Mar 12, 2018

Weighing the scale: Should banks explore or ignore Net Promoter Scores?

By at least one measure, USAA has the most satisfied customers of any bank on the planet. The Texas-based group of companies—which offers banking, investing and insurance to active service members and veterans of the U.S. military—enjoys the highest Net Promoter Score  in the business, according to For its banking services, USAA earned a score of 76 as of February, the company says. To put that in perspective: Any NPS above 0 is considered good, while 50 or higher is seen as excellent.

Embraced by many banks and other organizations—but not without its skeptics—the Net Promoter Score purports to measure customer loyalty and a company’s potential for revenue growth by asking a single question: “On a scale from 0 to 10, how likely are you to recommend this company to your friends and family?” The NPS metric is trademarked by Fred Reichheld, Bain & Company (where Reichheld, now an advisory partner, has worked since 1977) and software provider NICE Satmetrix. An author, speaker and business strategist, Reichheld introduced the score in his December 2003 Harvard Business Review article "The One Number You Need to Grow." It’s a fascinating read (though some wags might suggest that the Net Promoter Score began as a self-promoting venture).

Promoters, passives, detractors defined

Depending on their answers, respondents fall into one of three categories. Those giving 9 or 10 ratings are “promoters”—loyal  enthusiasts who will keep buying and refer others. Customers who rate a company at 7 or 8 are deemed “passives,” meaning that they’re satisfied but indifferent, and therefore vulnerable to competitors’ offers. Scores of 0 to 6 signify “detractors,” unhappy customers whose negative word-of-mouth might damage a brand and hinder its growth.

The net score—determined by subtracting the percentage of detractors from the percentage of promoters—can range from a low of minus 100 (if every respondent is a detractor) to a high of 100 (if every respondent is a promoter).  

A spokesman for Bain says the scores are confidential. But—a website connected to the company CustomerGauge, which sells and services the Net Promoter System on behalf of Bain—reports the scores of many banks over the last several years.

According to the site, USAA’s high score reflects “the ease of doing business with the company” and the fair treatment of customers. CustomerGauge credits USAA with being the first financial services company to let customers check balances via text messages and email in 2009. A recent Bain report also recognizes USAA for introducing a feature that allows customers to conduct banking transactions by speaking conversationally—as opposed to in awkward chatbot questions and answers—with Amazon’s Alexa voice assistant.  

Lloyds, the British retail and commercial bank, earned a 62 score as of February, up from 43 in 2011, according to António Horta-Osório, CEO of Lloyds group, says the company has been deploying new technology to make “banking simple and easier for customers.”

German financial services company Allianz SE recently earned a solid 60, up 52 points from its score of 8 in 2013, according to As news site THE FINANCIAL reported, Allianz continued to improve its customer-experience measures in 2017, and its score rose 5 percentage points to reach its current level.

Critics and critical oversights

Though many banks rely on the method to gauge and improve customer satisfaction, the Net Promoter Score has its critics. According to a 2007 study by New Jersey research company Ipsos Loyalty, and academics in the United States, Turkey and Norway, “recommend-intention alone will not suffice as a single predictor of customers’ future loyalty behavior … contrary to Reichheld’s assertions.” Myopic focus on the score risks “potential misallocations of resources,” says the study, which argues that a multiple indicator performs better.

What's more, an NPS might be rendered partially irrelevant in the face of data that gets to the heart of how consumers decide to change banks. Clearly, the motivations don't always correlate to how much people promote or detract it.

Experts agree, based on the examples set by high-scoring companies, that banks can improve customer loyalty by making financial services simpler and easier to use, often through technology. Yet is it that simple? Some customers who profess to love their bank might decide to leave on a digital whim, based on a competitor’s unveiling of a shiny new toy.

According to BAI's Banking Outlook survey (prepared from 2000 customer responses), a third of all consumers (34 percent) would switch primary financial institutions if they found one with better banking apps and digital capabilities. And the number jumps to more than half among surveyed millennials. The findings were shared in the webinar, Banking in 2018 from the customer's perspective.

So if promoters are believers, and detractors are deniers, then consider millennials “platform agnostic,” says Mark Riddle, BAI's Director, Research and Content Delivery.

“Only 58 percent would trust their primary financial institution most for financial products and services, compared to the ‘silent’ (mature) at 86 percent,” Riddle says. “Couple that with millennials' willingness to switch for a better banking app, and banks are beginning to lose relevance with each passing generation.”

That, concludes Riddle, "is a recipe for disruption in the industry.”

Net opportunities

That’s not to say Net Promoter Scores amount to flag-waving fluff: far from it.

“The best NPS programs are built around a continuous process of identifying opportunities and making improvements, not discussing a number,” says Bruce Temkin, Managing Partner of the Temkin Group, a Waban, Massachusetts-based consulting firm that works with financial-services companies and other clients.

Temkin, who publishes an annual “Net Promoter Score Benchmark Study,” adds that banks will encounter problems if they focus too much on the metric itself: “The deepest insights about opportunities to improve often come from a well-designed, open-ended question asking ‘why’ as opposed to the multiple-choice question that drives the score.”

Thus if the Net Promoter score still has solid net worth—and many in the financial services industry believe it does—how can banks boost it? Here are three actionable insights:

  • Do digital simply. Banks should refine their website and mobile app to be convenient, multifunctional and easy to use with just a few taps or strokes, the Bain report says. In the UK, digital transactions lead to higher Net Promoter Scores than those conducted through employees, the report says.
  • Set different promoter/detractor targets. “Banks need to analyze the data for promoters and detractors separately, and take actions targeted for each of those areas,” Temkin says. “The actions that eliminate detractors aren’t typically the same as those that create promoters.”
  • Listen, understand, act, repeat. Reichheld writes that boosting loyalty and Net Promoter Scores “starts with listening to customers, understanding them and taking action that improves the customer experience.”

As for how Reichheld himself might score among his colleagues at Bain after 40 years there, that’s another story—though it’s reasonable to guess that he has some strong opinions on how his bank treats him.

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Greg Beaubien is a Chicago-based writer and editor. The author of three books including a novel, he has written for the Chicago Tribune, Los Angeles Times, Travel + Leisure, Yahoo Travel and for the petroleum company BP.

Lou Carlozo is the managing editor at BAI.

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