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Is NPS dead for retail? Understanding the power and the pitfalls

There’s no doubt that retailers’ planning and target-setting for 2024 is well underway, but sometimes, it’s worth taking a step back to examine the metrics that… View Article

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Is NPS dead for retail? Understanding the power and the pitfalls

There’s no doubt that retailers’ planning and target-setting for 2024 is well underway, but sometimes, it’s worth taking a step back to examine the metrics that underpin the way we think about performance and success.

NPS (or net promoter score) has been around for 20 years (it’s milestone birthday this year!) and is a well-understood tool for assessing customer sentiment. It may crop up in your customer marketing and insights meetings, and the question may have been asked: is it still relevant, or has it had its day?

According to a Gartner study published in 2021, around 75% of companies plan to abandon NPS as a measurement of customer service and support by 2025. They claim NPS doesn’t actually help improve customer service, primarily because the language used to capture NPS (a simple ‘Would you recommend this business?’) isn’t specific enough to drive the actions and decisions that make a difference.

It’s a seductive argument, so much so that we’ve addressed it in our latest report: ‘NPS is dead, long live NPS!’.

LINK TO REPORT

As always, the answer is never quite as simple as it seems.

The case for NPS

There is, of course, a lot to be said for NPS. Its beauty lies in its simplicity – and when it comes to communicating complex customer views to a broad audience, that’s not to be sniffed at. The single score of NPS means that everyone in your business, from the Saturday shop assistant to backroom digital teams to the CEO, can easily understand the biggest question of all in retail: ‘How are we doing?’. It’s a snapshot, true, but it’s easy to track performance over the short and longer term simply by keeping track of one number. It’s excellent for benchmarking against the competition, too. And, in a complex world, where everyone is talking and no one is listening, it’s also simple to respond, which means customers are more likely to, well, actually respond.

…and the case against

The flip side of this simplicity is its limitations. Timing is everything: seeking a customer response on the day of interaction leads to higher scores than asking 3 – 6 months later, for example. That makes sense. People are forgetful, and the halo of thoughtful service soon fades. But even if you do manage to gather NPS responses in real-time, calculation and communication of the score creates a lag. That means store managers always act on out-of-date data, which can lead to poor decision-making and wasted effort.

It’s also a blunt instrument. It tells you about happiness but doesn’t tell you why customers are happy. Individual positive interactions can’t be extracted or isolated, which means they can’t be talked about and spread across stores. The opposite is true, too – when customers are unhappy, NPS doesn’t tell you what went wrong, so you don’t know how to fix it.

The good news?

There is a solution: make NPS part of the mix.

At Goodays, we really believe in simplicity. With that lens, NPS is always going to be a valuable tool. But it’s far from the only tool in a retailer’s box of tricks. Combining NPS with other KPIs allows retailers to create a Customer Relationship Score – a score out of 5 measuring relationships, rather than recommendations, in real-time. NPS has a place, but it’s not the be-all and end-all. To create genuinely customer-centric businesses, where satisfaction = loyalty = profitability, the focus has to be on the customers, not just on their NPS.

Find out more

Our deep dive into the world of NPS draws on research, expert opinion and case studies to show retailers how NPS is simply the beginning of a Customer obsession journey that builds loyalty and sales. You can download it here. 

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