Net Promoter Score

October 3, 2011

Net Promoter Score (NPS) was developed by Fred Reichheld in 2003 (http://en.wikipedia.org/wiki/Net_Promoter for the history of NPS).  NPS measures customer loyalty, but the power and data that can be derived from NPS goes much deeper and can have an impact at every level of your company.  It tells you what in your company is working and what is not.  It will focus you on “good profits” and help you move away from the temptation of “bad profits”.

Here is the NPS question, “On a scale of 0-10 how likely are you to recommend <insert company name or product> to a friend or colleague?”

Respondents are then bucketed into three groups.  Promoters are those that give a score from 9-10, neutral is 8-7, detractors 0-6.  The score is then calculated by taking the percentage of promoters minus the percentage of detractors.  For example.  If 10 people responded to an NPS survey and the scores came back as follows:

Promoters – 5

Neutral – 3

Detractors – 2

The NPS score would be 50% (Promoters) – 20% (Detractors) for a score of 30.

The follow-up question that provides the data that can be converted into action is “If you did not give us a 10, please tell us what we can do to allow you to give us a 10 in the future”

To have an effective NPS strategy, it is important that you collect data on a regular basis.  Doing periodic Relational Surveys where you poll your entire customer base, as well as Transactional Surveys (each time there is a customer touch point) will provide you a good percentage of customer response.

The high effectiveness and response rate is built into the simplicity of the question.  It is two questions that your customers can answer in less than 30 seconds, which promotes a high response rate.  A 50% response rate is not uncommon for companies that have an effective NPS strategy.  If you do implement an NPS Survey program, avoid the temptation to layer on additional questions.  The more questions you ask, and the more time you are asking of your customers to complete the survey, the lower your response rate will be.  In addition, to promote a high response rate, you need to make sure you are informing your customer that they will be getting a survey.  Have Sales people, Support people, anyone that touches a customer, remind them that they will be getting a survey, and also make sure to explain that the survey is THE key way in which the company makes changes, you are reinforcing to the customer that their opinion matters and that action will be taken based on their feedback.

The data from NPS will give you a ton of information that will allow you to take action almost immediately.  If you are in an MRR based business, NPS is very powerful because you will be able to quickly identify possible customer churn and take action before you lose the client.  NPS will tell you what you need to change in your product, if it met customer expectations, and if your supporting processes/teams (support, customer care, user guides, etc) are effective and customer friendly.  The data will provide you with an operational roadmap of change that then can easily be re-measured to gauge the changes effectiveness.  Additionally, this is an excellent way to share immediate positive feedback from customers with staff and allow quick action to take place when a negative customer experience occurs.  Providing positive employee feedback is always good and allows you to see the great work your company does along with the impact it has on clients. And when things don’t go smooth, you can take swift action for an upset customer, that can often times more than make up for the negative experience in the customer’s mind and move them from a Detractor to a Promoter rather quickly.

The obvious question is “what is a good NPS score?” and there are publicly available scores for various companies that you can find.  In general, anything above 50 is good and above 70 is world class.  However, what your focus on NPS should be shouldn’t be the score, your focus needs to be on what customers are telling you and then what are you doing based on that information.  Additionally, establishing a baseline score, and then based on the data, using it as the focus of continuous improvement and changes in your business, and then seeing how your NPS score has improved is the real power and value that both you and your customers will get from NPS.  Once you have established a high NPS score based on consistent data collection, you can then start converting customers into an effective grass roots marketing army that will cost you almost nothing, but deliver you new customers and new growth.  Happy customers buy more and tell people about it, and they keep on buying.  NPS allows you to know who is happy and if they are not happy, why.

Two recommended resources for more on NPS.  Satmetrix (http://www.netpromoter.com  and http://www.satmetrix.com ) and the book “The Ultimate Question” by Fred Reichheld (http://www.theultimatequestion.com)

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