We've recently seen a dramatic increase in the number of our clients who are using Net Promoter Score (NPS) as a KPI and management tool. For those of you who are new to NPS, here is a primer:
Over the last few years Net Promoter Score (NPS) has gained prominence as a core measure of how customers really feel about a product/solution/service. It is based on the answer to a simple question – how likely would you be to recommend <xyz>? To be willing to make a recommendation, not only do you need to be satisfied with it, you have to be willing to put your credibility on the line in promoting it to friends and colleagues.
NPS scores correlate strongly with revenue growth. Customers who give a vendor high marks on willingness to recommend stay with their current provider, buy more from them, and encourage others to use them. Customers who give a low NPS are much more likely to look elsewhere and dissuade others from buying.
To calculate an NPS, customers are asked to rate their willingness to recommend on a scale of 1 to 10. Responses are then segmented into 3 groups:
- 9 or 10 – Promoters: Enthusiastic endorsers who actively seek out opportunities to promote the product/solution/ service.
- 7 or 8 – Neutral: Mostly satisfied users who won’t actively promote the product/solution/service whose opinion won’t dissuade a potential buyer if asked
- 1 to 6 – Detractors: Somewhat unhappy to very unhappy users who will actively share their displeasure and/or if asked, whose opinion will cause a potential buyer to rethink a purchase.
The NPS is then simply the % Promoters – % Detractors. The highest possible NPS is 100% (everyone is a Promoter) and lowest NPS is -100% (everyone is a Detractor).
For a high level NPS benchmark, a 2013 survey by The Tempkin Group of 269 companies found NPS’s to range from a high of 66% to a low of -42%.