Loyal customers may love your product and service, but the goal is to get them to spread the word. Here's everything you need to know about Net Promoter Score and how to retain, grow, and convert brand advocates.
The so-called performance metric Net Promoter Score (NPS) has certainly faced some scrutiny, but with over two-thirds of Fortune 1000 companies using it, no one can deny the wide adoption by brands of this “one number you need to grow.” It’s definitely a number that is taken seriously by many industries.
Travel is no exception. Research done in 2019 by NICE Satmetrix in its U.S. Consumer Net Promoter Benchmark report, surveying 68,000 respondents and covering 23 industries, revealed that in the travel sector, airlines have been leading with an average NPS of 39. Hotels follow with a score of 36, and travel websites have an average of 18.
Knowing your company’s NPS is great, particularly when it acts as a benchmark to competitors, but actually understanding the reasons behind the score is where the secret lies.
How to Measure NPS
“The one number you need to grow” became widely known in 2003, released in the Harvard Business Review and coined by Frederick Reichheld. Its purpose was to minimize the use of complex traditional surveys in evaluating customer satisfaction. More importantly, what made many companies jump on the wagon of NPS adoption was the finding that Reichheld had reported: high net-promoter percentage is strongly correlated with high revenue growth across many industry sectors.
NPS is measured on an 11-point scale from 0–10, presented with the question that asks: “On a scale from 0–10, how likely are you to recommend this company to a friend or colleague?”
Promoters are grouped on respondents who selected 9–10, passives are those who selected 7–8, and detractors are between 0–6. To work out the score, the percentage for the total detractor scores needs to be subtracted from the total percentage of the promoter scores. In doing this, the score is calculated as a number and not a percentage between -100 and 100. Zero is considered a fairly reasonable score. However, the aim is to be 50 and above, which means the percentage of the promoters is at least 50 points more than that of the detractors. If it drops below zero, then companies are entering the red-flag zone, with more detractors than promoters.
Promoters are seen to be a brand’s advocate, and more brand advocates are associated with more revenue. Passives are somewhat undecided, and detractors will disparage a company based on their last experiences.
With this metric, a company can continuously measure their performance without a customer having to fill in a hefty survey. Sounds simple, right? Companies that are already using this know that while this sounds simple, the NPS needs to capture the entire customer journey.
Additionally, having “the one number you need to grow” goes beyond being just a number — without knowing the reasons behind that number, brands won’t know where their weaknesses are, or their strengths.
Promoters Are a Company’s Most Loyal Consumer
Promoters will drive revenue for a business due to their advocacy. NPS is one of the most valuable metrics to measure customer loyalty and inevitably bring in more revenue by implementing strategies to grow the NPS number. According to research done by Temkin Group in 2016 — a customer experience research and consulting firm that was acquired by experience management company and survey platform provider Qualtrics in 2018 — promoters will recommend a company to around 3.5 people and are more than five times as likely to make a repurchase. Brands should leverage the fact that their promoters are also much more forgiving than their counterparts, passives and detractors
Due to the importance of having promoters for a brand, companies should implement strategies to convert passives and detractors into promoters as well.
How Do Travel Sectors Fare in NPS?
There’s not a huge difference between the leader of NPS in airlines and hotels in 2019 by NICE Satmetrix research — Southwest Airlines was ahead of the airline industry with the highest NPS of 71 — only three points behind the overall leader Costco (NPS of 74). Ritz Carlton had the highest among hotels with an NPS of 68. Although there was a steeper drop in the average NPS between airlines and travel websites, Airbnb was not far behind for travel websites with an NPS of 44.
Airlines have not always been in the lead with NPS — research carried out yearly by Temkin Group shows an interesting variation within the travel industry between 2014–2018. This study doesn’t include travel websites. However, Airbnb is considered a hotel in this study. Hotels were leading in two consecutive years in 2014 and 2015 with airlines being on par with hotels on average NPS in 2016. But then airlines dropped in the average again, below hotels and rooms in 2017 and 2018.
A Kuoni Use Case of NPS
Kuoni Travel, headquartered in Switzerland with a strong presence in the UK market, specializes in luxury and bespoke travel. The CEO of Kuoni, Derek Jones, refers to how the agency embedded NPS as part of its values to increase customer retention. NPS has driven the business to the success it has today. Jones describes NPS as not just a score; instead it’s a system where “We’re now able to capture everyone’s comments — good and bad — and respond immediately to issues.”
