What is NPS?

Net Promoter® is an easy to understand loyalty metric used to measure and track the health of the customer relationship. It is also an operational discipline that uses customer feedback to drive change, growth and profit. It is not just another customer satisfaction research tool.

Net Promoter was developed by Satmetrix, Bain & Company, and Fred Reichheld. The concept was first popularized through Reichheld’s book The Ultimate Question, and has since been embraced by leading companies such as Apple, eBay and Harley Davidson for measuring and improving customer loyalty.

Customer Satisfaction versus Loyalty

“Satisfaction” refers to a customer’s sometimes temporary or one-time feeling about individual transactions or products. Customers may be satisfied but this could be because their expectations were so low that the product or service did not disappoint. Satisfaction is no guarantee that the customer is emotionally engaged.

“Loyalty” is a composite of a customer’s overall satisfaction, commitment to strengthen the relationship, and repeat buying with a willingness to recommend the company to others and to resist switching to a competitor.

Loyal customers are emotionally engaged. They care and want to see you succeed.

Beware of “counterfeit” loyalty when customer appears to be loyal but can be easily bought with bought with incentives and discounts

 

 

The Ultimate Question®

 

A single question can be used to measure loyalty and identify Detractors, Passives, Promoters.

How likely would you be to recommend us to a friend or colleague?

Having customers respond to this question on an eleven point scale, from 0 to 10 ranging from 0 (Not at all likely) to 10 (extremely likely) determines if that customer is a Promoter, Passive or Detractor.

Promoters are critical to business growth while Detractors can pull down a business.

The three customer classifications exhibit very different loyalty and purchase behaviors:

Promoters –    Loyal enthusiasts who keep buying from a company and urge their friends to do the same

Passives –       Satisfied but less enthusiastic customers who can be easily wooed by the competition

Detractors –   Unhappy customers trapped in a bad relationship by contract, lack of  alternatives, inertia, need to buy from low bidder, or other reasons

Calculating NPS®

The Net Promoter Score™ or NPS® is calculated by subtracting the percentage of Detractors from the percentage of Promoters

% Promoters – % Detractors = Net Promoter Score™

 

NPS® is:

  • Easy to measure
  • Easy to communicate
  • Easy to implement

When used in a disciplined process across an enterprise, NPS® can drive organizational and cultural changes that  result in increased profits, growth and a customer-centric organization.


Net Promoter, NPS, and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Company, Inc., and Fred Reichheld.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s