Menu
RSS

NPS Only Tells A Piece Of A Retailer’s Health; Why Does The Industry Rely On It?

  • Written by  Georgina Nelson, TruRating

0aaGeorgina Nelson TruRatingAcquiring new customers is hard work and costly, so making sure that customers are happy, coming back and buying again is every retailer’s number one priority. Which is, in part, why the retail industry has relied so heavily on Net Promoter Score (NPS) data to gauge customer satisfaction. But, while NPS gives insight into general customer satisfaction, i.e. likelihood to recommend, one of its major drawbacks is that it cannot be used to guide a business to the specific areas that need focus in order to improve.

Certainly, NPS has its value. For example, NPS can be used to predict customer lifetime value, price sensitivity, willingness to try new products and a range of other metrics associated with loyalty. Therefore, when you see that you’ve done something to change your NPS score, you can estimate that change’s impact on financial outcomes. NPS also is valuable because it is easy to benchmark to your direct competitors on an ongoing basis.

ADVERTISEMENT
But it does, however, have quite a few limitations, mostly driven by the low sample size associated with receipt and email surveys. Specifically, NPS responses often suffer from selection bias. Typically, people who agree to take these types of surveys are either your most loyal customers or folks that are highly disgruntled. Thus, NPS scores likely overweigh both your fans and your detractors. 

Also, since NPS only gives a brand-level view, it cannot be used effectively to improve customer satisfaction at the store level. Some stores may be much more effective at driving likelihood to recommend than others, but you won’t see that with the low sample size that receipt surveys gather. A brand-level view is helpful but difficult to act on — you can’t confidently see what store locations are examples of best practices, or which need more attention. 

And that’s the point. Net Promoter Score doesn’t paint an accurate picture of what is happening at the store level. The customer feedback that NPS can gather is most valuable when you can determine how to convert a detractor to a raving fan. But absent mass representative data, polled on multiple metrics across each location, it’s impossible to know why a detractor is a detractor and thus difficult to act on an NPS alone. 

To understand what is driving NPS, or better yet to accurately understand where to focus in order to improve, retailers need to find ways to collect more store-level data: Ask multiple questions, in aggregate, in a low-touch, low-friction way.

For example, one of the most fundamental but revealing questions a store can ask is “How was your service today?” Many different things can impact service scores, but mainly this comes down to staff: Is there enough on shift? Have they been equipped with the right knowledge and training to help? And is management leading them effectively? Service can also be impacted greatly by a manager that inspires and a team that is motivated. In many cases when service scores have dropped, it’s because of the manager. More training, a new manager or even just a brief check-in can often inspire improved results.

Another highly useful question is: “How was your experience today?” Experience is a very hot metric right now, because retailers are struggling to understand the consumer’s expectations on the in-store experience. This metric is important because retail customers who are impressed by their overall in-store experience spend 43% more on average than those who are disappointed. The “experience” question also is perfect for testing things such as new store layouts or new checkout experiences before investing in those changes.

Customers may love the experience they received when shopping in-store, but having a great experience doesn’t always mean customers are buying more. For example, by asking only one question at checkout, one sports apparel retailer learned that while their experience scores were high, value was surprisingly underperforming and was a missed opportunity in revenue. Because of the low friction in their survey method, they received a large sample of responses, allowing them to test and learn in real time. As a response, they trained their staff in benefit-led selling, resulting in an immediate rise in value scores and an 11% increase in revenue. 

At the end of the day, in order to understand what is driving customers and what is impacting revenue, retailers need to find simple, low-friction ways to collect customer feedback. NPS only gives a narrow view of your customers and the data isn’t representative of your entire customer base.


 

Georgina Nelson is the CEO and founder of TruRating, a customer feedback solution. Headquartered in the UK, TruRating has operations across Australia, Canada and the U.S. With a background in law and an eye for the consumer, Nelson saw the need for reliable, validated customer ratings that would better serve businesses, thus launching TruRating in 2014.

back to top