The winter resort industry has begun using the Net Promoter Score (NPS), a measure of how likely customers are to recommend resorts, as the ultimate tool to improve profits and drive growth. Proponents claim the NPS is the best predictor of customer behavior and business growth. Is it really that easy?
No. The NPS is a useful number, but it works better for some industries than others. In a business as complex as winter sports, the number has its limitations. It does not indicate how or why a score is achieved, and resorts need that knowledge to understand what steps to take to improve their score.
What is NPS?
Still, it’s worth understanding what NPS can, and can not, do. The NPS asks, “How likely are you to recommend X to friends or colleagues?” to measure loyalty. Customers’ answers are scaled from 0-10, with 0 meaning “not likely at all” and 10 meaning “extremely likely.” NPS then groups responses into three segments:
Promoters, those responding a 9 or 10. They repurchase the most and are accountable for 80 percent of referrals.
Passively satisfied customers, those responding 7 or 8. Their repurchase rate and rate of referrals is significantly lower than that of the 9 and 10s.
Detractors, those responding 0 to 6. These individuals account for more than 80 percent of negative word of mouth.
The NPS is the difference between the percentage of 9 and 10 responses and the percentage of 0 to 6 responses. In simple math terms:
NPS = Promoters – Detractors.
As such, NPS is an indicator of how your customers feel toward your resort. NSAA research indicates the average resort score is 57. This number is relatively high compared to the average for all businesses—which is less than 10.
Limitations and Criticisms
How does a resort determine what drives its overall score? That’s the hard part. Companies that successfully use NPS apply research and management processes to understand the drivers and use what they learn to improve the experience at various customer touch points.
Because NPS is a new measure, we don’t have long-term experience with it. But Leisure Trends asks a similar question in our annual National Skier/Boarder Opinion Survey (NSOS). A review of the 12-year satisfaction trend shows a rise from 7.9 to 8.5 on a 10-point scale. Growth in the industry over this time period moved from 52.7 million skier days to right around 59 million. Does rising satisfaction explain this growth? Not necessarily. It has many sources, most notably the vast expansion in the use of season’s passes.
It is likely that, had anyone been measuring it, the industry’s NPS has always been near the relatively high score of 73 that the sport itself currently has. Comments on the sport have always been very positive. Unfortunately, there are a multitude of reasons people don’t participate more frequently, among them time and money. These factors weigh on all customer groups regardless of satisfaction or promoter ratings.
How Accurate is NPS?
One of the biggest criticisms of the score is its statistical reliability (or relative lack thereof). ForeSee Results, an online research satisfaction measurement company, found that the confidence interval, the plus-or-minus range of numbers around which a score is found to be statistically accurate, is very wide—about +/- 10 points to achieve a 95 percent confidence level—and that therefore, the ability to detect changes is relatively low. The industry score of 57 has a 95 percent confidence interval of 47 to 67.
This brings into question the statistical significance of the scores when comparing population groups using the “recommend” question. For example, how valid is the apparent difference between first-time or low-frequency visitors and core visitors? NSAA analysis indicates that the NPS score for a first-time visitor is 46 while the score for those visiting more than 10 times is 66. But if each score has a +/- confidence interval of 10 points, both these scores could be 56, meaning there is no significant difference between the first-time and core population groups.
In our NSOS research, we have been using a 5-point scale for our “recommend” question. When we analyze mean scores among the different populations within the loyalty group, we see no statistical significance between them. However, if we apply an NPS approach to the scores, we see what might be considered significantly different scores. (See graph, p. 28.) This leads us to question the mean score differences in the NPS analysis, and is an example of the issues found by ForeSee Research. The wide gap in confidence interval means that large changes in the score each year may not be significant.
And finally, how are we to evaluate the nearly 20-point difference in NPS for recommending the sport (73) compared to the average for recommending a specific resort (57)? One possible explanation is that expectation of the experience of the sport is high and identified as pleasurable. However, the actual experience does not measure up. Understanding this gap and the detractors of the experience may help to increase visitation.
Using the Score
The good news is that, thanks to the NSAA research, many resorts now know their score. The question for many is, what to do with it?
Along with the overall score, it is important to understand the makeup of the score—the percentages of each of the three categories, promoters, passives and detractors. As you can see in the examples to the right, a score of 40 can be arrived at in several ways, and the prescription for change would be different for each. Knowing the makeup of your score will help provide direction.
Once you know your score and percentage of promoter segments, you can identify the drivers behind the results. To plumb your customers’ deepest thoughts, ask questions that elicit open-ended comments—questions like, “what improvements would you make,” “what did not go perfectly today,” and “what could we have done better.” Then analyze the responses by promoter and detractor segments (age, sex, frequency of visit, incomes, etc.) to really identify how to address specific issues.
While segmentation by promoter group is critical, so is segmentation by customer type. For example, one company found that their new customers averaged lower scores. Further analysis showed that these customers found the product to be too complex. The upshot: engineers built a more intuitive product for beginner users.
One effective use of the NPS is to chart satisfaction with individual customer touch points. By mapping the many interactions customers have and identifying satisfaction with each one, companies can identify weaknesses and strengths in the total experience.
But again, because of the wide confidence interval for the score, resorts should not use NPS as the sole basis to measure the customer experience. Monitoring customer satisfaction and value scores can be better indicators.
A Focus on Detractors
Interestingly, service detractors (and the low scores they cause) are a good predictor of defection. In particular, food service is a big detractor for winter resorts. Why do resorts accept negative NPS on food service? One marketing manager assured us, “They are not here to visit the restaurant.” This may be true, but they may not come back because of that negative experience. Parking is another such issue. As customers evaluate the hassle factors of a resort, these negative detractors become an experience visitors can—and will—do without.
The biggest advantage of using the Net Promoter Score for the ski industry is likely to be benchmarking. A large number of companies and industries use the score and provide excellent comparisons. The NPS for the industry (73) matches that of Amazon.com. The average NPS for resorts (57) puts them just above Southwest (51). However, both these companies are growing faster than the resort business. Perhaps, the score for the industry indicates opportunity?
In the end, it’s likely that NPS on its own has not driven growth; rather, it’s been the resulting focus on the customer experience. Weekly and monthly attention to satisfaction scores, particularly in customer service areas, will drive the NPS and, possibly, industry growth.
Here’s the rub: Most areas know their flaws, but often accept them as areas they cannot change. If the NPS focuses ski resort managers on their main asset—the customers—and serving their needs, then it will serve a key purpose.