Net Promoter Scores
February 04, 2015
Net Promoter Scores: Performance from the Customer’s Perspective
What is a Net Promoter Score?
A Net Promoter Score is a simple management tool to help track the overall attitude of your customer base toward your business. This checkup is performed by assigning a numerical value to the quantity and quality of the word of mouth being spread about your business. Unlike a simple satisfaction rating that is an average score based on simple interactions, this measurement is designed to give you a more holistic view of your business, product or service's reputation.
How does it work?
The measurement system is built around a single question:
“How likely are you to recommend (Business/service/product) to a friend, relative or colleague?”
Customers are then asked to give a response on a scale of 0 (not at all likely) to 10 (very likely). Their response will land them in one of three groups:
Promoters- those who answered 9 or 10.
Passives- those who answered 7 or 8.
Detractors- those who answered with 6 or less.
Promoters are customers who are clearly happy with your business/service/product. They are willing to stake their own reputation on promoting you; and odds are that if they feel that strongly, they already are. Passives are customers that are unsure if they are willing to stake their reputation on a recommendation and can probably be swayed into trying a competing business/service/product that fits their needs. Detractors are customers who feel that their needs are not being met in some significant way and are not likely to give you a positive review or recommendation.
The philosophy behind the calculation of the Net Promoter Score is to weigh the number of customers who are most likely to be vocal about your business, service or product (both negative detractors and positive promoters) and see if you are currently achieving negative or positive reputation points.
The NPS is calculated based on the percentage of the customers that answered who fall into the promoter and detractor categories. Simply put: % promoters - % detractors = NPS
Interpreting Your Score.
The higher your NPS, the better you’re doing as a business/service/product at building a positive experience for customers and a better name for your business. But don't just focus on the number itself. The NPS score is meant to serve as a baseline for future measurement. The NPS was designed to be measured consistently over time, such as once per quarter, to evaluate the overall health and impact of your relationship with customers.
For example, if you had an NPS of 12 last quarter and an NPS of 8 this quarter, you can infer that one or more changes to your business practices or the competitive marketplace had a negative impact on your overall reputation and the likelihood of getting a referral from your customers.
Like all management tools, this score is not intended to be used as a silo for evaluating your business. The fluctuation of other key performance indicators and external influences will help you understand changes in your NPS score and will help paint a clearer picture of the success of your business. How? By indicating what has changed (KPI’s & external factors) and what impact those changes have had on your customer experiences (NPS).
Knowing your NPS is great, but knowing what factors are influencing that number is also critical. That is why most NPS surveys include an optional follow-up question that allows your customer to offer an explanation of their rating. Those customers that choose to answer are more likely to have strong opinions (positive or negative) and will tend to be the Promoters and Detractors who directly influenced your Net Promoter Score. Whether the customer provides positive or negative feedback to support the score they provided, it helps you to better understand your customer's experience.
Most importantly, that feedback is actionable. Positive reviews pinpoint what you should be advertising to potential new customers. These customers might even be willing to provide case studies or other promotional material for your business to use. Complaints are going to be the items that need review and improvements most, as they are determining factors in the customer's negative experience with your business. Be sure to look for patterns in the feedback; these trends are key factors that will help or hinder your business over time.
When to Perform an NPS Poll
There are critics who raise the question of how to control the business environment when polling for a Net Promoter Score. Because this score relies heavily on the mood of your customer base at and around the time they are polled, there is a definite chance that environmental and situational factors could have a positive or negative influence on the results.
Factors that could influence results:
-- Recent interactions with your business
-- Changing the way you do business
-- A price increase or decrease
-- A public relations incident
-- A product/service problem or failure
-- The launch of a new product/service
-- Changes in quality or sourcing of a product/service
-- Expanding or removing points of contact or service
-- The gain or loss of high value staff members or employees
-- The gain or loss of influential promoters or backers
Naturally, you would want to question the integrity of Net Promoter Score heavily influenced by these factors or other large scale events. That is why it’s vital to measure business performance with multiple tools and KPI’s on a regular basis. This will give you an idea if the changes are related to internal or external factors. Using the NPS as your only point of reference for success can leave you blind to building internal problems.
Ideally, an NPS scoring survey would be conducted when your business environment could be described as “business as usual.”