Thinking about NPS benchmarking? Think bigger picture

It can be tempting to compare yourself to Apple…but if you don’t make phones or have $100 billion in the bank is it really a fair comparison?

If you’re working on Net Promoter Score (NPS) the issue of benchmarking will come up at some point. For most of us implementing NPS the hope is that these issues will come up once NPS is stable. That is often not the case.

We’d like to share with you our thinking on benchmarking in the hope it will help you make better decisions.

The allure of benchmarking. What drives the need?

1. There’s a desire to baseline customer experience performance against recognised leaders and innovators.
2. There’s the prospect of releasing positive NPS results to investors and analysts. There is a desire to be first!
3. The hope that benchmarking will drive improvement efforts.
4. The belief that it will drive employee’s ‘hunger’ to beat competitors.
5. The hunger to be a category Apple. Apple Computer Hardware NPS = +63. Where are we? How do we compare?

My view on benchmarking. Be careful.

Benchmarking can be useful in comparing business performance against a standard. Whilst NPS has reduced the cacophony of customer experience and loyalty measures out there it is far from standard.

A standard implies a harmonised method and associated behaviours have been adopted. This may be the case in EBITA measurement but isn’t the case for NPS. Every business uses NPS in its own unique way and even the ultimate question and scales can differ.

The pitfalls of benchmarking — a ‘world of confusing and conflicting variables’.

1. You don’t know how competitors are measuring NPS i.e. Sampling, survey design etc.
2. Benchmarking often ignores interdependencies i.e. operating models, business models, value propositions.
3. Benchmarking can risk masking the impact of cultural differences across businesses.

Is benchmarking possible? Yes but…

Only if you have a ‘tight’ competitive set and only if you can be sure you’re measuring like for like. It can be an expensive way of finding out who the leaders and laggards are.

Was a study necessary to find out that Southwest Airlines is a leader in customer experience?

Looking at the bigger picture.

There are more holistic ways to measure business success. Benchmarking NPS tells you only part of the story. You need a single thread that can tell you how you’re performing as a business on a series of fronts.

Work with others to identify how various data sources can fused together to tell that story. Think about things from a market and investor point of view. What do they want to know? How can you use these topics to track your own success?

1. Confidence in business customer acquisition and growth. Confidence that our customers love us.

% of user sign-ups, total number of sign-ups, frequency of purchase, % of recency of purchase, share of wallet, % of referral, NPS, brand tracking.

2. Confidence we can mitigate competition and secure our market against threats. Confidence that we’re getting our message across.

Market on-boarding and growth rate. Growth by market. NPS likelihood to recommend against competitors. Competitor customer base, brand tracking, churn, competitor churn.

3. Confidence that you’re aware of customer sentiment and feedback. Trend aware. Ability to spot early warning signs.

Text analytics data. Top improvement priorities. Improvement themes by market, regions and territories.

4. Confidence in financial strength.

Cash flow, investor value, debt burden, financial commitments, Opex & Capex costs.

5. Confidence in ability to secure the right skills, people and technology to support growth.

Training plans, technology partnerships, employee churn.

I’ve seen many clients fall down the rabbit hole that is benchmarking. It’s often an expensive exercise in finding out something you already know. If you want to understand how your business is performing put some serious thought into taking a more holistic approach.