In 2003, Fred Reichheld of Bain & Company introduced a new customer loyalty matrix in the Harvard Business Review as One Number You Need to Grow. Net Promoter Score&TM; is a market research tool that can be used to measure customer loyalty to a company. Net Promoter Scores (NPS) have been used in place of traditional customer satisfaction research.
The Net Promoter Score is generally derived from surveys research, and today, Net Promoter Score research is almost exclusively conducted online with commercially derived panels of survey participants. The participants in a panel are selected from large pools of stand-by research subjects according to particular consumer attributes. In other words, if a company produces auto wax, the participants in their Net Promoter Score surveys research will exhibit an interest in custom automobiles, will usually be male, and may be members of a car club.
How Are Net Promoter Scores Derived?
Net Promoter Score is a key metric for determining the answer to this question: How likely are you to recommend this company to a friend, colleague, or family member? Customers respond to this question - or some very close version of this question - by selecting an answer on a scale that spans zero to ten. A rating of 10 indicates that the customer is Very Likely to recommend the company to others. A customer is considered to be a promoter if they choose a nine or a ten on the scale. Customers who select the number six or below on the scale are considered to be detractors.
Net Promoter Scores can range from -100 to +100. These scores represent everyone surveyed is a detractor (-100) to every surveyed is a promoter (+100). The term net indicates that the percentage of detractors have been subtracted from the percentage of promoters to arrive at a net score, in much the same way that accountants subtract all the expenses paid out from all the revenue coming in to arrive at a net profit. Net Promoter Score survey respondents can also fall into the category of passives, which means they have selected a rating of seven or eight. Passives are ignored in the calculation of Net promoter Score.
What Are the Benefits of Using Net Promoter Score?
- In as much as the health of a company can be measured by the loyalty of its customers, Net Promoter Score provides a concrete target that can be used to track fluctuations in customer satisfaction over time.
- Net Promoter Score can be used to motivate a company to focus on those customer-facing activities and interactions, as well as improve the products and services offered to customers.
- Competitive growth rates may be tied to Net Promoter Scores.
- Identification of detractors provides an opportunity for companies to follow up with those customers and learn more about weaknesses or problems that may have relatively easy solutions.
- The information that is derived from follow up calls to promoters and detractors can be used to develop training content for coaching account representatives and customer service representatives.
- Real time transparent data can foster immediate follow up with at risk customers, support the resolution of customers' problems, and be used to turn detractors into promoters.
- Net Promoter Scores highlight the touch points in an organization by reminding employees that they are accountable for their part in the customer experience. Net Promoter Scores can report how the company is doing at a relevant level of granularity that makes most sense for the business, whether by department, branch, event, or agent.
- Net Promoter Score can be used to focus employees on the task of becoming a learning organization - or maintaining those practices for a company that has established learning as a pivot point for its business.
How Does Net Promoter Score Fit with Voice of the Customer (VoC)?
To implement a strong Net Promoter Score measurement program, a good voice of the customer (VoC) program must be in place. Net Promoter Score programs are useful for learning more about customers and clients, but digging deeper into customer experience dynamics is essential. This is particularly true as social media networking allows consumers to take voice of the customer to the social media platform. Engaging consumers in social media networks and conducting robust market research are all important components of an effective market research strategy.
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