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What’s Your Net Promoter Score?

It seems you can’t make an online purchase or service inquiry these days without being greeted afterward by a pop-up questionnaire: “Help us improve our service to you by taking this brief survey.”

The problem is the survey usually isn’t brief, which is why we often dismiss them reflexively. The company may then be left with results which are not representative of their customer base.

Which might explain why the net promoter score (NPS) is so widely used. To gauge customer loyalty, NPS comes down to essentially one question: How likely is it that you would recommend our company/product/service to a friend or colleague?

The question was the product of two years of research in the early ’00s by Frederick Reichheld of Bain & Company, who was looking for the one question that was more predictive of profitable growth than any other. In his 2003 article in the Harvard Business Review, he called NPS “The One Number You Need to Grow.”

Respondents answer on scale of 1 to 10 and are categorized: 9 and 10 makes the responder a “Promoter”; 7 and 8 “Passive”; and 1 to 6 “Detractor.” The NPS becomes the difference between the percentage of Promoters and Detractors. It’s that simple, although NPS is often used in conjunction with a variety of other metrics and insights to provide more depth and detail on the reasons behind scores.

According to the American Marketing Association, the NPS method has three principal advantages:

1. It’s simple. And it’s readily applicable in the digital era, so adaptation is high.

2. Its findings are easy to digest. Rather than an amalgam of attributes reduced to an obscure index, NPS measures one thing that everyone in an organization can understand (“60% of our customers are Promoters,” e.g.).

3. It can be benchmarked. NPS is standardized, so companies can compare results from period to period or to other companies.

On the other hand, there are three potential shortcomings.

1. It’s meant to measure relationships, not transactions. Applying an NPS to isolated events rather than a company’s body of work can be misleading.

2. It shouldn’t stand alone. NPS can measure a company’s overall health, but it can’t diagnose the cause or reveal a treatment plan. It needs to be accompanied by a deeper dive.

3. Detractors need to be heard too. What makes a Promoter a Promoter may not be what turns a Detractor into a Promoter. Future success can lie as much in converting perceived deficiencies into undiscovered potential as accentuating the positive.

We provide a full range of market research capabilities that we’ve been using to promote our clients’ businesses for three decades. To learn more, give us a call at 203-255-1066.

 

Sources: Harvard Business Review, December 2003 and Marketing News, September