Today's business is about facilitating customers with value and memorable experiences. In order to do so, organisations demand for tools that help them in managing this process. Oftentimes, organisations use the Net Promoter Score (NPS) to get a grip on customer loyalty. However, despite its wide usage, in this article we contemplate why the NPS is not future proof and propose a new and more comprehensive customer experience measurement tool that measures the customer's 'VALEX' instead.
The NPS Myth
The NPS is often depicted as a customer experience/satisfaction/loyalty measurement tool. However, this is far from its core purpose.
"The only number you need to grow". That's how the NPS has been introduced in 2003. The NPS is based on a single question, namely: "On a scale from 0-to-10, how likely is it that you would recommend us (or a certain product, service or brand) to a friend or colleague?". This question is often followed-up by other questions to find out the primary reason of choice. This enables organisations to divide customers into three categories: ones that absolutely love it ('promoters'), hate it ('detractors') or those who don't care about the product, service or brand ('passives').
The 'NPS ambassadors' see it as a quick measurement of customers' feelings and attitudes. As such, it has gained its popularity within practitioners because of its simplicity and ease of use. The NPS even became a key C-level KPI and entire sales departments are assessed on NPS. It quickly became the most widely adopted customer experience metric, especially in the US.
For sure, the NPS has been helpful in bringing more focus and importance towards the customer in growing businesses. As a result, companies also devote more effort and resources towards investing in customer experience management, which always is a positive thing.
Why there's much more than the NPS
Without going too much into detail, the NPS definitely contains shortcomings.
Some people claim it is a simple and accurate tool. People fill in a number on a 0 to 10 scale. At first sight, this indeed seems pretty accurate. Having a closer look, however, shows that the NPS uses an arbitrarily three-point scale in an unbalanced way. This because the 0 to 6 are categorised as detractors, 7 to 8 passives and 9 to 10 promoters. For example, a customer that rates a service with a number two, is considered 'the same' as one that gives a six. The NPS thus reduces a ten-point scale to a three-point which oversimplifies everything. Besides, research shows that a promoter is not 100% of the time a promoter as a detractor does not always detract. So... how accurate is the NPS really?
Despite managers often claim that NPS have a positive effect on organisational growth, it does not. The NPS solely measures the likelihood to recommend and does not measure customer satisfaction (which according to scientists has impact on organisational growth). Some NPS fanatics stand their ground and claim that it intermediates satisfaction or loyalty, but empirical research does not support this. So NPS... what the growth?
VALEX as a comprehensive tool for deep and effective customer experience measurement
We know by now that facilitating customers with value and extraordinary experiences and managing customer loyalty and satisfaction, goes much further than the likelihood to recommend. Especially when admitting that value is created by customers (also known as 'value-in-use‘), this becomes more complex.
Today's marketing paradigm asks for a relevant customer experience indicator. One that grasps the rich experience and value-in-use of customers. Therefore, we introduce the VALEX (VALue EXperience) index. Using this index, organisations gain in-depth insight into customer experience based on the value customers create.
With VALEX, organisations are able to measure the very rich experience of specific customers in every step of their journey for specific products/services.
More detailly stated, the VALEX index contains several measurement possibilities with different dimensions that allows organisations to:
- Measure customer or segment specific
- Measure product and service specific
- Measure customer journey step specific
- Measure the customer experience modularly and multidimensionally.
Because of this breakdown in for whom and what VALEX measures, and eventually, what VALEX measures in terms of experience, organisations can pinpoint exactly where points for improvement lie and where they perform well.
What does VALEX offer for organisations?
We are developing a tool that calculates the VALEX of your customers. It allows to detailly and multidimensionally measure customer experience for specific customer segments, different products/services, and across and in every step of the Customer Journey. Since it is built fully modular, the tool can be customised specifically to your business context.
In essence, our novel tool diagnoses your customer's experience. Through this diagnosis, a 'heatmap' creates in-depth insights into the customer experience for different products/services throughout the entire customer journey. This in turn serves as input to exactly pinpoint where to improve current offerings. Organisations therefore have insight where things 'go right' and where things 'go wrong'. This offers opportunities to enhance customers' experiences. Plus, when VALEX is measured over time in combination with organisational performance, our tool can prospect the 'Life Time Value' for your organisation.
Be part of the VALEX mindset
The VALEX tool is novel and still in development. For organisations, it can be very interesting to participate further developing the VALEX tool to customise it specifically to your business and needs. So, do you have the need to update and improve your customer experience management? Are you interested to know more about VALEX? Please reach out to us!
Freed, L. (2013). Innovating Analytics: How the Next Generation of Net Promoter Can Increase Sales and Drive Business Results. John Wiley & Sons.