NPS vs CHS: Which is right for my business?
November 6, 2018
Net Promoter Score ® (NPS) has long been touted as ‘The Ultimate Question’ since it was created in 2003. The Fortune 500’s favourite big cheese, NPS, is used to measure loyalty and predict business growth. But does it still meet the demands of a modern business?
80% of businesses believe they offer a superior customer service and yet the same study found only 8% of their customers agreed. It’s clear to see something’s amiss.
Soliciting feedback is nothing new but the industry standard systems used to measure loyalty and customer engagement are seriously dated and severely lacking. Not to mention boring for customers and companies!
Happy customers (and lots of them) are the key to a successful business. But how do you know if your customers are happy? Well… you have to ask. And to get the big picture, you have to collect as many responses as possible.
The Customer Happiness Score® was developed by businesses owners in an effort to better understand how their customers felt. With an onus on customer happiness, rather than their propensity to refer, it aims to empower entrepreneurs with the insight they need to grow their business.
CHS, NPS…what’s the difference? Feedback’s feedback right?
Let’s take a closer look.
CHS V NPS: The question
Each system asks the customer a single question. This is where the similarities end.
You’re probably very familiar with the NPS question. It’s everywhere. From your hairdresser to your mechanic, your local fast food vendor and your postal delivery service. Net Promoter claims to “gauge the loyalty of a firm’s customer relationships” but neglects to ask about how the customer feels about their experience in the business.
Sure, a recommendation is great, but as a measure of customer loyalty, it’s flawed in a number of ways.
NPS doesn’t care how your customers feel
Firstly, the recommendation question gives no direct insight into how the customer feels about your business or the experience they’ve had in it. The problem is the question is relational and not transactional. This is flawed because the relationship the customer has with your business is made up of their transactional experiences i.e. when they buy a product or service from you.
Customers are all too quick to give their business to the competition after a poor experience, regardless of how they may have felt about your brand as a whole. The referral question forces you to make assumptions about whether the customer enjoyed their experience with you or not. Interpretations and assumptions risk getting it wrong. The only person who can speak for the customer is the customer themselves.
NPS is solely concerned with a recommendation
Think back to the last time you recommend a product or service. Can’t remember doing it? Recommendations are rarely opening statements to a group of prospective customers eagerly listening for the next tipoff. They’re usually weaved into a conversation as part of a larger narrative.
The last time you did recommend a business it’s unlikely you volunteered the information out of the blue. It was probably prompted by something someone said or did. It was reliant on the product you were discussing, the people you were with and the relevance to the situation you were in.
NPS is a poor predictor of future behaviour
Science says asking your customers about things they haven’t done yet is a poor predictor of future behaviour. This is because people can say they’ll do something (ie recommend your business) but have no real intention of doing so. A study by Daniel Schneider, Matt Berent, et al showed NPS to be the worst of the four scales they tested in predicting a customers’ future behaviour.
A good example of this was a referral scheme run by luxury holiday resort, Potter Leisure. They sent a Christmas email promotion to 75,000 existing customers promising discounted booking to members when they successfully referred a friend. Despite saying they would recommend, less than 1% of actually did.
Asking about something that has already happened garners more accurate results than asking about something that hasn’t. Ultimately people are flakey. They can change their minds, forget or just not care enough to recommend your business even if they said they would.
NPS is open to interpretation
NPS asks you how likely you are to recommend a business. This is problematic because you’re asked to apply your answer to an 11 point scale. You either will or won’t recommend, there’s no varying degree. Despite this, NPS gives no scientific reasoning behind why they use an 11 point scale or any guidance on how to use it.
Opinions are subjective by their very nature and that includes how you and your customers perceive the scale. One person’s 8 might be another person’s 6. Thanks to the way the score is calculated, this could skew the results and still give you little to no insight about how the majority of customers feel about your business.
