What is NPS®?
Net Promoter ScoreSM (NPS) is a method for measuring the satisfaction and loyalty of a company’s customer. NPS is developed by Fred Reichheld, partner at Bain & Company. NPS was introduced in 2003 in his article “The One Number You Need to Grow” in the Harvard Business Review.
NPS is a single number ranging from -100 to 100 that shows how satisfied customers are with a product or service and indicates how loyal they are in relation to the company. NPS has become a popular tool for more and more companies worldwide, as it allows them to measure customer loyalty and improve customer satisfaction in a simple and easy way.
How NPS creates value
NPS creates value for your company by giving you insight into how your customers perceive your brand, services and product. This gives your customers the opportunity to identify your strengths and weaknesses, thus giving you a basis for taking action to improve the customer experience.
A high NPS indicates that customers are satisfied and loyal to the company and are likely to recommend the company to others. This can lead to more word of mouth advertising and increased revenue.
A low NPS, on the other hand, can signal problems with customer satisfaction and loyalty. This can lead to loss of customers and revenue. It also provides a basis for taking action to improve the customer experience.
One of the advantages of NPS as a model is that it basically only consists of a few questions, which gives the opportunity to ask customers more often. This means that you will continuously receive input and will be able to quickly adjust the strategy according to the market.
In general NPS provides companies with a simple and effective way to measure customer satisfaction and loyalty, and to create value by taking action based on the results. Monitoring customer satisfaction is an important method to improve business.
The NPS Scale
NPS is based on a single question: “On a scale of 0-10, how likely are you to recommend our company to a friend, family or colleague?” The customer chooses a number between 0-10 and their answer categorizes them as a “promoter”, “passives” or “detractors” (quantitative measurement), as well as a justification for the reason for the customer’s choice of score in free text (qualitative measurement).
Promoters are customers who respond with a score of 9 or 10, Passives are customers who respond with a score of 7 or 8 and Detractors are customers who respond with a score of 6 or lower.
How likely are you to recommend [company] to your friends, family or colleague?
What is the primary reason you gave that score?
NPS loyalty categories
Promoters (9 and 10) are considered satisfied and loyal.
Passives (7 and 8) are considered satisfied but disloyal.
Detractors (6 to 0) are considered disaffected and disloyal.
How to calculate the NPS score
NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. A high NPS score indicates that more customers are satisfied and loyal and will recommend the company to others. While a low NPS number indicates that more customers are dissatisfied and disloyal and will recommend the company to its network.
The NPS scale goes from +100 if all are Promoters to -100 if all are Detractors. If all respondents are Passives, the score is 0.
Quantitative and qualitative measurement
Quantitative NPS score is a numerical score that makes it possible to follow the company’s development with a number based on the answer to a single question: “How likely is it that you will recommend”.
Qualitative NPS scores are based on free text comments from respondents based on their rationale for choosing scores. This allows the company to get more detailed information about what customers like or dislike about the company, product or service and what can be improved.
To get the most out of NPS, companies should not only focus so deeply on the final number, but look more closely at the underlying data to understand why customers give their responses. This can help the business identify specific areas that require improvement and can help optimize the customer journey that the business wants their customers to experience.
Earned growth
Earned growth refers to growth achieved through word-of-mouth recommendations and positive publicity from existing customers. It is an important indicator of a company’s health, as it is an organic and sustainable way to increase the customer base = The part of your results that is created based on recommendations given by your existing customers.
NPS can help you understand how your customers’ satisfaction affects your earned growth. A high NPS indicates that customers are satisfied and loyal to the company and are likely to recommend the company to others. This can lead to more word of mouth advertising and increased earned growth.
A low NPS, on the other hand, can signal problems with customer satisfaction and loyalty, and can lead to fewer recommendations from existing customers or that they may outright recommend your company to their network. It is therefore a good idea to take action to improve the company’s reputation and thus increase the share of your earned growth. Referrals are an extremely effective form of marketing and it is free.
The difference between Net Promoter Score and Net Promoter SystemSM
Both concepts are called NPS which can cause confusion, but here is an explanation.
Net Promoter Score (NPS) is an indicator of customer loyalty that shows the degree of likelihood that customers will recommend a company or product to others. The score is calculated by subtracting the percentage of negative respondents (Detractors who give a score of 0 to 6) from the percentage of positive respondents (Promoters who give a score of 9 or 10).
The Net Promoter System (NPS) , on the other hand, is a method of measuring and increasing customer loyalty. It involves not only asking customers about their likelihood to recommend a company, but also collecting feedback, identifying specific problems and implementing improvements to increase customer loyalty. It is a systematic approach to understanding and increasing customer satisfaction and loyalty.
Overall, NPS is a simple but effective tool for measuring customer satisfaction and loyalty. It allows companies to get valuable feedback from their customers, and can help them improve their products and services and increase customer loyalty.
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