Does the Net Promoter Score work for business to business companies?
In 2003 Frederick Reichheld wrote an article in the Harvard Business Review entitled "The One Number You Need to Grow". The Net Promoter Score (NPS) was the “one number” and it has grown in popularity ever since. It is now followed slavishly by thousands of companies interested in improving their customer experience. Just look at its growth on Google Trends measured by the frequency with which people search for the term “Net Promoter Score”. Implying that it might not work for business to business companies is almost heresy.
The appeal of the NPS is its simplicity. It is derived from a single question – "On a scale from 0 to 10 how likely would you be to recommend this company?". Customers giving a score of 9 or 10 are called promoters. Those who give a score of 6 or below are called detractors. Scores of 7 or 8 out of 10 are ignored. The Net Promoter Score is derived by subtracting the detractors from the promoters. In this way we find out the net proportion of people who say they will promote a company. It is considered an improvement on a simple customer satisfaction score on a scale from 1 to 10 where many competing companies end up with a mediocre score.
Big claims are made for the Net Promoter Score. A high NPS correlates strongly with growth and profitability. The single number that offers such insights on future viability is appealing to Boards of companies. It avoids the complication of boring, boring customer satisfaction charts by providing a single number.
Before we discuss the viability of the NPS as a customer experience measure for B2B companies, let’s think about some norms.
It is almost impossible that every customer will give a score of 9 or 10 on the NPS question. That said, Tesla almost gets there. They have an astonishing NPS of 96. Great retailers such as Nordstrom achieve 75. Apple comes in at 70. Amazon clocks more than 60. These are outstanding scores.
So what would be the best NPS from a business to business company? The problem here is that people buying from a business to business company are acquiring products and services for inclusion in or to help produce other products. It’s very difficult to get as excited about these components as it is about a fabulous new Tesla on your drive. A business to business company that performs perfectly is likely to be considered very good and in spite of this it may attract scores of just 7 or 8 out of 10 from the companies it serves. These scores would be ignored in the NPS calculation. 30 to 40% of customers could be in this neutral or “passive” group. On the grounds that you can’t please all the people all the time a very good business to business company could have 10% of customers who are labelled detractors because of a score of 6 or less. This means that an NPS score of around 50 for a business to business company is very good. In fact, the average score for business to business companies is around 30.
The other problem for business to business companies is the relatively small number of customers that contribute to the calculation. Let’s imagine a business to business company with 200 customers. In an NPS poll a good response would be for 30% of customers to partake in the survey - ie 60 completed questionnaires. If a third of these are passives (ie giving a score of 7 or 8 out of 10) it means that the NPS is calculated on a base of only 20 responses. In a tracking survey aimed at finding out the NPS trend, a couple of extra customers falling in either the detractor or promoter buckets will cause the NPS score to dramatically fly up or down. You can imagine the anxiety or elation at a company Board when a new NPS score is revealed. We are not being disrespectful but Board members are typically short on patience and don’t want to listen to the whys and wherefores as to the NPS volatility and the likelihood of a skewed result.
What is the answer? Can business to business companies measure customer experience with just one number? No they can’t. The Net Promoter Score is a useful measure but it has serious limitations with small samples. The traditional customer satisfaction score from 1 to 10 is more reliable as it takes into consideration responses from all customers and not just those at the extremes. Furthermore, a single score doesn’t tell us much. We need to be able to look at customer experience scores across different groups of customers. This puts the NPS score under even more pressure if different segments are separated out for analysis, as each cell analysed will contain very small numbers of customers. Again, a traditional customer satisfaction score, embracing all customers, will be more reliable.
Another point to bear in mind is the nature of the NPS question. It doesn’t ask people how satisfied they are with their supplier, it asks how likely they are to recommend it. Some business to business customers find this question strange or even difficult to answer on the grounds that if they have a very good supplier, they want to keep it to themselves. Their likelihood of recommending a very good supplier to what could be a competitor could be quite low.
This means that for business to business companies there should be more than one number. In addition to the Net Promoter Score we suggest you ask the following:
“How satisfied are you with this supplier on a scale from 1 to 10?” (And we like to ask this question about products, delivery, price, availability and the like).
“How likely are you to continue buying from this company in the future?”
“How easy is it to buy from this company?”
And if there are small numbers of customers, there is nothing like an open-ended question such as “Can you suggest any ways in which we could improve our service to you?”.