Kuoni has been using NPS for a few years now, and Jones spoke to Skift about the three types of NPS questions the agency asks at different stages of a customer’s life cycle. The NPS question is sent to customers at post-booking, post-travel, and post-enquiry. Post-enquiry was the last NPS question Kuoni implemented because the company realized that it wanted to understand why a customer didn’t end up booking with it after they had made an inquiry. The idea was so that they could have a meaningful customer satisfaction measure to raise the bar in the customer service they provided.
Post-booking already showed positive scores from the beginning, so they decided to also ask an NPS question for post-travel. The last one they brought in four years ago was the post-inquiry NPS. End of year for 2019 NPS for Kuoni are: post-booking 87, post-travel 66, and post-inquiry (non-bookers) 35. This allowed Kuoni to better understand the full customer journey.
Post-inquiry was negative to begin with, which Kuoni expected would be the case because these were customers who chose not to book with them. However, Jones told Skift that customers will have their reasons for not booking with them, but “As long as our service was great … there’s no reason why people wouldn’t still recommend us to their friends and relatives, which is what NPS is all about.”
Jones further explained that Kuoni has a process in place for improving all NPS scores received. Kuoni publishes the scores with the reasons given by customers on live screens in the offices for everyone in the company to be able to see at all times. The team follows up with promoters to ensure all is still running smoothly for them, and store managers also contact their detractors immediately in all NPS surveys they do. The feedback is acted on and also looked at from a business development and operations perspective to review their processes for the future.
An example of an issue that was picked up at the beginning from the NPS survey Kuoni was sending to its customers was happening at post-travel. It had identified that there were issues around the airline journey on prebooking seats and baggage allowance. By identifying the amount of detractors that were affected by this, Kuoni was able to redesign their processes of prebooking for its customers. This ultimately helped to eradicate as many of those detractors as possible. Kuoni uses the feedback from the NPS surveys to make relevant changes, and this practice helps it maintain a high NPS.
An Airbnb Use Case of NPS
Airbnb has used NPS by looking at it from a data perspective by analyzing the patterns that were appearing based on 600,000 of its customers. Data scientists at Airbnb found a correlation between the likelihood to recommend (LTR) given in an NPS question and the actual referral of Airbnb to a friend via its app in a 12-month period. Promoters, with an LTR of 10, were 13 percent more likely to rebook and 4 percent more likely to submit a referral in the next 12 months for Airbnb than detractors.
Lisa Qian, a data scientist from Airbnb, in her December 2015 article How Well Does NPS Predict Rebooking? explained that in the company’s analysis: “We also note that guests who did not leave a review behave the same as detractors. In fact, they are slightly less likely to rebook and submit a referral than guests with LTR of 0–6. However, guests who submitted a review but did not answer the NPS question behave similar to promoters.”
In this case, fear the customers who go silent on giving any kind of feedback, not the customers who go viral online. The additional group of promoters also identified include those who submitted a review without answering an NPS question. Assuming that the review is positive, that leaves behind a group of promoters that NPS is also unable to capture. These findings demonstrate that NPS shouldn’t be followed dogmatically. Companies would need to find ways of measuring the behavior of those who don’t leave reviews or don’t fill out NPS questions that will enable a comparison of all groups.
Can Online Reviews Replace NPS?
Amazon’s CEO Jeff Bezos stated that “if you make customers unhappy in the physical world, they might each tell six friends. If you make customers unhappy on the internet, they can each tell 6,000 friends.”
There’s no doubt that online reviews play a huge role in travel decisions, from who consumers should fly with, what hotel they should book, and other travel-related purchases such as tour packages and experiences. TrustYou’s 2015 research identified traveler review habits including:
- 95 percent of respondents read reviews before booking.
- Leisure travelers read an average of six to seven reviews before booking versus business travelers, who read an average of five.
- Leisure travelers spend an average of 30 minutes reading reviews before booking; 10 percent of travelers spend more than one hour reading reviews.
