Loyal customers are your most effective advertising.
What is NPS?
NPS®, or Net Promoter Score®, is a popular Customer Experience (CX) metric designed to measure the willingness of a company’s customers to recommend the company’s products or services to others. NPS® is a straightforward indicator of overall CX performance, and organisations can use their scores to quantify customer experience and predict future business results.
The Net Promoter Score framework was developed by Fred Reichheld of Bain and Company several years ago. His books, the Ultimate Question and the Ultimate Question 2.0, have helped establish a strong business case for NPS among executives.
NPS is based on a single, simple question: How likely is it that you would recommend [brand] to a friend or colleague? Respondents are given an 11-point scale, with 0 being “Not at all likely” and 10 being “Extremely likely.”
Scores of 0-6 are classified as detractors, 7-8 are neutral, and 9-10 are promoters. The total NPS score is calculated by subtracting percentage of detractors from the percentage of promoters. (same with this graphic) Averages vary by industry. (See the Net Promoter Network’s 2015 NPS Benchmarks here.)
Pros and Cons of Using NPS
The Net Promoter Score has become popular because it is based on a clear question and criteria. It provides a simple metric that is easy to understand, links customer perceptions to visible business results, and measures the value of customer loyalty through referrals. NPS creates an easily-comparable benchmark, standardised across industries and businesses. Overall, it has proven to be a powerful metric for many brands. When used correctly, it can help companies move towards greater customer centricity.
Research experts, however, are quick to point out that NPS has its limitations. The 11-point scale, ambiguously labeled “not at all likely” to “extremely likely,” does not provide an option for negative recommendations, so it is nearly impossible for companies to distinguish between true detractors and non-promoters. The classification of scores into detractor, passive, and promoter creates an arbitrary separation of scales, turning continuous data points into discrete data. Important distinguishing information may be lost by lumping all of the scores from 0-6, for example, into one category without differentiating them further.
Furthermore, when NPS score is used outside the US, there are numerous rating biases that at the very least make data incomparable, but may flat out misrepresent the sentiment of specific regions. For instance, Japanese survey respondents are heavily weighted to lower levels, while in India, ratings show an upward bias.
Some researchers point out that NPS scores may vary depending on the product being offered—people are generally more likely to recommend a a full service restaurant with high service expectations going in than they are to recommend a wireless carrier where expectations for all carriers are not so high. As a result, Net Promoter Score may not always show causality or true correlation.
MaritzCX on NPS
MaritzCX has worked with Net Promoter Score for many years. We’ve been fortunate to power some of the most famous NPS programmes in existence today. Yet as a company that focuses on helping businesses make better experiences for their customers, we also recognise that there are many metric options and our own research indicates that the metric a company chooses is not as important as the firm’s commitment to developing CX competencies within an organisation, which will enable it to make the most of its VOC data, improving CX while also impacting the bottom line. The most important thing is to find a metric that works for your specific customer experience and overall business strategy.
Contact MaritzCX to learn more about NPS and other ways to drive business outcomes through customer experience improvement.
Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.