What is Net Promoter Score (NPS)?
Net Promoter Score (NPS)* is a loyalty metric and survey method that was developed by Fred Reichheld, Bain & Co and Satmetrix as a way of measuring customer loyalty. The method was published in the 1990s in a book called ”The Ultimate Question” and is based on a single question: What is the likelihood that you would recommend (our company) to a colleague or friend?
The functionality of our Net Promoter Score enables you to carry out continuous customer surveys and measure customer loyalty as an effective means of developing customer relationships. Major companies such as Apple, Vodafone and American Express are finding the NPS method to be extremely successful.
Measuring your Net Promoter Score
Net Promoter Score is based on the question “How likely are you to recommend (our company) to a colleague or friend? Customers respond on a 0-10 scale, where 0 is not at all likely and 10 is extremely likely. The respondents are then grouped into three categories:
- 0-6 = “Detractors”
- 7-8 = “Passives”
- 9-10 =“Promoters”
Net Promoter Score is calculated as follows:
NPS = percentage of Promoters – percentage of Detractors
Net Promoter Score – advantages
Net Promoter Score is a straight forward way of measuring how companies and their employees treat their customers. The method is used by many large corporations thanks to its simplicity and direct connection to profitability.
- A simple key ratio that is measured continuously
- Easy to understand
- Allows quick follow-up
- The ”word of mouth” of your promoters leads to an increase in sales
- An established method that enables comparison with other companies and industries
Net Promoter Score – criticism
Some critics are of the opinion that the method is too simple and is of little value as a measurement of future sales since it does not take such factors as product lines, brand awareness or market potential into consideration.
The actual value must be analysed separately. An NPS of 25 can be derived in many different ways. One company could have 25 % promoters and 0 % detractors, while another could have 55 % promoters and 30 % detractors but both would have an NPS of 25.
NPS is a measure of intention to recommend, rather than actual behavior. People are more or less likely to recommend a product or a service depending on how interesting it is, so it is more likely that they would recommend restaurants and fashion than petrol or washing powder.
Recommended uses of Net Promoter Score
Our tool not only allows you to continuously measure your NPS, but also to use the results to improve your customer relations.
- Carry out continuous customer surveys with NPS based on events, e.g. customer contacts, sales meetings, support calls etc.
- Ask for recommendations from your promoters
- Identify and group your promoters, passives and detractors in order to improve communication with each group
- Take immediate action on both positive and negative feedback
- Measure change over time
- Pass on the information internally in order to improve customer focus throughout the organisation.
We would love to tell you more about Net Promoter Score and how it can help your company.
* Net Promoter Score is a registered trademark of Fred Reichheld, Bain & Co och Satmetrix