The Difference Between NPS and Customer Satisfaction Index: Which is the Best Metric to Measure Customer Loyalty?

The Net Promoter Score (NPS) is a metric developed by Fred Reichheld in 2003 to measure customer loyalty towards a company. It is based on the question: “On a scale from 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?”

The NPS classifies customers into three categories: promoters (score of 9-10), passives (score of 7-8), and detractors (score of 0-6). It is calculated by subtracting the percentage of detractors from the percentage of promoters.

This metric provides an overview of customer loyalty and is considered effective for measuring satisfaction and fidelity.

The Customer Satisfaction Index evaluates overall customer satisfaction with a company or its products/services. Unlike the NPS, it is based on several questions that evaluate different aspects of the customer experience.

These questions can address topics such as product quality, customer service, ease of use, and perceived value. Each question is scored on a scale, and the Customer Satisfaction Index is calculated by averaging the scores.

This metric offers a more detailed view of customer satisfaction and can help identify specific areas that need improvement.

Although both are used to measure customer satisfaction and loyalty, there are significant differences in their approach and results.

The NPS focuses on the likelihood of recommendation, making it more oriented towards acquiring new customers. The Customer Satisfaction Index evaluates overall satisfaction, being more useful for assessing customer retention and the quality of the customer experience.

Another key difference is how the results are calculated. The NPS is based on the difference between the percentage of promoters and detractors, while the Customer Satisfaction Index is calculated by averaging the scores of the different questions.

These differences make NPS and the Customer Satisfaction Index suitable for different business objectives and situations.

The NPS has several advantages:

1. Simplicity: It is based on a single question, easy to understand and respond to.
2. Focus on recommendation: It focuses on the likelihood of recommendation, relevant for acquiring new customers.
3. Overview of customer loyalty: It divides customers into promoters, passives, and detractors.

However, it also has disadvantages:

1. Oversimplification: It may not capture all aspects of the customer experience.
2. Lack of context: It does not provide detailed information on the reasons behind the scores.
3. Difficulty interpreting results: It only provides a number, making it difficult to identify specific areas for improvement.

The Customer Satisfaction Index also has advantages:

1. Detailed evaluation: It provides a more detailed view of customer satisfaction.
2. Identification of improvement areas: It helps identify specific areas that need improvement.
3. Additional context: It provides detailed information on the reasons behind the scores.

However, it also has disadvantages:

1. Complexity: It involves answering several questions, which can result in a lower response rate.
2. Subjective interpretation: Scores may be subject to subjective interpretation.
3. Lack of focus on recommendation: It does not specifically focus on the likelihood of recommendation.

The choice of the best metric depends on your business goals and needs. Both the NPS and the Customer Satisfaction Index have their pros and cons, so consider the following when making your decision:

1. Business goals: Are you focused on acquiring new customers or retaining existing ones?
2. Type of business: What factors influence your customers’ satisfaction and loyalty?
3. Implementation capability: Do you have the resources to implement and analyze a more complex metric?

Ultimately, the best metric is the one that aligns with your goals and provides the most relevant information to improve customer satisfaction and loyalty.

To illustrate how these metrics are used in practice, here are some examples:

1. Energy Fitness: Energy Fitness is a gym chain with 33 locations across Chile and more than 65,000 active members. Challenge: Maintain a high standard for customers and consistent performance across different locations. Solution: Better control of the experience at each location and reduced variance across different locations.
2. Dunkin’: Dunkin’ is an international restaurant chain that sells coffee and donuts, with 113 stores in Chile. The number of stores grew by 20% during 2022. Challenge: Previously, they had a QR survey system with a very low response rate adopted from the USA. Solution: They increased the number of responses in stores by more than 500%, giving them a larger critical mass for better and more comprehensive analysis.

These examples show how different companies can effectively use NPS and the Customer Satisfaction Index.

If you want to implement these metrics, follow these steps:

1. Define your objectives: Be clear about your goals and what you hope to achieve.
2. Select the appropriate metric: Choose between NPS and the Customer Satisfaction Index based on your needs.
3. Design the questions: If you opt for the Customer Satisfaction Index, design clear and easy-to-understand questions.
4. Collect and analyze data: Use survey tools or specialized software.
5. Interpret the results: Analyze the data to identify areas for improvement.
6. Follow-up and adjustments: Continuously monitor and adjust based on the results.

Both NPS and the Customer Satisfaction Index are effective metrics for measuring customer satisfaction and loyalty. The choice of the best metric will depend on your specific goals and needs.

Remember that implementing these metrics is not enough. Use the results to take concrete actions and improve your customers’ experience. With the right information and strategies, you can build strong relationships with your customers and continuously improve their satisfaction.