An overview of NPS®
Net Promoter Score℠ has become a widely used benchmark of a brand’s ability to convert customers into advocates, and has become a standard measurement of loyalty and growth. It all began back in 2004 with an article published in the Harvard Business Review called, “The One Number You Need to Grow”. In this Article Frederick Reichheld argues that loyalty – not customer satisfaction – is the best indicator of growth and profitability of a company. The trick, however, is how to track and grow loyalty. His research ultimately became the genesis of NPS® programs.
What is Net Promoter Score?
The primary purpose of the NPS® is to evaluate customer loyalty. NPS® begins by asking a customer to rate on a scale from 0 to 10, “How likely are you to recommend [brand x] to a friend of colleague?” Zero being not at all likely, and 10 being extremely likely. This question, as Reichheld demonstrates in his research, is the most effective indicator of brand loyalty.
How is Net Promoter Score measured?
NPS is rated on a 0-10 scale. After the responses are collected via surveys, customers are grouped into three segments: Promoters, Passives, and Detractors.
Promoters are advocates and loyal enthusiasts who evangelise your products for you. Reichheld’s research demonstrates that these people actually promote the brand.
Passives are content with your services or products, but are not enthused enough to encourage others to become customers. Passives are susceptible to being acquired by competitors with discounts or clever marketing campaigns.
Detractors are unhappy customers and have the potential to damage your brand. They either have nothing good to say, or actively discourage others from doing business with you.
How do you calculate Net Promoter Score?
The calculation of Net Promoter Score is simple. You take the (% of Promoters) - (% of Detractors) = NPS
Businesses across the globe are utilising these findings to leverage enterprise wide Voice of Customer (VOC) initiatives and programs. By creating a company imitative, businesses seek to not only improve loyalty but also improve customer experience (CX). In future posts, we’ll outline what a common NPS program looks like, what it takes to get one going, common criticisms of NPS, and even highlight a few companies that are doing it right.
If you have any specific questions about how Net Promoter Score will fit into your business or like to learn more about Salmat's customer experience solutions call us today on 1300 725 628.
Net Promoter, NPS, and the NPS-related emoticons are registered service marks, and Net Promoter Score and Net Promoter System are service marks, of Bain & Company, Inc., Satmetrix Systems, Inc. and Fred Reichhel