Implementing a Net Promoter Score (NPS)? – Here’s what you need to know
Net Promoter Score – the pros and cons
If you’re thinking of implementing a Net Promoter Score (NPS) system in your company, here are some factors that it usually pays to be aware of before you start.
But first, a little background into what the NPS is, exactly, is in order.
What NPS is and how it came about
The Net Promoter Score is a customer loyalty metric that was developed by Fred Reichheld and Bain and Company and popularised in his book The Ultimate Question.
That question is to ask customers, on a scale of 1-10, how likely is it that they would recommend the company / brand / service to a friend or colleague.
In the book, Reichheld claims that it is the one number you need to grow, and that companies that focus on ‘good’ profits (i.e. on customers who are promoters as per the graphic above) rather than ‘bad profits’ (just marketing again and again to all customers, even if they are detractors or unhappy with the company’s products or services), will achieve a much higher growth profile (we have included an infographic below for more detail).
Other benefits about using the NPS include:
· it achieves higher response rates from customers, since it only asks one question (with a follow up question)
· it is easier to implement inside a company, since there is only one number
· it makes customer follow up by front line staff easier to action
Sounds good. But does it ‘do what it says on the tin’?
Net Promoter Score – the reality
One flaw the question has is that it assumes that if the customer scores 9 or 10 to the question above – they will, indeed, recommend the product or service to a friend or colleague.
Not so, it seems.
Have a look at the graphic below. This is the consolidated data of a study conducted by Bruce Temkin of Temkin Associates in the US.
As you can see, only two thirds of customers who said that it was highly likely they would recommend a company, actually did so. We guess that the old saying does still hold some sway – buyers are liars!
However, before we throw the baby out with the bath water, it is also clear that there is a significant link between customer ‘say’ and customer ‘do’, and that there’s a clear trend between overall score and customer recommendation.
The Bottom Line
The bottom line is that the Net Promoter Score has some clear value and is much better than the alternative (customer satisfaction surveys that have response rates of perhaps less than 10%), but that it is only a starting point for a customer engagement programme.
The critical factor remains the follow up and linkage to a deliberate customer experience. We’ll be following up in due course as to how you can do this. In the meantime stay tuned to our emails here.
Talent Technologies helps companies implement Customer Engagement programmes. For more details, please contact us here.