Net Promoter Score & Model

Net Promoter Score (NPS®) is the most popular and proven metric for measuring and acting on customer loyalty data.

Why NPS?

The Net Promoter model is an approach in which you use your Net Promoter score to drive improvements.

=

Higher Margins

Promoters are usually less price-sensitive than other customers because they believe they’re getting good value overall from your company. The opposite is true for Detractors, who are more price-sensitive.

=

Higher Annual Spend

Promoters buy more, more often, than Detractors do. They tend to consolidate more category purchases with their favorite supplier. Promoters’ interest in new product offerings and brand extensions also exceeds that of Detractors or Passives.

=

Greater Cost Efficiencies

Detractors complain more frequently and consume more service resources. In contrast, Promoters reduce customer acquisition costs by staying longer and helping to generate referrals.

=

Higher Retention Rate

Detractors generally defect at higher rates than Promoters, which means that they have shorter and less profitable relationships with your company. Rescue those Detractors—turn them into Promoters—and experience higher margins.

=

Greater Word of Mouth

What proportion of new customers selected your firm because of reputation or referral? The lifetime value of those new customers, including any savings in sales or marketing expense, comes from Promoters. If you’re using the Net Promoter model, you’ll attribute 80 to 90% of referrals to Promoters. On the other hand, Detractors are responsible for 80 to 90% of negative word of mouth, so you can attribute the cost of this drag on growth to them.


How It Works

At a basic level, you can implement the Net Promoter score and model in four simple steps.

1. Ask the Net Promoter Question
Getting to your Net Promoter score begins by asking one simple question: How likely is it that you would recommend us to a friend or colleague? By asking this question, and by categorizing customers based on their answers, you can get a clear measure of your company’s performance through customers’ eyes.
2. Categorize Based on Answers

Customers respond to the one question on a scale from 0 to 10; their responses indicate which category they fall into.

3. Calculate Your Net Promoter Score

To calculate your company’s NPS:

 

  1. Find the percentage of customers who are Promoters and Detractors.
  2. Subtract the percentage of Detractors from the percentage of Promoters.

For instance, suppose 100 customers respond to your survey as follows:

Now calculate:

NPS = % of Promoters – % of Detractors
NPS = 25% – 35%

NPS = -10%

As you begin to implement the Net Promoter model, you will work to increase the number of Promoters and decrease the number of Detractors, monitoring how the strategic and tactical changes you make move the metric.

4. Implement the Net Promoter Model

Because a Net Promoter program is not like a traditional customer satisfaction program, simply measuring your NPS does not lead to success. Instead, best practices indicate that you should follow the associated Net Promoter model, gain leadership commitment, and have the right software and business processes in place to deliver real-time information to employees, so they can act on customer feedback and achieve results.


The Ultimate Test

The ultimate test for any customer-relationship metric is whether it helps your organization tune its growth engine to operate at peak efficiency.

  • Does it help your employees clarify and simplify the job of delighting customers?
  • Does it help you identify and engage your best customers?
  • Does it allow you to compare your performance—to yourself and to industry leaders—from week to week and month to month?

Net Promoter—and its notion of Promoters, Passives, and Detractors—does all this, and will help your company realize the benefits you may have heard about.