What is the Net Promoter Score (NPS) System?
Last week, I traveled to Florida (I do this every quarter or so) and for the first time I listened to a book on Audible on the way down. I selected The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World after a dialogue with some marketing professionals online.
The Net Promoter Score (NPS) system is based on a simple question… the ultimate question:
On a scale of 0 to 10, how likely are you to refer a friend?
The book goes on to explain how the open source system has been adopted across all industries, often modified beyond the 0 to 10 scale, the question sometimes varies, and the follow-up questions are optimized and timed to provide a statistically valid score that represents the health of your company.
Keep in mind that it’s not a specific score that is needed to predict how well your company is performing, it must be analyzed against all the competitors’ scores in your industry. You don’t have to have a 9 when the rest of your industry is pushing 3s! Some industries simply attract terrible customers.
NPS is becoming a fairly common means of measuring customer loyalty and the impact of marketing, sales, customer service, and even the financial health of a corporation. Unlike many short-term key performance metrics of a company, NPS provides a look at how likely your customers are to stay with you and even recommend you.
Since retaining customers is critical to profitability and word of mouth is one of the best ways to acquire customers, NPS is proving itself to be a very good system for predicting the long-term health of a company. When all of the departments and strategies are aligned to optimize your customer loyalty, you don’t run the risk of having competing silos within the organization that are may produce great numbers – but don’t provide a great customer experience.
At it’s root, NPS = the Percentage of Promoters – the Percentage of Detractors. So, if 10% of your customers promote your company and 8% are harming your brand through negative word-of-mouth, you have an NPS of 2.
The Net Promoter Score system breaks down your customers into promoters, detractors, and passives. Every company should want to decrease its detractors as it takes about 5 promoters to combat every detractor… which is quite a bit of work! And every business would be much better off if it avoided passives and detractors altogether and attracted the right customers – the promoters.
Beyond customer loyalty, NPS is also making its way into employee satisfaction analysis. Just as you would hope to find customers to promote your business, you also want employees who promote it as well!
The folks at Ambassador put together this infographic on the Net Promoter Score that sums it up:
PS: While the book was fantastic, IMO I think the subject matter could have been reduced from over 7 hours to just a couple, though. That’s my affiliate link if you wish to buy the book.
