposition itself. Because fixing a poor NPS is often a lot more complicated than just tackling irritating service issues. For the CIPD it’s about understanding what ‘value’ represents to our members and how to understand, demonstrate and deliver on that value (again another post for another time).
It’s true that ‘a good net promoter score to have is one that is higher than you had last quarter’ (Adam Ramshaw quoted in Where NPS Falls Short (and How to Put It to Work). But for the CIPD, we’re setting ourselves an ambitious target of a seriously positive NPS in the next couple of years. It doesn’t really matter what the target number is – and it’s important not to get fixated on the number itself – but what this does indicate is a commitment at director level to put the member/customer experience front and centre of the CIPD’s strategy; to coordinate efforts across every part of the business – from our organisational culture, to our research and policy output, from our brand positioning, to the artwork that hangs in our offices – to deliver a much improved experience for our members.
So to sum up:
- NPS can be a useful metric to open the conversation with the C-Suite about Customer Experience, especially if you have historical data and comparative scores from your sector to benchmark against.
- NPS should be a part of a wider framework of CX measures.
- Always find out the ‘why?’ behind the scores by giving your customers the opportunity to give unstructured/open ended feedback.
- Commit time and resource to analysing that feedback.
- Positive feedback can be used to inspire and connect colleagues to your customers.
- Negative feedback should be investigated and acted upon.
* If you happen to be reading this blog post outside the UK, marmite is a famous British spread that makes a virtue of it’s ‘love it or hate it’ taste, so much so that ‘marmite’ has become shorthand vernacular.
As ever, a huge thank you to the CIPD’s Customer Experience team for your passion, ideas, creativity and hard work. This is your story.