The rule of thumb in advertising when it comes to accessing the success of a TV commercial or any other radio, print or outdoor campaign is quite simply (and effectively), “would you share it with your friends at a braai?”. Similarly, when it comes to customer care, the benchmark of effectiveness can be measured by what industry insiders refer to as the Net Promoter Score.
What is the Net Promoter Score?
The Net Promoter Score is a measure of customer loyalty and, as a management tool, can be used as an alternative to traditional customer satisfaction research. A registered trademark of Fred Reichheld, Bain & Company and Satmetrix, the Net Promoter Score metric is based on a single, direct question: “How likely is it that you’ll recommend this product to a friend or colleague?”
The response options range from 0 (Not at all likely) to 10 (Extremely likely). Depending on the rating that is given to the Net Promoter Score question, three categories can be distinguished:
Promoters: Responses from 9 – 10 Passives: Responses from 7 – 8 Detractors: Responses from 0 – 6
Detractors– With a score lower or equal to 6, detractors are not particularly enthused by the product or the service. They, most likely, won’t purchase again from the company and could potentially damage the company’s reputation through negative word of mouth. Passives – With a score of 7 or 8, passives are somewhat satisfied but could easily switch to a competitor’s offering. Passives probably wouldn’t spread pessimism, but are not thrilled enough about the products or services to promote them. Promoters – With a score of 9 or 10, promoters love the company’s products and services. They are the repeat buyer who will recommend the company products and services to other potential buyers.
How does Net Promoter Score rating work?
The Net Promoter Score is determined by subtracting the percentage of customers who are detractors from the percentage who are promoters. What is generated is a score between -100 and 100. For example, 100 promoters, 30 passive and 80 detractors gives you a Net Promoter Score of 9.5% (20 divided by 210). This mean there are 9.5% more promoters than detractors.
Customer perception and the bottom line
Research by Bain & Company proves that sustained value creators – companies that achieve long-term profitable growth – have a Net Promoter Score twice as high as the average company and grow at twice the rate of their competitors too. The Net Promoter Score therefore clearly clarifies the link between the quality of a company’s customer relationships and its growth prospects.
While revenue remains the ultimate metric for any company, it’s not necessarily the ultimate indicator of future growth, especially if you are short-changing customers for short-term revenue. If your customers are loyal and satisfied, you are more likely to increase next year’s revenue and revenue the year after that. Perception has a bigger role to play than is perceived (pun intended).
In concept, the Net Promoter Score is simple and effective in measuring customer satisfaction, but a lot of hard work is needed to ask the question in a manner that provides reliable, timely, and actionable data – and, of course, to learn how to improve your Net Promoter Score. Questions as to whydetractors and promoters rank the way they do will also provide essential feedback for correcting negative customer relationships.