Businesses have always sought a crystal ball that would give them insight into their customers’ experience about their company’s products and services. Over the years many experts have put forward many theories and strategies as how to best capture and measure customer satisfaction.
Who knew that one of the best tools for getting this type of insight would involve asking only one simple question. Fred Reichheld of the management consultancy Bain & Company is one of the leading experts if not THE expert of loyalty economics and the creator of the Net Promoter Score (NPS).
What is the ultimate question?
The question seeks to broadly identify the likelihood of someone remaining a customer and how likely they would be to recommend the company to others in their circle of influence. Here is a typical example of how the NPS question is structured:
Based on a scale of 0-10, the responses are grouped into three categories:
Detractors: Responses of 0-6 are customers who are unhappy on some level and will speak negatively about your brand.
Passives: Responses of 7-8 are customers who are fairly indifferent and will neither promote nor degrade your brand.
Promoters: Responses of 9-10 are customers who are highly satisfied and will enthusiastically promote your brand throughout their circle of influence.
When should you ask the question?
There are several schools of thought about when is the appropriate time to ask the NPS question.
Periodic: Organizations will ask the NPS question to their entire customer base at a regular interval or after a significant milestone is achieved in products and services offered. .
Interactional: This approach involves asking the NPS question after every significant event between the customer and the company. It could be after a purchase, customer service event, or other action. ;l
Your company’s industry, size, growth stage and other factors can determine the frequency and the nature of your NPS deployment.
How to calculate Net Performer Score
Calculating NPS is simply the percentage of respondents who were promoters minus the percentage of respondents who were detractors.
Example: Out of 100 NPS responses, let’s say 15 are detractors, 17 are passives and 68 are promoters.
So, NPS = % of promoters – % of detractors
NPS = 68 – 15 = 53
What is a good score?
What constitutes a good score can vary widely by industry. Some industries enjoy friendlier relationships with their customer base while others are perceived as more adversarial by customers. An example is that Cable TV and Satellite providers historically have lower scores near 20 while retail stores and online stores trend closer to 60.
It is critical to establish a benchmark for your organization to be able to incrementally measure changes in NPS over time. Comparing your score to other organizations and competitors in your industry can add additional perspective as well. If you are a cable company and your score is 27 well above the industry average then you are clearly doing many things well to differentiate your service from competitors.
NPS pros and cons
While asking the ultimate question will give you some valuable insight into how your customers feel about your company, there are some areas that it does not address.
- Simple to deploy across any platform after any interaction.
- Gives executive level management a high-level view of performance.
- Provides a leading indicator of overall business and revenue growth.
- Allows companies to see how they stack-up within their industry.
- Understand and engage with your brand ambassadors and detractors effectively
- NPS does not answer the question “why” someone responded with a certain score.
- The question is focused on the relationship not the transaction
- Requires additional progressive surveying
The negatives about utilizing NPS as an organizational benchmark are only problems if you are relying on the NPS question and not using the broad insights provides to create more detailed strategies.
NPS is a great place to start and should be a part of every organization’s strategy to keep a finger on the pulse of their customers. Be sure to take the next steps and keep asking your customers other important questions as a part of a comprehensive customer satisfaction survey strategy.