NPS was created before the rise of social media
NPS was created when word of mouth was one of the most effective marketing methods. Now social media and online reviews dominate. The reach and permanence of this feedback is a double-edged sword that can make or break your business. It makes knowing how your customers feel about your business infinitely more insightful than if they’d recommend it. Knowledge is power!
The One Question operates on a different logic. One driven by the customer.
The customer may not know how likely they are to recommend a business between 0-10, but they do know how they feel about the experience they’ve had. And, because your customers have told you exactly how they feel, there’s no need to guess!
How we feel ultimately dictates what we do. This makes feelings the best predictor of a customer’s future behaviour. Their answer will indicate whether they’ll come back to your business, recommend you to family or friends and even highlight how receptive they’ll be to your marketing efforts.
Whether they’ve got 15 seconds or 15 minutes, your customers can tell you all you need to know about your business, simply by clicking 1 of 5 emoji style faces. A one-second response will establish whether you’ve exceeded their expectations or missed the mark.
Offering such a low barrier to response means people aren’t put off from filling surveys in. This secures higher response rates and provides your business with more accurate insight.
The One Question’s ‘Tell us more’ button helps you build the bigger picture. This captures the specifics from those who care to share. This puts the power in the customers’ hands and lets them expand on their answer if they have the time or inclination.
The faces provide you with your Customer Happiness Score, a measurable quantitative result to run your business by. The ‘Tell us more’ gives you the qualitative data, the all-important ‘why’ to help you take the right course of action.
CHS V NPS: The segments
This is where it gets interesting (if you’re into that kind of thing).
The NPS calculation is derived from splitting the scale into three groups;
- Detractors (Respondents who gave a score of 0-6): These guys weren’t impressed. You seriously let them down and their rating will negatively impact your overall score.
- Passive (Respondents who gave a score of 7-8): While it might be at the upper end of the scale in the real world, in NPS town this is strictly middle ground. They’re not complaining but they’re not raving either.
- Promoters (Respondents who gave a score of 9-10): First place, the holy grail, the creme de la creme of customer satisfaction.
So on first glance that makes sense. You have your three groups. You know who is most and least likely to recommend your business and this provides a framework for establishing who thinks what.
What doesn’t make sense is why a score of 6 has the same negative effect on your NPS score as a 0. It’s a difficult concept to understand so if you’re struggling please join me in donning our imagination caps.
You’re staying in a lovely little hotel by the sea. You’re not blown away by the 1970’s style decor but it’s nice enough. The staff are friendly, but not overly helpful when you complain about the couple in the room above line dancing into the early hours. You give your experience a 6/10 and be on your merry way.
Your friend comes the following week. They eagerly await to check in only to be ignored by the girl at the front desk. When they finally get in the room it’s damp. And is that a cockroach scuttling behind the curtains?! They call the front desk in despair to be told they’re fully booked so there’s no possibility of a room swap.
The next morning, bleary-eyed, they hastily scribble a 0 on the feedback card and leave. Vowing never to return, they bad mouth your business to everyone they meet before penning a particularly scathing review on TripAdvisor.
Despite having very different experiences and giving very different scores, both you and your friend sit in the detractor’s group. These ratings will result in the hotel receiving the worst possible score. There is no differentiation between 0 and 6, which doesn’t seem fair considering the range of experiences possibly encompassed on a scale of 0-6.
On the other side of the coin, a score of 9 has the same value as a score of 10. Both are promoters that will result in a perfect score of 100. However, this system doesn’t take into account the ‘buts’.
The ‘but’ is when you’ve had a great experience but there was room for improvement. An example of this could be the meal was delicious and the service was friendly, but the toilets smelt. As a customer you rank that experience as a 9 to account for the slight let down in standards, but NPS disregards that and attributes a score of 9 top marks.
The One Question keeps it simple. The system lets the customer self-select their own group meaning there’s no interpretation required. Their choice is segmented by how they felt about their experience in your business.
There are 5 groups, one for each emotion ranging from Actively Unhappy to Actively Happy. Each segment is depicted by a classic emoji image denoting a facial expression. Each emoji represents a varying degree of happiness. It’s pretty self-explanatory and everyone is capable of sharing how they feel.
