Why NPS Falls Short In Ecommerce, And The Case For Earned Growth Ratio As A Better Metric - Retail...

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Customer satisfaction and loyalty are paramount in today's competitive ecommerce landscape, since customers have countless brands, retailers and marketplaces to choose from. Even the best products and online storefronts fall flat if customers aren't happy with one tiny part of their experience. One negative interaction can easily drive them away.

At the same time, it is common knowledge that keeping an existing customer is cheaper than getting a new one, which makes it a worthwhile investment to understand and implement strategies (and proper incentives for internal teams!) that keep them coming back for more.

And while understanding customer satisfaction is crucial, traditional methods like Net Promoter Score (NPS) have limitations that can actually lead to the opposite of intended outcomes if not applied carefully.

Survey collection methods can significantly impact the validity of NPS data. Offering incentives like "If you fill out this survey, give us a 9 or 10 and mention my name, it'll be doing me a huge favor" can emotionally influence customers, potentially leading to inflated scores that don't reflect genuine experiences.

A high score might simply be a result of manipulation, offering little meaningful insight into actual customer satisfaction or actionable guidance for improvement. Essentially, a high NPS might look good on paper — but lack true substance. This is especially prevalent if your employees are incentivized or paid a bonus on the basis of their NPS scores.

Another limitation of NPS is found in its data collection methodology. Ideally, data should be gathered through statistically sound sampling methods that control for various factors and make sure a representative sample of the customer base. But NPS often falls short in this regard.

Not only that, NPS primarily relies on self-reported data from customer surveys, potentially missing the bigger picture. It doesn⁘t consider quantitative metrics like sales figures or revenue, focusing only on customer responses. While this approach captures vocal feedback from both highly satisfied and dissatisfied customers, it doesn't take into consideration the vast majority of customers who fall somewhere in the middle (and are often most of your profit!).