Net Promoter Score started as a business metric, looking to see whether there was some kind of linkage between customer loyalty and the financial performance of companies. It was discovered there was a pretty good correlation between the growth of businesses in any given industry and the willingness of customers to recommend companies in that industry.
The metric is based on asking customers "On a scale from 0 - 10, How likely are you to recommend the brand to a friend or colleague." Depending on the score that they give, each respondent is categorized in one of three ways:
- Promoters - (Score 9 or 10) Very Likely to Recommend the Company
- Passive - (Score 7 or 8) Somewhat Likely to Recommend the Company
- Detractors - (Score 0-6) Not as Likely to Recommend the Company
The percentage of promoters less the percentage of detractors represents the Net Promoter Score. Companies are encouraged to follow the direct question with an open-ended request for elaboration, soliciting the reasons for a customer's rating of that company or product. These reasons can then be provided to front-line employees and management teams for follow-up action.
The ability to measure customer loyalty is a more effective methodology to determine the likelihood that the customer will buy again, talk up the company and resist market pressure to defect to a competitor. For example, in a B2C environment, when a Company factors in the customer acquisition cost to the overall profitability of a consumer account, the longer a consumer stays active and resists defection the more profitable the relationship can be for both parties. Measuring the value of the relationship after costs gives the Company a clear view of how to attract and retain the most profitable consumers and how to most effectively invest in and develop those relationships.
This system has helped many companies identify potential detractors before they make a switch to a competitor thus allowing a proactive service company to:
- Build on customer retention,
- Aid in being able to cross sell/up sell other products,
- Turn potential lost customers into long term Brand Champions,
- Address product, process or staffing concerns for those that did not ultimately make a purchase.
The ultimate test for any customer-relationship metric is whether it helps the organization tune its growth engine to operate at peak efficiency. Does it help employees clarify and simplify the job of delighting customers? Does it help them identify and engage their best customers? Does it allow them to compare their performance to the best from week to week and month to month? The notion of Promoters, Passives, and Detractors does all this, and helps companies turn into Net Promoter stars.
Net Promoter methodology also includes a process to Close The Loop. Closing the loop is a process by which the Company actively intervenes to change a negative perception and convert a detractor into a promoter. The Net Promoter survey will identify a detractor and should automatically alert the Company to contact the consumer and manage the follow-up and actions from that point. These verbatim comments can end up being more important than the actual score as they point to a specific item that was the primary reason for their score. Accumulating these reasons can further point to commonalities that contribute to a lower score. A Company Culture that is focused on customers would then provide opportunities for all Team members to contribute ideas to help create a better customer experience.
A good book on the subject is “The Ultimate Question 2.0” by Fred Reichheld. In the book they discuss the methodology and how some of the largest most customer focused companies are having great success with Net Promoter Score as they improve the customer experience, streamline processes and enhance their bottom line. There are several ways the surveys can be done and then from there a number of different software providers ranging from low cost and simple up to custom software with extensive reporting like Satmetrix and several in between. Depending on how many customers are to be surveyed, the frequency and what reporting is needed, we can help recommend a good provider for your needs.
Recently, we mentioned using Net Promoter Score to a client and although they were skeptical of a one question survey being able to give much insight, once we did it and started to get responses, it was completely eye opening. We are now re-designing processes and internal reporting to drive process improvement. It is expected that this change would result in an increase in sales of over 30%.