What is Net Promoter Score or NPS and how is it measured?
In 2003, Fred Reichheld wrote an article
in the Harvard Business Review called The One Number You Need to Grow.
With this in mind, Fred was looking to accurately predict
the future growth patterns of companies which could be used by both Fortune 500
companies to start ups alike, alike. His overriding premise was that companies
which were loved by their customers would be proactively recommended to both their
families and friends and thus more likely to grow.
The old methodology of measuring market share, sending customers multiple question
email surveys or using financial modelling were fast becoming outdated.
Simply put, organisations were investing too much time and money over-analysing
what should have been a simple solution to an even more simple question.
The breakthrough was simple and one
that Reichheld penned as 'The Ultimate Question'.
Also the title of his now famous book.
The ultimate question is simple
on a scale of zero to 10, how likely is it that you would recommend
our product or service to a friend or family member?
The score given by the customer to the ultimate question is then followed
up with one final question, what is the primary reason for your score?
The open ended nature of the question, coupled with the simplistic zero to 10
scoring scale, reveals the main reason behind customers score in their own words.
These results were studied and a new customer experience benchmark emerged.
Those scoring nine or 10 intimated that their lives had been enriched
by their customer experience, which would lead to ongoing purchases
and a result in unsolicited referrals to friends and family.
This group was now referred to as the promoters.
Those scoring a seven or eight suggested that they got what they wanted,
nothing more, nothing less, which also suggested that they could be
easily swayed by competitor offers and made no referrals.
This group was now referred to as the passives the final group.
Those responding with a score of zero
to six represents those customers reluctant to repurchase again due to a bad
customer experience and were more likely to make the switch to your competitors.
This final group was now referred to as the detractors.
So how is net promoter score measured?
Simply by taking the percentage
of promoters and subtracting the percentage of detractors.
Your NPS score is then revealed it's a score that is as tangible as net
profit and signals a measure of customer experience that will provide a direct link
to the future growth potential of your business.
NPS provided a huge breakthrough in how customer satisfaction was now measured
globally, allowing for comparison across business and industries.
What to do with your NPS score?
From here, your company can develop a strategy to improve your customer
experience and NPS scores by implementing fixes to your business processes that had
previously led to your customers scoring you as a detractor or passive.
This strategy revolves around instigating
actions and new business processes designed to convert detractors to passive
and passive to promoters, thus leading to more referrals and sales growth.
So now you know how NPS works and what's good for your business.
Your biggest issue will be creating
a simple way to reach your customers to get that valuable feedback.
That's why we created IntelliNPS. An SMS
based NPS system designed to easily get customer feedback and your NPS score fast.
Not only does SMS get superior open
and response rates enabling faster feedback,
our NPS dashboard keeps you informed where your business is at all times so you can
continue to improve your customer experience processes.
So to get started, call 1300 015 013
or visit our website at Intellisms.com.au/NPS.