TripAdvisor’s 2019 research with Ipsos MORI, which polled 23,000 TripAdvisor users, found that online reviews make all the difference when choosing between two properties that are almost identical in what they offer — 79 percent are more likely to book the hotel with a higher rating, and 52 percent would never book a hotel that doesn’t have reviews.
With the power of online reviews, can the information on various review and social channels be standardized and quantified in a manner that can serve as a replacement of NPS? It’s clearly a huge undertaking due to the volume of free-form content. Having appropriate tools to sort through this information in a timely manner makes all the difference for a business and from a customer’s point of view.
Reputation management services are starting to provide ways to tackle these issues and make online reviews with star ratings a viable NPS alternative. Trustpilot’s 2019 report with Skift, which offers five strategies to grow travel business, uses a TrustScore metric that calculates customer satisfaction levels using an algorithm that combines how recent a review is with a company’s star rating in order to generate an overall score. This is to create a holistic approach to a brand’s success. Tracking consumer sentiments can help a business get through its open-ended feedback without having to go through each individual comment. Chief Product Officer Ramin Vatanparast from Trustpilot explained how they deal with this:
“You can choose 10 sentiments and follow the trend of those sentiments … Then you receive a report automatically, by email, on a weekly basis, which tells you what sentiments were positive or negative and what are the areas of improvement. This means you don’t necessarily need to go through all the reviews. [Trustpilot] is doing the heavy lifting.”
Trustpilot is an example of using consumer sentiments; however, this can be done internally by a business using platforms such as Qualtrics with Text iQ.
Standardizing online reviews this way is similar to collating scores of an NPS in a quantifiable way. The downside of sentiment analysis is that if a company wants to follow up with a passive or a detractor immediately based on their feedback, then sentiment analysis will not provide this information and at some point would require someone in the company to review. Moreover, there needs to be a balance between generating scores with sentiments and sorting through free-text.
Social Media Week talked about ways to build brand loyalty with online reviews that include free-text. It advised that a brand should be proactive and reply to 40 percent of negative reviews received; not hiding negative reviews to remain transparent; and to show gratefulness by thanking customers for positive reviews they posted.
Other Challenges of the Original NPS
A recent article published in the HBR in October 2019 by Christina Stahlkopf reviewed some of the pitfalls of NPS with a guide on using its application effectively, in C-Space’s study Beyond NPS: Unlocking Customer Advocacy.
Two thousand consumers in the U.S. and the UK were surveyed and asked to rate up to three of the 10 largest global brands, such as Airbnb, Netflix, Burger King, and Amazon. C-Space asked the NPS question with an additional two questions: “Have you recommended this brand?” and “Have you discouraged anyone from choosing this brand?” The former is similar to the Netflix approach of asking past behavior instead of future intent. Netflix asks its subscribers: “In the last six weeks, did you recommend us to a friend or family member?” with a binary response of yes/no. In addition, the C-Space study also wanted to test past behavior of negative influence. Stahlkopf noted, “Research suggests that intention is not a reliable metric — because intentions often stay just that.”
Furthermore, in referring to the current three buckets within the NPS metric, Stahlkopf explained that humans are more complex than this:
“NPS presumes that someone can’t be both a promoter and a detractor. But humans are complex and often contradictory. Our minds are always operating on multiple planes — placing facts, feelings, and experiences within contextual and subjective frameworks. An oversimplified model can ignore this natural human state.”
Their study concluded that the focus should be on customers’ actual behavior.
Depending on how NPS is used, it has proven to be a metric that allows a company to better understand how loyal its customers are through the power of recommendation. When it’s not used effectively, it ends up being a number without meaning, but when meaning is added, it becomes a much more profound metric.
With the growth of online reviews websites, some companies may prefer to focus on this measurement combined with star ratings. As long as reviews are by a brands’ customers and remain authentic, then this can also be a reliable metric to gauge consumer loyalty. Just as comments from NPS need to be followed up, so do online reviews — this is where they both hold some similarities.
Where a company would go wrong is if it never measured consumer loyalty via at least one metric — it would be missing out on key opportunities to retain its most loyal customers who would be spreading the word and bringing in more revenue because they recommend the brand to others.
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Photo credit: Southwest Airlines was ahead of the airline industry so far in 2019 with the highest Net Promoter Score of 71, according to NICE Satmetrix research. Southwest Airlines