Net Promoter Score is a metric that gauges the customer loyalty and can be used to predict the growth of a business. It measures customer experience, or the loyalty between an organization and a consumer. Net Promoter Score serves as the core metric for customer experience management programs and is used by the majority of Fortune 1000 companies. In this article, we provide a detailed analysis of new promoter score.
Net Promoter Score is a metric that measures customer loyalty. Developed by Fred Reichheld, Bain & Company, and Samtrix in 2003, this metric divides consumers into three different segments on a scale of 1 to 10:
By using Net Promoter Score, businesses can determine the experiences their customers have and improve their experience.
Net Promoter Score and Net Promoter System
Net Promoter Score is a measurement tool that indicates the satisfaction, experience and loyalty of a customer. It measures how likely consumers are to recommend a business, a product or a service to someone else. A single question is asks consumers a single question and rates the responses that are provide based on a scale of 0 to 10. The question asked is this:
- How likely is it that you would recommend this company (product, service, experience, associate) to a family member, friend or colleague?
Since this metric is so easy to understand, many establishments use it to gauge the loyalty and retention of their customers. The Net Promoter System brings the Net Promoter Score to a higher level, as it helps to turn results into action. The Net Promoter System allows businesses to learn about their customers’ loyalty in a real-time way and take action to improve their experience.
Used by some of the biggest businesses around the world, The New Promoter Score and the Net Promoter System work by creating tangible feedback that businesses can use to improve the loyalty of their customers.
How Net Promoter Score is Calculated
As mentioned, the Net Promoter Score asks customers a simple, single question: “How likely is it that you would recommend this company (product, service, experience, associate) to a family member, friend or colleague?” (the question can be modified, but this is the general gist). Customers use a scale of 0 to 10 to provide their answer to the question.
Customers are segmented into three separate groups, and this segmentation is based on the score they provide:
- Detractors: Anyone who offers a score of 1 to 6. This group of customers may not purchase a product or service again and there’s a chance that they will speak negatively about a business if the business doesn’t do something to improve customer experience.
- Passives. Anyone who provides a score of 7 or 8. This group of people are usually satisfied with a business, but not so much that they would become loyal customers. There is a chance that they will choose a competitor in the future, but they don’t speak negatively or positively about a business.
- Promoters: Anyone who offers a score of 9 or 10. These customers are both loyal and enthusiastic. They speak highly of a company, recommended it to people they know, and would be considered advocates for a brand.
To calculate the Net Promoter Score, the percentage of detractors is subtracted from the percentage of promoters. This calculation offers a score that falls between -100 and 100. If the Net Promoter Score is -100, all respondents are considered detractors; if the score is 100, every respondent is a promoter. The score indicates the health of a company and can be used to improve customer satisfaction and loyalty.
Why Net Promoter Score is Important
The Net Promoter Scores is a key measure of the overall perception customers have of a brand. It is the leading indicator of the growth of a business, which means it serves as a vital anchor for a business’ customer experience program. In other words, this score can be used by businesses to determine how satisfied their customers are and whether or not they are experiencing positive growth. If the score is low, a business can take strides to improve the experience of their customer. If the score is high, a business knows that it is on the right track for establishing customer loyalty and that it is experiencing growth.
When the Net Promoter Score is complemented with other types of insights and metrics, they have an inclusive and actionable insight regarding the experience of their customers.
Other reasons why the Net Promoter Score is important include:
- Promoters of a business account for about 80 percent of referrals a business receives, which boosts success.
- Detractors of a business account for about 80 percent of the negative publicity a business will receive, which can hinder success.
- Promoters tend to be committed and loyal to a company than other customers, which means that they have a long-term and more profitable relationship with a business.
The Benefits of the Net Promoter Score
There are several key benefits that businesses can reap from the Net Promoter Score. Some of the leading benefits include:
- It’s simple. The survey used by a Net Promoter Score an System is based on a single question, which makes it quite simple. This keeps the burden on consumers’ low, which means that they are more likely to respond. Additionally, responses are scored on a basic scale of 0 to 10, which makes it easy for businesses to determine where the experience and loyalty of their customers lies.
- It’s easy to implement. Businesses can conduct the surveys that are used for measuring Net Promoter Score in various and simple ways; for example, they can be conducted via email, by phone, or on a simple web-generated questionnaire. Scores can be compiled quickly, which means that a company can see how their performance racks up in a very timely and efficient manner. The Net Promoter Score can also be used to share real-time insights with the management and employees of a company.
- An effective tool for customer loyalty. Net Promoter Score is one of the most effective metrics used to determine the loyalty of a customer. As such, businesses can find out how loyal their customers and make efforts to improve their loyalty.
- Boosts customer satisfaction. Since the Net Promoter Score allows you to gauge customer satisfaction, it can also be used to help you improve it. This, in turn, will lead to greater success for a business.
- Lower the churn-rate of customers. Since promoters tend to desert a company at lower rates than other customers, businesses can make efforts to reduce their churn-rate, which will help to enhance the relationship they have with a business. This leads to greater profitability, as consumers who remain loyal to a company are more likely to continue making purchases into the future.
Disadvantages of the Net Promoter Score
Though the Net Promoter Score offers definite benefits and has been widely adopted by businesses of all sizes around the world, some criticize it. Some of the key criticisms of the Net Promoter Score include:
- Doesn’t add to other questions concerning customer loyalty. Some claim that there is no scientific evidence that the “likelihood to recommend” question that the Net Promoter Score asks is a more beneficial predictor of a business’ growth than other questions related to customer loyalty.
- Focuses on relationships more than transactions. The satisfaction question that the Net Predictor Score asks focuses more on the relationships customers have with a business than it does on the transactions customers make. In other words, it doesn’t measure the amount or the quality of transactions customers make.
- A plan of action is necessary. While the Net Promoter Score can be used to measure customer loyalty and businesses can use it to boost that loyalty, unless a plan of action exists, it won’t do anything to help a business. In other words, companies must establish a way to enhance customer loyalty in order to see any improvement.
How to Improve Net Promoter Score
Though the Net Promoter Score is a very popular metric, many people don’t know what they should do to improve it. Here’s a look at some tips that will help you boost a low Net Promoter Score:
- Be clear. Ensure your entire business knows about your Net Promoter Score, including what it means and why it is important. A low score is a business-wide problem, so it’s important for everyone to be aware of it.
- Perfect your brand. Find ways to develop real connections with your customers so that you can grow your brand and enhance customer loyalty.
- Develop a customer advocacy program. Doing so will help you turn your customers into promoters. For example, develop simple, yet creative tasks that customers can complete in order to receive rewards, and offer great prizes for any referrals they offer.
- Get feedback. Find out why detractors aren’t satisfied so that you can find out how you can improve your efforts.