5 Things You Should Know About Net Promoter Scores
The Net Promoter Score® (or NPS) was developed by Fred Reichheld from Bain & Company as a way to measure how well a company treats the people they interact with. The result has been a widely adopted “loyalty metric” that’s helped thousands of companies and individuals gain a better understanding of their customer interactions. This deeper understanding has in turn helped businesses convert everyday customers into raving fans. And as we all know, raving fans are a very good thing for business. So, in an effort to share the love (so-to-speak), we thought we’d offer a few insights we’ve picked up over the years as we’ve watched companies do NPS right…and wrong.
1. IT’S STILL ALL ABOUT RELATIONSHIPS
Business is made up of many things, but as we all know, it’s built on relationships. Owner and employee. Employee and customer. Customer and colleague. And so on and so forth. Nothing new here, this is grade school stuff, right?
That’s why NPS sets out to specifically track relationships—how customers represent a company to their friends, family, peers, audience, and others. Not surprisingly, Bain’s research has uncovered a strong link between this score and a company’s growth. In fact, they go as far as to say that the loyalty leader—the company in a particular industry with the most loyal customers and highest NPS score—will outgrow competitors by a factor of 2x. That’s real money that hinges on…yes, you’ve got it, relationships.
2. IT STARTS WITH ONE CAREFULLY CRAFTED QUESTION, DON’T BLOW IT.
In an effort to measure the relationships that power business, NPS — and the wider Net Promoter System — start with one simple question. However, like a lot of seeds for a robust system, this question is simple on the outside, but has an awful lot of complexity folded up inside.
Here’s the question in question.
How likely are you to recommend Company X [or Product X] to a friend or colleague?
A Net Promoter Score is then derived from this simple scale. It’s calculated by subtracting the percentage of respondents labeled “Detractors” from the percentage labeled “Promoters” according to Bain’s NPS scale.
This deceivingly simple question has actually been built on years of research. For example, the scale associated with the question intentionally excludes the word “neutral” because it’s been found that a neutral option biases responses to sit out conflict and hold back valuable feedback. But the old saying “If you don’t have anything nice to say, don’t say anything at all” doesn’t apply to NPS. When it comes to feedback, you want your customers to pick a side, and be direct about the reason behind their choice. There are a million ways to go about asking for feedback, but this phrase and scale has been proven over time to be the best angle. To learn more about why this language is so important, take a look at what Fred Reichheld and Rob Markey have to say about it:
3. A STANDARDIZED QUESTION ALLOWS BENCHMARKING
Business leaders understand that success is in large part derived from intangibles — passion, interest in others, inspiration, and so on — but only a fool believes you can operate on a practical level without metrics. So, the Net Promoter System allows a business to quantify the qualitative. That is, to assign a descriptive number to the state of your relationship with your customers, your employees, or your market. In a sense, it’s like having your own customer balance sheet—a measurement that can be shared easily and measured often. Then, once you have a reliable metric, you can start to benchmark your success over time, or against relevant competitors in your industry.
Why does this matter? After all, shouldn’t you just watch your NPS score and make sure it’s getting better? I mean, forget the competition, right?
Well, technically that’s true, but it leaves out an important resource allocation question. You see, if you discover that your NPS score is 42, you might panic and go all hands on deck with customer support to boost the number. However, if you have a benchmark that says the average score of your competition is 29, you have some freedom to choose to add support, or to focus efforts on new products or markets. Maybe those resources would be better spent on R&D? Having a benchmark can be wildly helpful for both calibrating your NPS score to your market, and determining where to allocate resources inside your company.
4. IT’S SCAAAAAAALEABLE
Another element that makes the NPS system so valuable is scalability.
We touched on this ever so slightly above. You can get an NPS score for a single department or your whole company, whether that company is a half dozen friends set up in a garage or a multinational spread across three continents. But you can also run NPS on a single product. Or a campaign. Or a store location, team, or territory. The question can be directed as narrowly or as broadly as needed.
This is neither magic nor mathematics. It’s just common sense, and it goes back to the “ultimate question” we talked about earlier. In the end, business — regardless of the size, revenue, or location — is about relationships. Those relationships exist both outside and inside the organization. And the core business relationship again comes down to:
“How likely is it that you would recommend Company X [or Product X] to a friend or colleague?”
Perhaps the most scaleable part of this simple metric, is the ability to communicate it across the entire organization. It’s a powerful concept that people get almost intuitively. We all understand “Net Worth” and we understand “Net Profit”. Your Net Promoter Score gives your team a familiar concept that can help rally the troops and align your organization when other, more complicated measurements often fall short. It’s a bottom line number you can focus on that allows you to decide when you need to look deeper into the breakout of promoters, passives, and detractors. Watch this video to learn more about the power of the single number:
5. QUALTRICS HAS BUILT A POWERFUL AND RESPONSIVE SOLUTION AROUND NPS
Many businesses have implemented Net Promoter Score as a solution to improve customer loyalty. But what they often overlook is that the feedback they collect is only useful if and when they act on it.
Qualtrics enables organizations to act faster than ever on the feedback they collect from NPS surveys. And in today’s hyper-competitive markets, speed has become table stakes; organizations must gather data quickly and then act on it even faster if they expect to build loyal customers.
Qualtrics Research Suite helps companies do just that by providing an integrated system built around the Net Promoter Score. With Qualtrics, you can:
- Build panels for ongoing dialog. Automatically sort customers into lists of “detractors,” “passives,” and “promoters” that can be used for additional research and track progress over time.
- Automatic triggers. Trigger follow-up surveys to specific groups, tailored to their unique needs.
- Close the loop. Automatically alert line managers of the feedback, allowing them to take immediate action where necessary.
- Track over time. Track individual and aggregate customer changes over time.
- Company-wide implementation. Collaborate with others across the organization for company-wide customer loyalty programs.
- Simple distribution. Collect NPS feedback via e-mail, link, embedded survey, or pop-up.
- Automatic scheduling. Schedule surveys to go out to clients automatically.
- Customizable reporting. Access and share real-time reports from a custom dashboard that can parse results by other criteria for instant analysis.
NPS is the key to understanding your customers, employees, and markets. With Qualtrics, you have a wide open door to the Net Promotion System as a whole; a door that allows entry to a new world of business intelligence. So get out there and start connecting with your customers. Before long you’ll have customers who stay longer, refer friends, and buy more. Happy growing!