The NPS method of measuring customer loyalty has been around for a while now. In case you have forgotten, NPS stands for Net Promoter Score, and in order to arrive at the score, you ask just one question: How likely are you to recommend (my company) to a friend or colleague?
Responses are on a scale of zero to ten, where zero means no chance, and 10 means definitely. Respondents rating you between zero and six are classed as ‘detractors’, those that score you at seven or eight are ‘passive’, and those giving you nine or 10 are ‘promoters’. You work out the percentage of detractors and promoters, subtract the detractors from the promoters, and the answer is your NPS score. If it’s a negative, you keep quiet about it; if it’s a high positive, you tell the world.
The system was developed by Fred Reichheld of Bain and Co, after research undertaken with Satmetrix, to address the issue that measuring customer satisfaction does not accurately reflect customer loyalty. By discounting the ‘passives’ - the ambivalent ones who are not dissatisfied but are not satisfied enough to feel loyal, and are unlikely to express an opinion either way - and focusing on those who do feel strongly enough to express their opinion, the NPS method can tell you whether the word on the street about your company is positive or negative. And that is a vital piece of information because it’s public perception of your company, and whether you’re gaining customers or losing them, that is going to affect your profits.
NPS was seized upon hungrily by businesses, who loved its simplicity and wanted to believe it was the one indicator they needed to measure business performance.
Unfortunately customer relationships are too complex to be fully explained in the answer to a single question. A low score, for instance, gives no indication of what your customers particularly dislike. When businesses began to realise that conscientiously measuring their NPS was not magically improving profits, there was something of a backlash against the system.
Nowadays, sensible businesses recognise it for what it is: a very useful indicator that can, when used alongside other methods of evaluating customer satisfaction and business performance, add a valuable perspective to the overall picture. It also has the advantage of being beautifully easy; an NPS survey conducted for instance through Survey Monkey can be set up in next to no time.
Patrick Zanella, Global Services Product Manager at Enterasys Networks, believes that NPS is gaining traction. He explains why he values it. “Using only one question in a survey may seem like a novel approach, especially since most companies typically use far more than one question in their surveys. However, I think asking this one question really brings focus to the age old way people typically use in deciding who they do business with, using word of mouth recommendations from people they know and trust.
“Asking only one simple question not only makes it easier and more likely for customers to respond to the survey, it gets right to the point of determining whether a person thinks enough of a company to recommend it”
While the NPS score is certainly not the only way to measure customer loyalty, it certainly provides a glimpse into how customers view a company. Most of the companies rated with a high NPS have these traits in common;
- Follow a customer-centric philosophy and go out of their way to provide value to their customers with high quality solutions and services
- Utilise in-house resources in their customer support functions, typically staffed by long-tenured product experts
- Make these experts available to their customers when they call for assistance
“A high NPS score” he adds, “means that Customers feel their needs are either met or exceeded, which leads to an increase in satisfaction and customer loyalty. Companies develop a repeat customer base that not only continues to buy from them, but also recommends them to their co-workers and colleagues.
Customers gain quick and consistent access to product experts. No one wants to call into a support desk and quickly realise they know more about the product then the person who answers the phone.
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