Most B2C and many B2B organisations use the Net Promoter Score (NPS®) as a metric to understand customer loyalty and as a key part of a Voice of the Customer programme.NPS is a powerful metric, and it's popularity lies in it's simplicity. Used alone, however, it will only give you part of the picture, a bit like looking at a fragment of a masterpiece and not seeing the full picture.
Increasingly requested by our clients, NPS is valuable but we always recommend it forms part of a wider programme. Voice of the Customer is multi-dimensional and there are a multitude of tools available to gather and analyse customer feedback and get a well rounded view of your customers.
What is the Net Promoter Score?
Developed in 2003 by customer loyalty guru, Fred Reicheld, liklihood is that you will have been asked this question many times in recent years following the purchase or use of a product or service:
'On a scale of 1 to 10, would you recommend (product or service or company) to a friend/family or colleague'
Those who score 9 & 10 are promoters and are customers who are regarded as loyal and are likely to be repeat customers who will provide referrals to others for your product or service.
Scores of 7 & 8 are passives who are not considered likely to recommend.
Detractors are those who score 0-6. These are likely to have a negative view of the company, have little or no loyalty and may share their bad opinion with friends and/or colleagues.
Good recommendations are a powerful promotional source, bad ones can be a disaster. Customers are 3x more likely to talk about a bad experience than a good one.
Calculating the NPS
To obtain the NPS, calculate number of promotors and number of detractors as percentages of the total. Then subtract the % of detractors from the % of promoters which will give you a number between -100 and +100 (drop the %). Passives are part of the total but not part of the calculation as, the theory goes, they are unlikely to recommend.
How should the NPS be used?
As an accepted standard, NPS is useful. It allows comparison over time, across departments or product lines and even across geographies (although care should be taken with this, as interpretation of the question may differ between cultures).
Immediately, detractors can be 'red-flagged', equally, if one team is performing significantly worse than others or a measure experiences a dip, this can be investigated and acted upon.
Be aware though, of the drawbacks of the NPS
Recommendation alone is not a predictor of customer loyalty or customer retention. Depending on when the question is asked will make a difference to the overall result. NPS doesn't atually measure loyalty, simply the customers sentiment following purchase (and this may change over time).
NPS as part of a wider customer feedback mechanism
“It’s not the score that matters, it’s what you do with it to make Promoters that really count”. Fred Reicheld
It's what you do with it that counts. A wider customer satisfaction or customer engagement survey can include an NPS element while measuring other aspects of the customer relationship. Customer satisfaction can be investigated in some detail using surveys and can look into satisfaction with delivery, views on personnel, value for money and many other measures. Customer engagement can be analysed over time using a combination of metrics. The organisation can then make decisions based on good, empirical data.
How strong your relationship is with your customer can be measured by seeking to understand whether they intend to purchase from you in the future, which competitors they view as providing a better (or worse) product or service and understanding their overall satisfaction.
If you are carrying out a programme with face-to-face interviews you can include quantitative relationship questions. Verbatim comments from customers are a goldmine. This will enable you to measure the confidence customers have in your ability to provide them with the products and services they will need in the future is a far better measure of customer loyalty than NPS.
Customer feedback gathered from a variety of sources will give a more diverse and rounded view of your customer and their attitudes and loyalty to you.
Wouldn't you rather see the full picture?
Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.