There is a tendency in most companies to rush to set NPS targets and goals. This usually comes from a very good place. Leaders want to emphasize that customer loyalty is important - I agree, of course - and including it in goals is the signal that most organizations use to let employees know something is important.
The challenge comes, however, when you connect NPS to compensation before your program (and your data) has reached an appropriate level of maturity.
Target setting is appropriate only when you feel you have trustworthy data. I come back to this issue of trustworthy data a lot, because it is so critical and so often overlooked. If you don’t feel your data is accurate, reliable, and representative of your customer base, then it is very difficult to argue that you will have confidence in setting targets around the Net Promoter Score, or related feedback. For many organizations, making their CRM systems and customer databases accurate, and obtaining feedback from the right customers can take at least 6 months—often longer.
Let’s assume you’ve crossed that first chasm of trustworthy data. Then how do you approach the challenge of setting appropriate targets?
Below are some approaches that we have used at Satmetrix. Ultimately, the path each company chooses is dependent on the organization’s philosophy about target setting in general. The list below is by no means exhaustive, but it’s a good place to start.
Set targets based on improvement goals.
In its most basic implementation, some companies require every group to improve by a similar number of points on the Net Promoter scale -for example a 3 point improvement. Although this seems like an appropriate mechanism there are a couple of challenges with this methodology.
First of all, individual business units, stores, or functions that start with low scores will generally improve more than those at the top of the range. A good solution is to ask the top performers to maintain or improve on the margin, while setting more aggressive goals for the bottom scoring units. For example, a businesses with a negative 40 Net Promoter Score might reasonably expect to see a 10 point improvement in a year’s time with appropriate actions are taken, while a businesses with a 70 NPS might only expect a 2 to 3 point improvement.
Secondly, if you operate in multiple countries, you will need to consider cultural differences in how customers use numeric rating scales such as the 0 to 10 scale that is the basis of Net Promoter. If you treat all countries and geographies equally, you will be penalizing countries in which we generally see lower averages and ranges for NPS. My group has published reports on this topic that show the ranges for about 40 countries around the world where most global companies do the majority of their business. By comparing with that type of data, you can determine whether, in fact, your country and regional scores are meeting expectations or not relative to cultural norms in each market. If you can get direct competitive benchmarks in each country, even better. But this data gives you a way to level the playing field across many key geographies.
Set targets based on historical performance.
While this also seems like an appropriate mechanism, you can imagine scenarios (not uncommon) where the score is declining. Unlikely that you will want to use the "trend" function in excel to set targets when performance is declining.
In this case you have several options - you can set the target at the highest score the company or unit has previously achieved, or set goals to move back to that level using a rolling average of some sort. Either way the message you are sending is that scores must improve.
Set targets based on statistically significant improvement.
Although I am a fan of using statistics, as it takes some of the debate out of setting targets, this approach should not be used in a vacuum. We typically apply multiple mechanisms to get to the right targets – start with some reasonable growth goal, ensure it is statistically different from last year’s performance, and consider things like cultural influences.
Set targets on improvement or movement in the Net Promoter categories or "buckets".
For example, depending on the distribution of your Promoters, Passives and Detractors, you might consider moving X% of Passives to Promoters, or consider eliminating Detractors (or nearly so). Why I focus on the distribution is that some lucky companies with 2% Detractors would waste time and money trying to solve the Detractor problems, vs. moving your Passives to have more Promoters.
Set targets based on the key drivers of Net Promoter.
With this approach, you are focusing the organization on the "levers" to pull, and key operational actions and KPIs that will ultimately improve the Net Promoter Score, instead of focusing everyone on the score itself. For some employees, this approach has the advantage of creating specific goals they feel closer to - and can more easily control, such as improving their responsiveness, or thinking of ways to make their organization easier to do business with.
These are just a few techniques we have used. I think you can see that setting the right goals is not a "one size fits all" proposition. But when you have trustworthy data and can connect NPS goals to the core business strategy, the customer’s voice can serve as your company’s ultimate rallying cry.
