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NPS Explained

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Author: Terri Wilcox - Aug 2015

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 is a measurement tool that can be used to evaluate 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. At Resultants For Business, a referral coming from one of our clients is THE highest compliment ever given to us. Loyalty is defined by our clients. Through their eyes, if they are willing to refer their friend, relative or professional alliance that means their loyalty and belief in us is set.

The Net Promoter concept and scoring method was developed by Fred Reichheld, Bain and Company, and Satmetrix. It was introduced by Reichheld in his Harvard Business Review article “One Number You Need to Grow” in 2003. His book followed in 2006, “The Ultimate Question”. When the question is answered by your customers, using a 0-10 point scale, there are 3 categories that emerge:

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

THROUGH THE EYES OF THE BUSINESS WORLD

With one question and based on these 3 categories, we use a simple formula to come up with our final “net score”. To calculate the net score, take the percentage of Promoters and subtract the percentage who are Detractors.

Net-Promoter-Score

So what does that score mean and how do other companies compare to our score? From the research and gathering of data by Satmetrix, the average company’s NPS efficiency rate is around 5-10 (Refer to www.Satmetrix.com and www.netpromoter.com). What they have uncovered with this score 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 U.S.? Take a look at Amazon (5 years in a row leading the pack), Zappos, Harley-Davidson, USAA Bank, Discover Card, Apple, and Southwest Airlines. Their scores consistently fall within the 50-80 range.

SO 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, then the work begins after we survey our clients and establish our NPS. We now have 3 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 department teams, and to their positions as individuals. We’ve got our communication 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 will share what we plan on doing based on the score.
  3. Even the highest scoring organizations have work to do. We want that score to improve. We have to continue to turn the detractors and passives into promoters. This is the focus. This is 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 our clients 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.

If you are wondering what RFB’s Net Promoter Score is, click on the link and scroll down to Our Success Stories http://www.theresultants.com/results/

About the Author:
Terri Wilcox is co-founder of Resultants For Business. As an organizational strategist and certified Senior Professional in Human Resources (SPHR) Terri focuses on the people side of business, building teams that develop the aptitude and resiliency needed to meet the challenges of today’s business climate. As an RFB Business Advisor, Terri works side-by-side with business owners and their management teams, providing clarity of thought and the courage to act in the best interest of the organization. Connect with Terri and other RFB® Business Development Advisors here, or on LinkedIn.

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