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NPS Explained

Author: Terri Wilcox - Originally published Aug 2015, Edited March 2020

Through the Eyes of Your Customers

Wouldn’t it be great if you could measure how valuable your relationship is to your customers coming from their viewpoint, not yours? And wouldn’t it be awesome to be able to get that sort of feedback using an easy method that boils it all down to one simple metric? That’s exactly what the Net Promoter Score does. It evaluates the loyalty of a company’s customer relationships by asking one question:

“How likely is it that you would recommend this company to a friend or colleague?”

No other question better defines loyalty. A client referral is THE highest compliment ever given to The Resultants as we believe loyalty is defined by our clients. Through their eyes, if they are willing to refer their friend, relative or professional alliance, it means their trust and belief in us is set.

The Net Promoter concept and scoring method was developed by Fred Reichheld, Bain & Company and Satmetrix. It was introduced by Reichheld in his Harvard Business Review article “One Number You Need to Grow” in 2003. His book, “The Ultimate Question”, followed in 2006. When the question above is answered by your customers, using a 0-10 point scale, there are three categories that emerge:

  1. Promoters – Your most loyal customers who will continue to keep buying and referring others
  2. Passives – Your satisfied yet unenthusiastic customer who is on the fence when it comes to the competition
  3. Detractors – Your unhappy customers who will eventually do damage by negative word of mouth

Through the Eyes of the Business World

With one question and based on these three categories, a simple formula allows one to come up with a final “net score”. To calculate the net score, take the percentage of Promoters and subtract the percentage who are Detractors.

What Does That Score Mean and How Do Other Companies Compare?

Based on Satmetrix’s research and data, the average company’s NPS efficiency rate is around 5-10. What they have uncovered is that promoters barely outnumber detractors. Not very healthy, right? So why do companies accept that type of score? Perhaps it’s because there are a lot of companies out there that have negative Net Promoter Scores. According to Reichheld, this is why companies are having such a hard time with sustainable growth. So what is the gold standard? What is a truly well-deserving Net Promoter Score in the United States? Take a look at Amazon, Harley-Davidson, Apple and Southwest Airlines. Their scores consistently fall within the 50-80 range.

Why Do Your Customer’s Eyes Keep Staring at You?

This one simple metric, by our standards, is also THE most valuable accountability metric for the company. Simply recording the Net Promoter Score each year, bi-annually or every quarter is not the most important part of the measurable. If we expect our company to grow, the real work begins after we survey our clients and establish our NPS, resulting in three very important actions:

  1. We share it with everyone on our team from the part-timers to the executive C-suite to our preferred partners … immediately. EVERYONE must understand what that number means to our organization, their departments and to their individual positions. We’ve definitely got our work cut out for us.
  2. We follow through and circle back to our clients. If you want your customers to quit staring, then let them know that “we heard you” (good or bad). This means we more than likely will need to ask more questions to uncover more specifics. It also means we share what we plan on doing based on their feedback.
  3. Even the highest scoring organizations have work to do. We always want that score to improve. We have to continue to turn the detractors and passives into promoters. This is the focus and the only way to improve our score.

And yes, our clients are staring, especially our most loyal ones, because they want us to succeed, just as much as we want them to succeed. We are learning from our clients every time we measure using the Net Promoter Score. It’s worth the effort because it is the foundation for growth. Loyalty defines who we are.

Click here to see The Resultants most recent Net Promoter Score.

Author, Terri Wilcox, is a co-founder and Business Advisor with The Resultants. To learn more about Terri, visit our Team Page or connect with her on LinkedIn.

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