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Net Promoter Score (NPS) fundamentals
An analysis* carried out by Bain & Company shows that companies that generate long-term profitable growth, such as Apple, Amazon and Zappos, have double the average Net Promoter Scores (NPS). Used by an ever-growing number of companies, particularly as a performance indicator, the NPS is the best known, and also the most discussed, indicator for measuring and monitoring customer satisfaction and loyalty. In a nutshell, here’s what you need to know:
Definition of the Net Promoter Score
The Net Promoter Score, , also called the customer recommendation index is a customer loyalty indicator developed in 2003 by Fred Reichheld, a consultant at Bain & Company and author of the book The Ultimate Question. This indicator measures the likelihood or probability of customers or users recommending a product, brand or service, by asking the question: « How likely is it that you would recommend (company or brand X) to a friend or a colleague? »
The answer is given on a scale of 11 points: from 0 (“Not at all likely”) to 10 ( “Extremely likely”).
From this, three categories of customers can be identified:
The Promoters who give a score of 9 or 10. They like your company’s products and services. They are the loyal customers of and ambassadors for your brand. They recommend the company’s products and services to other potential buyers.
The Passives who give a score of 7 or 8; also known as the neutrals. They are quite satisfied, but could easily switch to the competition if the opportunity arose. They probably don’t give negative word-of-mouth opinions, but are not enthusiastic enough about your products or services to promote them to friends or family.
The Detractors who give a score of less than or equal to 6. They are not particularly enthusiastic about the product or service. They will probably not be inclined to purchase again and could harm the company’s reputation by making negative comments to friends and family.
How is the Net Promoter Score calculated?
The NPS score is an absolute number that can range from -100 (where all customers are detractors) to 100 (where all customers are promoters).
Its main advantages
Its main limitations
1. When the NPS is the sole indicator in your questionnaire...
2. Use the NPS as one of the indicators in your customer satisfaction survey...
In addition to overall satisfaction, re-purchase intention or other criteria for measuring satisfaction (expectations, quality, sales relationship, etc.).
3. Take action
In conclusion, companies must remember that the Net Promoter Score offers a reasonable, consolidated snapshot of customer satisfaction. However, when analysed in detail and viewed as a state of mind, the NPS can be a powerful performance driver. This is because, rather than being just an indicator, the NPS offers a truly comprehensive approach for companies: by starting with customer interaction, getting employees involved and taking the company to new heights, and by offering ever more positive customer experiences.
NPS®, Net Promoter® and Net Promoter® Score are registered trademarks of Satmetrix Systems, Inc., Bain & Company, and Fred Reichheld.
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