Net Promoter Score
What is Net Promoter Score?The Net Promoter Score (NPS) is a loyalty metric developed* by Fred Reichheld, a Fellow of Bain & Co and a board member of Satmetrics. In Reichheld’s bestselling book The Ultimate Question, NPS is touted as the most important metric for business, an assertion that has been actively debated since its debut.
Why is Net Promoter Score important?The Net-Promoter Score tracks how customers represent a company to their friends, associates, etc. Reichheld argues that this consumer representation is free marketing that greatly influences business growth. Supporters of the method cite Apple as the company with the greatest NPS, and draw correlations to its recent growth.
How do you calculate NPS?
Reichheld advocates asking customers, “How likely are you to recommend (our company) to a colleague or friend?”
His recommendation is for a 0-10 scale where respondents are reclassified as:
- 0-6 = “Detractors”
- 7-8 = “Passives”
- 9-10 = “Promoters”
Reichheld calculates the Net-Promoter Score by subtracting the percentage of respondents that are labeled “Detractors” from the percentage of respondents that are labeled “Promoters” like this:
% of Promoters – % of Detractors = NPS
Success of the Net Promoter Score
The Net-Promoter Score has received significant attention and use since its introduction in the 2003 Harvard Business Review article The One Number You Need to Grow by Reichheld. It has been used by recognizable businesses like GE, Phillips, Procter & Gamble, and American Express, as well as by small organizations.
Criticisms of NPS
Net Promoter has been critiqued as a measure of little value because it misses the predictors of future sales or growth, such as the company’s product line, product innovations, accuracy of pricing, or operating efficiency. NPS is simply a surrogate measure for quality and satisfaction, and not brand recognition, equity or market power.
The Net Promoter score is an attitudinal measure of intention to recommend, rather than actual behavior. Because recommendations are made when discussing interesting products, and interest varies by industries and product categories, NPS does not report actual product “Buzz”. Some products are not interesting, discussed, or recommended (e.g., toilet paper, toothpaste, laundry detergent, copy paper, etc.), while other highly interesting products and brands can easily generate passionate fans (e.g., fashion, restaurants, music, etc.).
Next, NPS values are not numerically unique in meaning. For example, an NPS of 20 can be derived in many different ways. A company with a 20 NPS could have 20 percent promoters, 80 percent passives, and 0 percent detractors, while another company with a 20 NPS could have 60, 0, and 40. A company with 20 percent promoters and 0 percent detractors is very different than the one with a polarized customer base with 60 percent promoters versus 40 percent detractors, but the NPS is the same.
Finally, NPS is not actionable. What if you had a good or bad NPS? A bad NPS could reflect poor product performance, overstated advertising promises, poor customer service or many other issues, none of which are identified by the NPS.
Good metrics should offer attribute and benefit specific information sufficient to direct a product or brand. It should be based on consumer actions and be actionable. At a minimum, “Considering all competing brands, how likely are you to purchase Brand X on a continuing basis?” should be evaluated along with an understanding of “What is it that makes you so likely to purchase Brand X?” and “What can we do to improve Brand X?”
Recommended uses of the Net Promoter Score
Many businesses have implemented the Net-Promoter Score as a solution to improve their customer relationships. What businesses often overlook, however, is that this feedback is only useful if a company can act on it.
That’s why the Qualtrics Research Suite enables users to act on the feedback they collect. Qualtrics allows users to:
- Ask users if they can be contacted in the future
- Automatically sort these users into lists (panels) of “detractors”, “passives” and “promoters”
- Repeatedly survey these groups, each with surveys tailored to their group
- Determine why respondents feel the way they do
- Track changes over time
- Correct problems and capitalize on successes
- Build meaningful relationships with customers in all 3 groups and improve perceptions
The Qualtrics Research Suite is the best tool to track and improve your NPS, revolutionize your customer relationships and grow your business.
Where Qualtrics Adds Value
Qualtrics enables users to calculate their Net Promoter Score – the customer service metric developed* by Fred Reichheld, Satmetrix, and Bain & Co – and improve it. The Net Promoter Score is a quick way to determine customer loyalty and predict growth.
Qualtrics includes a number of features that are useful for this survey type:
Calculate Your Net Promoter Score Collect data via e-mail, posted link, survey embedded in a website or pop-up. Automate surveys to go out to clients as soon as they are signed or after a specified amount of time. Create multiple reports that segment by region, branch or any other criteria and update in real time for instant analysis.
Create Panels for Ongoing Communication Build separate panels for promoters, detractors and passives. Ask them for permission to continue contact and repeatedly survey these respondents to track their progress over time. Qualtrics enables you to customize information that you send, which improves your standing with each group.
Engage Promoters, Detractors, Passives Maintain contact with each group and customize messages to them. Give promoters information to disseminate, show passives why you’re great, and find out how to remedy the concerns of detractors. Throughout the whole process you are building a relationship with them and increasing their enthusiasm for your brand.
* Net Promoter Score is a registered trademark of Fred Reichheld, Satmetrix, and Bain & Co.