Net Promoter
NPS stands for Net Promoter Score, a metric that serves as the standard for measuring customer and member loyalty. Net Promoter was developed by (and is a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. NPS is derived from a single question: How likely is it that you would recommend our company/product/service to a friend or colleague?
The beauty of NPS is its simplicity. It provides a single metric that is easy to understand, and it’s easy to benchmark. NPS is used by more than two thirds of the Fortune 1000 companies.
How it Works
The NPS question is scored on a scale from 0-10 and respondents are grouped as follows:
Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
Subtracting the percentage of Detractors from the percentage of Promoters yields the Net Promoter Score, which can range from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter).
How to apply NPS to your organization
It is really very straightforward. I recommend it for use by a wide range of organizations. There are a few things that will maximize your NPS program. First, NPS is typically delivered as a survey based question. The traditional approach for surveying customers, and the one that most organizations still do (poorly), is the once a year, every other year survey. Now this is not about the big once a year survey, although NPS should be included in those surveys as well. This is about building a systematic, ongoing program that continually helps you understand and take action. And that last part is really important, YOU HAVE TO TAKE ACTION!
There are several approaches you can take. You can send an NPS survey on a quarterly, monthly or more frequent basis. You can include NPS at the point of purchase or transaction. And you can segment the data to examine different populations, demographics, product groups or regions to understand where you are doing well and where you need to improve.
The NPS survey frequency should not be a concern, because it is only one question and the customer or member can answer it very quickly. You can include a couple of optional questions to capture some additional feedback, but try to keep the survey very short. Also, NPS can become a key metric for the organization when it is deployed at key touch points and done regularly.
The American Customer Satisfaction Index (ACSI)
ACSI is the only national cross-industry measure of customer satisfaction in the United States. The Index measures the satisfaction of U.S. household consumers with the quality of products and services offered by both foreign and domestic firms with significant share in U.S. markets.
The ACSI uses data from interviews with roughly 70,000 customers annually as inputs to an econometric model for analyzing customer satisfaction with more than 230 companies in 43 industries and 10 economic sectors, as well as over 100 services, programs, and websites of federal government agencies.
ACSI is produced by the Stephen M. Ross Business School at the University of Michigan, and is one of the components of the U.S. governments Key Economic Indicators. It is an important benchmark for understanding how Americans feel about the companies and organizations that serve them. Looking at the ACSI data will give you a good sense for the state of customer or member satisfaction in any given industry. This is important to help you understand how you and your industry are doing in meeting the needs of your customers or members.
Measuring your NPS
ACSI
NPS (wikipedia)
The One Number You Need to Grow (HBR)
Comments (0)