NPS: No Longer the Best Measure of Customer Experience

You’re probably familiar with the old standard for measuring customer loyalty: Net Promoter Score (or NPS), right?

For nearly twenty years, the NPS question “Would you recommend company X on a scale of 1-10” was THE question. 

Thousands of companies adopted NPS, using it as a barometer to assess the health of their customer relationships.

But now, years have passed and flaws have surfaced that undermine the strength of this measure. 

The problem with NPS is simple: too often a company registers a high NPS score, but this high NPS does not translate into winning business and growing in the market.

Why’s that?  

Long story short, NPS measures likeability. And likeability doesn’t always mean best or preferred. 

Let’s break this down. 

NPS is highly influenced by the quality of customer service a client experiences. If the company does a great job taking care of its customers, customers typically respond favorably, rating the company with a high NPS. 

So far so good. 

But, in spite of the quality customer service and favorable feelings - aka likeability - other factors come into play that can surpass great service. Factors like low prices, product availability, and reliable quality.  

Liking a company is great, but it’s not everything. That helps explain why Walmart, McDonald’s and some of the discount airlines are so popular in spite of low NPS scores.  

The point is that measuring NPS gives false positives, and frankly, is not the most predictive measure in competitive industries. 

So, NPS tells us if customers like us or not, but it doesn’t consider where we stand compared to competitors. It doesn’t tell us if we’re preferred over other suppliers. That’s the key flaw. 

‍Is there a better way to assess your standing with customers that will predict your company’s outlook for growth? 

There is. And it’s called Supplier Rank.  

The concept of supplier rank is simple. It involves measuring the customer’s preference for your business vs. another option. 

The question is equally simple, “Presuming you’ve worked with (or sourced) from more than one supplier [company], how would you rank supplier X vs. the other suppliers in this category, all things considered?”

By asking this question, the customer is forced to choose who they prefer. And with their responses you quickly understand how you stack up.

If your business is ranked #1, you’re positioned to win more business. If you’re tied for first, you’re in the hunt, but it’s not a sure thing you’ll win the next deal. If someone else is preferred, you’re playing catch up. The other provider is likely to win the next opportunity when it arises. 

Knowing where you stand with your customers, as compared to your competitors - and why -  allows you to make intentional and impactful decisions. 

The evidence in favor of Supplier Rank is very compelling. 

Over the past three years, we’ve asked the NPS and supplier ranking questions in over four thousand customer interviews. 

We’ve also asked how much business the respondent awards to each supplier (aka “wallet share”).  

If the supplier is the preferred choice, regardless of NPS score, they tend to have at least 50% wallet share.  

Conversely, if the supplier is ranked second or third, they have much less: often less than 25% share of wallet.    

One respondent summed it up well, “I love doing business with Company X.  They take great care of me. They make me feel important. The problem is they don’t always stock what I need. I can’t depend on them.” 

When asked later who they prefer, the other supplier won out.  No surprise, they do over 70% of their business with the other supplier.   

This fact holds true across industries where customers buy from multiple suppliers.

Putting Supplier Rank to Use

Expand your thinking the next time you run a customer survey, include the supplier ranking question. 

Then compute the percentage of customers that rank you first. 

If you’re favored by over 50% of your customers, you’re in a strong position. If the percentage is only 25-30% or worse, that’s a red flag. You’re likely losing share. 

Knowing how to improve your position comes as a follow up question: “What is your reasoning for this ranking?”

This response is gold. 

The answers you receive to this question reflect what differentiates you from others. It unveils why you are preferred. 

Alternatively, if another supplier is preferred, the answer is the number one issue to address if you want to win more business at the account. 

[Quick caveat for those businesses that are the sole supplier to their customers: in this instance, supplier rank doesn’t apply as there are no suppliers to rank against. Instead NPS is still your preferred measure.]

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Interested in learning more about supplier rank and related satisfaction measures? Or ready to collect impactful customer feedback? Check out our website or email us at info@t4associates.com to see your options.

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