The new corporate buzzword everyone has been talking about is NPS or Net Promoter Score. NPS is being hailed as the new way to measure customer satisfaction–it has proven to be one of the most accurate predictors of revenue growth. As a result, companies worldwide are adopting NPS as a simple yet effective measurement of how their businesses are doing.
Here’s a quick understanding of what NPS actually means:
NPS is based on a direct question: How likely is it that you would recommend our company/product/service to a friend or colleague? Scoring for this answer is most often based on a 0 to 10 scale. Promoters are those who respond with a score of 9 or 10 and are considered loyal enthusiasts. Detractors are those who respond with a score of 0 to 6 and are considered unhappy customers. Scores of 7 and 8 are passives, and they will only count toward the total number of respondents. Passives don’t directly affect the formula. NPS is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. NPS can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter). An NPS that is positive (i.e., higher than zero) is good, and an NPS of +50 is excellent.
So even though NPS is great and companies globally are using it, I rarely come across organizations that measure how their promoters are impacting business. We believe that the biggest single disadvantage of the NPS approach is the crucial lack of ability to identify and act upon the driving factors behind customers’ responses to the questions. There is little point in asking customers for their views unless you are able and willing to act upon the answers you obtain.
I have worked with clients who utilize NPS, and the need for supplementary questions is apparent. You must ask supplementary questions to understand the drivers behind NPS and what actions can be taken to improve satisfaction and loyalty. At Inquisium, we have developed a program that doesn’t just allow our users to measure loyalty, but rather, how loyalty can be leveraged to positively impact business.
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Written by Mike Julka