The Net Promoter Score – more than a metric?
„On a scale from zero to 10, with 10 being highest, what’s the likelihood that you would recommend us (our company) to a friend or colleague?“ That is the basic question for the Net Promoter Score, also known as NPS, which was created by Fred Reicheld and Bain & Company in 2003. Based on that question, the Net Promoter Score index directly quantifies the willingness to recommend a product or service and indirectly measures customer satisfaction.
The Net Promoter methodology is based on a scale from 0 (not at all likely to recommend) to 10 (extremely likely to recommend) and falls into three different groups of customers:
Promoters are those people who respond with a 9 or 10.
They are loyal enthusiasts who regularly purchase a company’s product or service and encourage their friends and colleagues to do the same.
Passives are those people who respond with a 7 or 8.
They are satisfied with a company’s product or service, but are generally unenthusiastic. Passives are likely to instantly shift to a competitor for a better deal.
Detractors are those people who respond somewhere between 0 and 6.
They are significantly unhappy customers who perceive themselves as being in a bad company/customer relationship – and they aren’t afraid to share their experience.
To determine the NPS score, the percentage of detractors is subtracted from the percentage of promoters. The result is the net share of promoters, the Net Promoter Score.
What makes the NPS valuable
An important advantage of the NPS is its ease of use. The survey can be conducted by e-mail, phone, web or in-app and there are no complex indices or correlation coefficients. It’s a single number that can be tracked and broken down just like net profit.
Due to its simple structure, the NPS also requires low effort and time from customers to answer. Thus, there is a relatively high probability that they will take the short Net Promoter Score survey. They may even answer another question or two. Simple additional questions like „Why?“ or „What could have improved your rating?“ give insight into what causes promoters to stick to a product/service or what might turn around a detractor. The answers are valuable feedback any company can use and important information to understand what is actually driving the score.
As an open-source method, the NPS can be easily applied in a wide variety of business settings. Apple uses it in its retail stores, American Express after servicing calls and Logitech to assess what customers think of every of their products. The Net Promoter methodology is universally applicable and does neither depend on a specific industry nor on the point of contact with the customers.
But the concept of the Net Promoter Score offers more than an easy and versatile analysis to determine customer satisfaction. In addition, the score has a strategic component. Company-wide, every decision should lead to an increase of the NPS in the long run. Thus, the figure can function as the acknowledged key performance indicator for customer satisfaction, which could be controlled by the management just as revenue, profit or growth. Customer loyalty, indicated by high Net Promoter Scores, surely isn’t the only factor determining growth. However, profitable organic growth cannot be sustained without it in the long run.
How to use the NPS correctly
But asking people about recommending your company isn’t solely about the most recent interaction. It’s about the entire experience. Therefore, one should be careful about when and where to ask the question for what purpose. When the most recent experience of a loyal promoter of your company with a customer support representative was not satisfactory, the NPS score asked right after the interaction may be lower. Certainly, it would be a good measure of the specific service and would reveal pain points or areas of improvement if combined with a follow-up question. But it may not reflect the overall sentiment of the customer. Furthermore, customer specific data such as demographics has to be connected to the information obtained in order to draw further conclusions or to identify ideal consumer types.
Using the NPS in the right context and the right way is important. Making it an essential part of your business can be a game changer. Instead of focusing on the specific metric being used, companies need to internalize the system behind to make changes based on what they learn from using the metric. The Net Promoter Score merely represents the key figure. The Net Promoter System embodies a model, in which not the measurement itself but the implementation of improvements from a customers‘ perspective is paramount. It requires every level of the organisation to be rigorously, consistently focused on customer centricity and building strong customer relationships. Strategically relevant activity fields for improvements can be derived from the customer feedback. By establishing a robust organisational infrastructure for the analysis, a company can ensure that relevant customer needs are incorporated within the further development of its products and services. Early adopters of the NPS such as Apple for instance have developed successful feedback systems based on Net Promoter principles and embedded them as strategic components within their customer-centric organisation.
However, since the metric is rather attitude-based and not clearly action – or intention-based, the information value about customer loyalty is limited. In this sense, the NPS could rather be seen as a customer loyalty indicator. For measuring actual loyalty behaviour and specifics, the score should be combined with other survey methods or additional questions and integrate the whole concept into your organisation.
The NPS is not the magic bullet to be shot carefree. Nevertheless, the Net Promoter Score can be an effective tool for measuring customer satisfaction, improving products/services as well as using it as a simple yet powerful KPI model. Net Promoter Score success comes from the whole process, and the right context, not only the metric itself.
You want to find out more about how to integrate the NPS and Voice of the Customer metrics into your business and how customer centricity helps your company to grow faster? Get in touch with us.