Net Promoter® Score
Measuring Customer Loyalty With a Single Question
What do your customers think about your organization? Are they impressed enough to recommend you to their friends and family?
When an organization provides a great product, gives exceptional service or demonstrates real integrity, people will often warmly recommend it to others. Clearly, this type of "word of mouth" – whether verbal or through social media – is invaluable.
Unfortunately, it can often be hard to measure positive word of mouth.
This is where the Net Promoter® Score (NPS®) is useful. It's simple and effective, and it helps you measure how likely your customers are to champion your organization.
We look at the Net Promoter Score in this article.
About the Tool
Frederick Reichheld, a partner at Bain & Company, introduced the Net Promoter management tool in his 2003 Harvard Business Review article "The One Number You Need to Grow."
Reichheld and his collaborators spent two years looking at ways to improve the customer survey process. Specifically, they wanted to find a way of measuring customer loyalty, and of linking this to profitability.
To do this, they matched customer survey responses to consumer behaviors such as making repeat purchases and giving referrals. They found that, for most industries, only one question effectively predicted customer loyalty, profitability, and growth.
That question was, "How likely is it that you would recommend our company/product/service to a friend or colleague?"
To calculate the Net Promoter Score, you need to ask customers how likely they are to recommend your product, service, or organization on a scale of 1-10 (with 1 being extremely unlikely and 10 being extremely likely).
Customers who score between 0 and 6 are considered to be "detractors." These are unhappy customers, who are unlikely to recommend your organization. Customers who score a 7 or 8 are considered to be "passives." They're satisfied, but they're not enthusiastic about your organization or product.
Customers who score a 9 or 10 are considered to be "promoters." These customers are extremely loyal, they will continue to buy from your organization, and they will recommend you to their friends, family, and colleagues.
Once you've surveyed your customers, you can then calculate your Net Promoter Score (NPS). To do this, you simply subtract the percentage number of detractors from the percentage number of promoters.
For example, imagine that 25 percent of respondents gave you a score of 9 and 10 (these are promoters), while 15 percent of respondents submitted scores of 0 through to 6 (these are detractors). Your NPS would be +10 (25 -15 = 10).
The range of possible outcomes from this calculation runs from -100 (extremely bad) to +100 (very, very good.) Anything above zero is, to some degree, good.
However, most people are used to seeing scales that run from 0 (very bad) to 100 (very good), and they may, therefore, misinterpret a score of, say, +27. (They may see it as quite bad, whereas, in fact, it’s actually OK.)
Before you share a NPS with other team members, take time to explain how the scoring works. Otherwise, people might easily misinterpret the score and feel discouraged.
Benefits and Uses
One of the biggest benefits of the Net Promoter Score is that it's simple to use. With one question, you can objectively measure customer loyalty, and gauge how that loyalty will affect future growth. You can then use your NPS as a benchmark to measure changes in your customer service processes, for example.
The Net Promoter Score also helps you serve your current customers better. For example, if your score is negative, it shows that you may be better off spending money on improving customer service rather than advertising to bring new customers on board.
How to use the Tool
Follow the steps below to use the Net Promoter Score in your organization.
Step 1: Survey Your Customers
Your first step is to ask your customers how likely they are "to recommend your product or service to your friends or colleagues." Use a 1 to 10 scoring scale to do this, and explain that 1 means "not likely to recommend," and that 10 means "extremely likely to recommend."
You can do this, for example, by following up on customer purchases with a simple survey, once customers have had time to reflect on their experience.
If you are only able to survey a small group of customers, make sure that you choose a representative group. Keep in mind that a larger sample group will lead to greater accuracy.
Although it may be tempting to do so, it's best not to add too many extra questions to your survey. This will put people off, diminishing your response rate and undermining the reliability of the test.
However, do ask your customers to explain why they scored you the way that they did. This will help you improve your offering (see Step 3).
Step 2: Calculate Your NPS
Once your customers have completed the survey, calculate your NPS by subtracting the percentage of detractors from the percentage of promoters.
Don't feel too discouraged if your NPS seems low. Many organizations have an NPS of +5 or +10, while a select few have a final score of +75 or higher. Some organizations end up with a negative score – this highlights a serious need for improvement.
You don't always need to use the Net Promoter Score at an organizational level – you can use it at a branch, site, service, or product-line level as well. This will help you uncover poor performance, as well as highlighting best practice.
Step 3: Make Improvements
If your NPS is lower than you'd like, then take steps to improve it.
First, look at your detractors. Why did they score you this way? Their answers could point to a bottleneck, a broken process, poor product quality, or an outdated policy in your organization that you may need to fix. You can use tools like cause and effect analysis and root cause analysis to figure out your next steps.
You can also use Customer Experience Mapping to see your organization through the eyes of your consumers. This can give you a valuable insight into why customers are unhappy with your organization. You may want to organize focus groups to gain a deeper understanding of why NPS scores are low.
Frederick Reichheld published the Net Promoter Score in 2003. The tool uses a simple question – "How likely are you to recommend our product or service to your friends and colleagues?" – to measure customer loyalty, and to link this with profitability and growth.
To use the Net Promoter Score in your organization, determine how many customers you need to include, and decide how you'll deliver the survey. Calculate your NPS by taking the percentage of customers who are detractors, and subtract this from the percentage who are promoters.
If your final NPS is lower than you'd like, use it as a starting point to make improvements to your organization.
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