NET PROMOTER SCORE
A business model for driving customer excellence
The Net Promoter Score (NPS) has found appeal because, according to its inventor, Fred Reichheld of Bain & Company, it is the "One Number You Need To Grow". This was also the title of an article by Reichheld in Harvard Business Review in 2003. The “one question” concept is appealing to senior managers of companies who may find the traditional plethora of customer satisfaction questions confusing and too much detail.
The Net Promoter Score (NPS) is a measure of customer satisfaction and loyalty and is used to determine how likely customers are to recommend and promote a company. The score is based on answers to the following question:
How likely are you to recommend brand X to a colleague using a scale from 0 to 10 where zero means not at all likely and ten means very likely?
It is argued that a “likelihood to recommend” score equates with loyalty. The NPS is computed by taking the percentage of people who give a score of 9 or 10 out of 10 (called promoters) and subtracting the percentage of people who give a score of 6 or below (detractors). Those giving a score of 7 or 8 are ignored in the calculation (passives).
A high NPS correlates strongly with loyalty and future growth. Tracking the NPS is important to determine trends in loyalty. Promoters are advocates of a company and become a company’s best salesperson.
In business to business markets the average NPS is between 20 and 25. The following scores are reasonable benchmarks:
Less than 20: Utility companies, monopolists, chemical companies, commodity suppliers, most Western airlines.
20 to 30: Manufacturing companies of all types, large corporates.
30+: Service companies and companies with a high service content in their offer, high-tech companies, professional services companies, small and medium-size companies, good merchants and distributors.
Companies and brands achieving high NPS scores (50+) are likely to excel at one or more of the following:
A strong brand that delivers against its promise.
Good relationships with customers through frequent contact and with staff who are friendly and empowered.
Responds quickly to requests.
Is easy to do business with.