Since its introduction by Fred Reichheld, Net Promoter Score® (NPS) has initiated a discussion of its effectiveness in overall growth. NPS® is a metric that is used to measure customer loyalty and satisfaction. Numerous organizations have adopted it over the course of the past two decades. The metric is derived from the question of “how likely, on a scale of 0-10, are you to recommend this brand to others?”. A Promoter is a customer who responds with a nine or a ten. A Detractor is a customer who responds with a six or under. Subtract the percentage of Detractors from the percentage of Promoters and you’ve calculated your NPS®.
The metric is attractive to businesses because of its straight-forward nature and simple approach. Its transparency allows for all employees within a company to understand its implications. It serves as an overarching measurement of customer sentiment, streamlining customer satisfaction and loyalty into a tangible metric. Furthermore, it provides a reliable benchmark for customer experience teams to work towards. When measured over time and compared against competitors in the field, NPS® clearly demonstrates the effectiveness of new implementations in your customer experience program, as well as where your company stands in relation to others.
Simple Does Not Mean Easy
Yet its simplicity has also sparked questions of its significance in terms of growth . In light of the debate around NPS®, Reichheld stated that “too many people think simple is easy” . Net Promoter Score® is not merely a floating number. It is a numerical representation of a company’s ability to gear their business towards customers and their expectations. The metric provides an initiative for businesses to gain a deeper understanding of the individual components of their customer experience, and how each aspect contributes to their collective score. In doing so, teams can identify singular elements of the experience that require improvement to meet customer expectations.
While the simplicity of the metric provides an easy way for businesses to gauge loyalty and growth, Reichheld’s explains a more holistic interpretation of the measurement. Net Promoter Score® is just the tip of the iceberg above the surface of an overarching mission and set of values . In order to extract its full potential, he insists that you must apply its mission to all aspects of your business. In doing so, your company will move from a product-centric model to a customer-centric one. The customer will be at the forefront of every operation, guiding your business towards a higher satisfaction rate amongst your audience. Allocating your efforts towards increasing NPS® will allow your business to grow its pool of Promoters. At the same time, you will strengthen the existing group of satisfied customers.
The Power of Referrals
As the saying goes, a happy customer is a repeat customer. Furthermore, a happy customer is more likely to refer their family and friends. Referrals play a crucial role in the growth of a company’s customer base. Unlike traditional methods of advertisement, the referral system is fueled by the circulation of information by reliable sources (Promoters) whom your potential customers already trust. Trust is critical in this age of information overload. Consumers are faced with the daunting task of determining the relevance and legitimacy of the endless stream of data that constantly floods their daily interactions. Thus, the difference in the financial growth between two similar brands could lie in their ability to build and maintain of a network of trustworthy Promoters.
While simple in its superficial understanding, NPS® goes beyond simplicity to establish a larger philosophy. It aims to align business objectives towards meeting customer expectations. When integrated into your broader survey infrastructure, NPS® will help you map out a path towards overall improvement in the quality of your customer experience. Like any useful metric, Net Promoter Score®’s significance lies in a company’s ability to analyze it against the proper background, and apply it beyond the surface level.
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.
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