Net Promoter Score (NPS) is a management tool used by companies to measure the loyalty of their customer relationships.
NPS is calculated based on responses to a single question: How likely is it that you would recommend our company/product/service to a friend or colleague?
Scoring is calculated on a scale of 0-10 with 9 and 10 responses considered Promoters, 0 to 6 responses are labeled Detractors, and responses of 7 or 8 are treated as Passives.
NPS is calculated by subtracting the percentage of Detractors from the percentage of customers who are Promoters.
Passives count towards the total number of respondents thus decreasing the percentage of Promoters and Detractors.
The idea being that the more likely someone is to recommend a business, the higher the chance they will remain customers for longer, buy more and make positive referrals to other prospective customers.
The Good
The strength of NPS is in its simplicity, as well as strong correlations to both customer loyalty and revenue growth.
With only the one question asked, it is easier for customers to answer increasing the likelihood of responses, thus producing more feedback for the company conducting the survey.
It is also easier for the business to analyze the results of one question and calculate the score.
The question itself is also found to be strongly tied to brand loyalty.
Loyal customers tend to stick with your product or service, are willing to be brand ambassadors recommending your company to prospective buyers and are inclined to buy more, all of which generates revenue growth for your company.
By measuring customer loyalty, a company can also continue to identify weak points in its customer experience consequently improving it for its customers to further drive retention and expansion.
Easy. Effective. Provides the feedback required to continually improve and stay relevant.
The Bad
NPS requires a process to close the loop with customers to understand and take action on their feedback, and to adjust business operations where necessary to address the deficiencies pointed out by customers.
Without these two critical components of listening and acting upon customer feedback, a business may as well not conduct a survey at all.
There is nothing worse than spending your time providing feedback to a company only to be ignored and then have the same bad experience inflicted upon you again.
A sure recipe for customer attrition!
The Responsibility
Consequently, it’s critical that the business builds the necessary process and invests in the resources required to take action upon the feedback.
We did a lot of things right at Eloqua, we also made a lot of mistakes, learned from them and course corrected accordingly.
Our NPS process however was our weakest customer experience link.
We diligently sent out NPS surveys once a year per customer (processing two surveys a year to half the customer base each time) and even reached out to all Detractors at a minimum by phone.
But the feedback was collated by hand, the call list was distributed amongst the senior executives manually and we implemented improvements in an ad-hoc manner.
For the same amount of effort we invested in chaotically trying to action responses and make changes to business operations, we could have done much more had we just had the processes and resources in place to improve effectively.
For this reason, a company needs to treat its NPS effort as a program and build out the operations and responsibilities accordingly to action on customer feedback as efficiently and genuinely as possible.
In doing so, a company can harness the power of customer feedback to generate strong, loyal customers that drive revenue growth and operational improvements to develop ongoing, great customer experiences.
Now that’s an awesome score!