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Net Promoter Score®: What is it and Why Should your Brand Use it?

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Found in:    engage | Consumer Products or Services | Financial Services | Healthcare | Restaurants | Retail/Ecommerce

What is NPS®?

Net Promoter Score®, or NPS, is a metric created by Fred Reichheld, and has been increasingly embraced by organizations seeking an efficient, effective way to measure and monitor customer loyalty, and how that impacts overall growth.

NPS® measures the likelihood of a customer to recommend your product or service to a friend or family member. As a stand-alone survey question, or embedded within a broader feedback measurement initiative, NPS® asks “On a Scale of 0-10 how likely are you to recommend brand name to a friend?” While measuring NPS® for your brand is relatively easy, interpreting the drivers behind the NPS® score is where the challenge lies. A customer is a Promoter if they score a 9 or 10, and a Detractor if they mark it as a 6 or lower. To calculate the NPS®, take the percentage of promoters and subtract the percentage of detractors. One real-world example of NPS® as a driving factor of success is the telecommunications company Optus. After a period of losing subscribers and revenue, Optus implemented a specific plan to improve their Customer Experience, and more specifically their NPS®. By implementing NPS® as a driving factor of their business, focusing on improving the way they interact with promoters, passives and detractors, they managed to reduce the number new complaints in half, as well as improve their NPS® by six points.

Why should your brand use NPS®?

NPS® is a valuable barometer of brand performance in that it offers a singular score of customer sentiment. If consumers are willing to recommend your product or service to a friend, then you are setting yourself up to retain the existing customer, as well as attract new customers to your brand. One way to utilize NPS® to drive growth for your brand starts with deep analysis of the customer journey. Rather than posing the NPS® question as an overall opinion of the brand, it can be helpful initially to break down the purchasing process and analyze how customers feel about specific aspects. Segmenting your Customer Experience into designated sections helps find more specified areas where the customer may be struggling or excelling. While NPS® is not without its critics, such as those who claim that it often does not accurately reflect consumers’ overall opinions of a company or that it does not bring any more tangible value than tradition customer satisfaction metrics, NPS® is a proven determinant of sustainability and growth, and reflective of a brand’s commitment to create mutually beneficial relationships with customers.

How does your brand use NPS®?

The key in utilizing NPS® to drive impactful change is being able to read the tea leaves of the score. An isolated NPS® is not very useful, and it is almost always directly followed by a “why” question, asking responders to justify their score. While some brands send out a survey consisting only the NPS® question, others use it in tandem with other survey questions. Identifying the right position of the customer journey to ask the NPS® question helps determine the validity of the score itself, given the context in which customers are answering this question is important. Even if a customer is traditionally loyal, their NPS® can be impacted by a specifically poor experience, recognizing they may still have an overall favorable view of your overall Customer Experience platform. Thus, positioning the question in the right spot of the survey or journey, traditionally near the end, allows customers to better process their opinion and reflect an accurate portrayal of their experience.

An optimally designed voice of customer survey, utilizing Net Promoter Score® as a key measure, supports an entire organization to focus on one key metric. By implementing this metric into a survey platform, brands can broadly assess the likelihood of retaining and expanding its customer base and market share. Additionally, NPS® provides much clearer transparency in terms so that employees are more aware of the current state of your brand. This is important because it allows them to more specifically focus on areas that need improvement, and better analyze current practices. While there are more complex methods that are necessary to conclude the specific areas of improvement that are driving customer opinions, adding a NPS® question into your brand’s existing Customer Experience platform can help determine a starting point for improving customer loyalty.

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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