Net Promoter® Scores Know How Your Customers Feel About Your Organization

What is Net Promoter® Score?

Net Promoter® Score, commonly referred to as NPS®, is a customer loyalty metric that gauges how willing a customer is to recommend a product or service. It’s commonly used as either an alternative or supplement to customer satisfaction measurement. In its most simple form, Net Promoter Score can be described with one simple question:

“How likely is it that you would recommend [Organization X] to a friend or colleague?”

The Net Promoter Score® concept was developed by Fred Reichheld, a Bain Fellow and founder of Bain & Company’s Loyalty Practice, to measure customer loyalty[1]. Its adoption and popularity has grown over the past decade and is now used in virtually every industry in every size organization around the world.

At its core, Net Promoter Score tracks how customers represent an organization to their friends, families and associates. Essentially, this positive customer representation is free marketing that dramatically influences business growth. The concept is actually quite simple. For example, when you get a strong recommendation from a friend about a new restaurant in town, you are much more likely to give it a try and become a repeat customer. The same is true for virtually any product or service. If you are in the market for something and you get a strong recommendation from a trusted source, you almost always take it into consideration and feel more comfortable becoming a customer.

Why is Net Promoter Score® Important?

So why are so many executives focused on Net Promoter Score? Many believe Net Promoter Score is a valuable metric for growing both revenue and profits. Research suggests that higher scores indicate more loyal customers, which leads to increased revenue and higher profits. Research by Bain shows that sustained value creators (organizations that achieve long-term profitable growth) have Net Promoter Scores two times higher than the average organization[2]. Apple, Costco and Nordstrom are often cited as examples of companies with stellar scores that correlate to positive business results.

One of the main reasons organizations choose Net Promoter Score is its simplicity. The typical organization often has a hard time rallying an entire organization in a common, customer-focused direction. Net Promoter Score supporters claim that focusing on a single customer satisfaction metric—that is visible and easy to understand—makes it easier to motivate an entire organization to be customer-focused. Net Promoter Score is also easier to implement and manage than a highly complex, opaque customer satisfaction measurement program. Although Net Promoter Score lacks detailed customer satisfaction levers, the sheer simplicity of the measurement helps organizations take action faster to improve customer experience.

Net Promoter Score has also proven valuable as a way to raise a flag for at-risk customers[3]. Many organizations have implemented processes to respond to customers who respond negatively on the 0 to 10 scale. Organizations can close the loop with customers who are not promoters and work to remedy any issues.

Here are just a few things Net Promoter Score allows you to do:

  • Segment customers by loyalty
  • Identify unsatisfied and at-risk customers
  • Optimize around a single customer metric
  • Benchmark against industry and competitor scores
  • Uncover customer loyalty drivers

How to Measure Net Promoter® Score Effectively

Net Promoter Score places customers into one of three groups: Promoters, Passives and Detractors. You categorize your customers by asking one simple question[1]:

“How likely is it that you would recommend [Organization X] to a friend or colleague?”

Respondents are given a standard scale that ranges from 0 (not at all likely) to 10 (extremely likely). Organizations often ask the Net Promoter Score question via an online survey after customer service interactions, purchase transactions or as an ongoing customer pulse study. Based on how a customer responds to “the question,” you classify them into one of three groups:

  • Promoters = 9 – 10
  • Passives = 7 – 8
  • Detractors = 0 – 6

Promoters are your customers who are loyal and enthusiastic about your organization and will continue buying and referring others. Promoter referrals fuel viral growth that helps bring in new customers at a lower acquisition cost. The cut-off score for Promoters is intentionally set high at 9 to ensure that the customer is an exceptionally enthusiastic fan.

Passives are generally satisfied customers, but lack the enthusiasm of Promoters. A ranking of 7 or 8 is no doubt impressive, but experience has shown that this group is still vulnerable to competitive offerings and not immune to defection.

Detractors are a potentially dangerous bunch that are often unhappy and can diminish your brand through negative word of mouth. A customer who rates your organization between 0 and 6 requires outreach to resolve issues before they do any damage. The best organizations work to correct grievances of Detractors and work to convert them to Promoters.

Once you have classified your customers, you calculate your score by subtracting the percentage of Detractors from the percentage of Promoters.

NPS = % Promoters – % Detractors

Or

NPS = (# Promoters / Total Respondents) – (# Detractors / Total Respondents)

The score is generally displayed as a whole number by dropping the percent sign for the final number and scores range from anywhere between –100 (all Detractors) to +100 (all Promoters).

How Qualtrics Makes Net Promoter Score Easy

We can all agree that every organization needs loyal customers to succeed. Customers have more power than ever to voice their opinions—opinions that can build or damage your brand. Qualtrics makes it easy to create your Net Promoter Score survey and get in front of your customers, so you can start acting on real-time results. Whether you want to pose this question to your customers based on their interaction with your organization, with an email invitation or with a website intercept, you can do it with Qualtrics.

Qualtrics is the world’s leading enterprise survey technology provider. Qualtrics clients love the ability to create surveys in minutes and to send to their customers in a snap through multiple channels. Start a Free Account or Request a Demo today to see how Qualtrics can help you start measuring NPS.

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Citations:

[1] Reichheld, Frederick F. (December 2003). “One Number You Need to Grow”. Harvard Business Review.

[2] Bain and Company. How is Net Promoter Score related to growth? Netpromotersystem.com. Retreived February 10, 2014, from http://www.netpromotersystem.com/about/how-is-nps-related-to-growth.aspx.

[3] Markey, Rob; Fred Reichheld, Andreas Dullweber (December 2009). “Closing the Customer Feedback Loop”. Harvard Business Review.

* NPS®, Net Promoter® & Net Promoter® Score are a registered trademark of Fred Reichheld, Satmetrix, and Bain & Company.

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