Your 4-year old niece could understand well enough to contribute if she would just take those crayons out of her nose for 5 minutes. It also means non-English speakers can contribute even if they can’t read the question. It’s a simple, easy and inclusive way to collect emotional data.
The beauty of customers self-professing their happiness means there’s no guesswork involved. There’s no confusion over what number dictates what feeling. A sad face emoji icon represents a real sad face leaving your business. It’s as simple as that. It’s what you do about it that matters.
CHS V NPS: The score
Ah, the score. This is the juicy stuff! It’s what your teams have been waiting for! For a pat on the back? For a telling off? For glory or admonishment!
And with NPS they will be waiting. And waiting. And waiting some more, until the data you’ve collected is out of date and it’s too late to rectify any potential damage.
NPS was developed in a time before social media. Today, customers with a cross to bear don’t have idle hands, they have active thumbs. A negative tweet or a ranty Facebook post could be damaging your reputation before they’ve even left the building. You’d know more about their issue from seeing it splashed across social media than you would waiting to collate your NPS data.
NPS scoring operates between -100 (bad) to 100 (good). This is calculated by applying a formula derived from the grouped scores, (remember those detractors, passives and promoters?). You add up the total responses from each of your three groups and divide it by the total number of surveys to give you a percentage. The total number of detractors subtracted from the total number of promoters gives you your NPS score. Phew!
Bit of a mind boggle isn’t it? As is generally the case, if you don’t understand the logic behind something it can be difficult to fully support it. Not only is NPS confusing, but when seemingly good feedback can calculate a score of 0, it can prove pretty demoralising.
For example, imagine you’re a hotel owner and your business receives an NPS score of -27 for cleanliness. And let’s say, perturbed by the negative score, the cleaners are really thorough for the next few weeks. After a lot of hard work, they manage to up the score to 0. It still doesn’t sound great, does it? Disheartening to say the least. The confusing nature of the score could have a detrimental effect on the morale of the team.
The One Question values simplicity. As an online platform, your business’ Customer Happiness Score will update in real time as feedback is submitted. Managers are able to view the responses and watch the dashboards update live. This gives you the opportunity to evaluate service if it happens. This ensures you can be confident things are going well or allows you to pivot and make changes if required. The score’s immediacy means you’ve got your finger on the pulse of customer happiness!
Your Customer Happiness Score is between 0-100 and is a reflection of how happy your customers felt about their experience in your business. The score is to interpret and understand. Having a score from 0 (Actively Unhappy) to 100 (Actively Happy) is logical. It demonstrates how your team’s actions positively affect change, making them accountable to your customers.
CHS has proven to be a hugely powerful productivity tool. Its simplicity means everyone can get behind it, from the staff room to the boardroom. It sums up a common goal your whole organisation can get behind in the long or short term, i.e. improving the score by 10 next service or getting above 90 in Q4. And because the score is calculated directly from customers’ feedback, it’s a fair and accurate way to measure performance.
The last word
To evolve (and profit) in business we need to build strong lasting relationships with our customers. And like any relationship, you do this by listening to and understanding the needs of the other person.
NPS was not without its merits when used for what it was designed for, but times change and times have changed. Social media and online reviews play a huge part in how prospective customers view your business. Letting customers go home disappointed is not a good business strategy and with the subjective nature of NPS, you simply don’t know if they did or not. If the negative scores do give you a clue, it’s way too late to do anything about it.
The One Question was born to remedy this confusion. A simple and novel collection method means more customers leave more feedback. You understand what your customers want and your staff has the insight they need to make it happen. Quick, simple and accessible. The One Question future proofs your business by making customers happy.
It pays to care how your customers feel so find out what your business’ Customer Happiness Score is and how you can improve it. Start paving the road to business growth and sign up for a free demo of The One Question platform today.
Customer Happiness Score® and CHS® are registered trademarks of The One Question Group Ltd.
Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld.