Just What is a Net Promoter Score?
A net promoter score (NPS) is one of the most universally accepted ways to measure your customers’ satisfaction with your products or services. It is a survey tool that is very quick for customers or clients to respond to and its ease of use if one of its most appealing characteristics.
How does it work?
The NPS was created in 2003 by Fred Reichheld, Bain & Company and Satmetrix in the United States.
The NPS is based on the premise that each of your customers or clients fall broadly into three main camps.
Promoters are your most loyal customers. They repeatedly buy from you and ‘promote’ your products and services to friends, family and colleagues.
Passive customers are by and large very happy with what you offer but can be tempted away to a competitor with a superior offer. Of course you can promote your passive customers to promoters if you actively increase their satisfaction by improving your customer service or product.
Detractor customers are dissatisfied. Based on prior experience they will want to buy less from you in the future.
The NPS is essentially a very simple survey tool. You ask a sample of your customers how likely they would be to recommend your company to family and friends. They respond by giving you a rating on a scale of one to ten – the promoters occupy spots 9 and 10, the passive customers 7 and 8 and detractors 6 and below.
The customer is also able to leave verbatim comments that can be very useful in analysing their response. This allows you to read about the Voice of the Customer.
The NPS measure ignores the passive customers. It simply calculates the percentage of detractors and deducts that number from your promoters. The final score can range from +100 to -100.
The survey is not confidential so you will know who has rated you. This is important because the NPS system relies on you “closing the loop” by following up with detractors post-survey, clarifying their feedback and working to improve your perceptions with passive customers with the goal of moving them up to promoters.
How useful is the NPS score?
In order to improve your NPS you need to move your passive customers up to raving promoters.
The NPS is a very useful metric of customer satisfaction but not particularly useful in isolation.
Consider for a moment that you received a low or negative score. You would want to know what you should do to improve so it’s very important to ask supplementary questions to understand where and how you can make changes.
The key is to chose these questions careful and limit the number. After all, the beauty of the NPS is it’s simplicity so you don’t want to detract from that.
Critics claim that there is no causal relationship between the NPS and revenue growth. Even if this is accepted, it opposite does seem to hold that a low or declining score would correlate with declining revenue.
Another common criticism is that the lack of anonymity may mean that customers are disinclined to give you a low score which might be entirely valid.
So it isn’t perfect?
No – no survey tool is.
However, most New Zealand small to medium business make no effort to survey their clients and we strongly believe they should.
Coupled with employee satisfaction surveys, the NPS has a place in giving quick and valid feedback. It avoids the potential of alienating your customers with long and tedious customer surveys.
We recommend you implement an NPS tool into your operations.
If you would like to read more, the article that launched the NPS as a concept and published by the Harvard Business Review is available here.