This is how it works
Net Promoter or Net Promoter Score (NPS) is a management tool that can be used to measure loyalty of a store or a company’s customer satisfaction. It’s a strong alternative to traditional customer satisfaction research and is proven to be correlated with revenue growth.
NPS has been widely adopted with more than two thirds of Fortune 1000 companies using the metric. The tool aims to measure the loyalty that exists between a brand and a consumer. The brand can be a company, employer or any other entity. The brand is the entity that is asking the questions on the NPS survey. The consumer is the customer, employee, or respondent to an NPS survey.
THE ULTIMATE QUESTION
The Net Promoter Score is calculated based on responses to a single question: How likely is it that you would recommend our company / product / service to a friend or colleague? The scoring for this answer should be based on a 0 to 10 scale and is called The ultimate question. An NPS can be as low as −100 (every respondent is a “detractor”) or as high as +100 (every respondent is a “promoter”). NPS scores vary across different industries, but a positive NPS (i.e., one that is higher than zero) is generally deemed good, a NPS of +50 is generally deemed excellent, and anything over +70 is exceptional.
DON*T ASK IF YOU DON*T FOLLOW-UP
Companies are encouraged to follow the likely-to-recommend question with an open-ended request for elaboration, soliciting the reasons for a customer’s rating of that company or product. These reasons can then be provided to front-line employees and management teams for follow-up action. Local office branch managers, mail or call back customers to engage them in a discussion about the feedback they provided through the NPS survey process, solve problems, and learn more so they can coach employees and managers.
DETRACTORS, PASSIVES AND PROMOTERS
Those who respond with a score of 9 to 10 are called Promoters, and are considered likely to exhibit value-creating behaviors, such as buying more, remaining customers for longer, and making more positive referrals to other potential customers. Those who respond with a score of 0 to 6 are labeled Detractors, and they are believed to be less likely to exhibit the value-creating behaviors. Responses of 7 and 8 are labeled Passives, and their behavior falls between Promoters and Detractors. The Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. For purposes of calculating a Net Promoter Score, Passives count toward the total number of respondents, thus decreasing the percentage of detractors and promoters and pushing the net score toward 0.
PREDICT CUSTOMERS LOYALTY
Expert say the rating and answers to the “Why?” question provide all that is needed to identify reference customers and improvement opportunities. While this may be the case, the lack of any easy way to automatically analyze the verbatim answers without human bias is problematic. Many companies solution to the problem has been to add additional questions with rating scales.
The primary objective of the Net Promoter Score methodology is to predict customer loyalty (as evidenced by repurchase and referral) to a product, service, brand, or company. The methodology was developed (and is a registered trademark of) by Fred Reichheld in 2003. It was introduced by Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow”.
Find out how many of your customers and/or employees that are
Detractors, Passives and Promoters
And set a plan to do something about it. The methodology has been proven to increase profitability in several businesses that has been working systematically with measurements and follow-up.
We can help you get started fast and efficient and will show you measurable improvements within weeks with our well-developed work methodology.