An Introduction to Net Promoter Score (NPS)

by Liesel Hatch •

The world of business, and the world in which we do business, has dramatically changed over the past 15 years. But there’s one concept that has not only stood the test of time, it has arguably become even more important in the current, highly competitive environment. That concept is NPS ®, otherwise known as Net Promoter Score®.

The meaning behind theories can become lost over time, so today we’re going to refresh you on the foundation of NPS.

Q: What is NPS?

A: A metric to measure your customers’ loyalty, which is a strong indicator of growth.

The bird’s-eye view of NPS:

  • Customers are surveyed asking about their “likelihood to recommend” you.
  • People who answer with 9-10 are your Promoters. They love your brand.
  • People who answer 7-8 are Passive. They could take it or leave it on any given day.
  • People who answered 1-6 are Detractors. Something went really wrong in their experience with your business.
  • NPS is calculated by subtracting the percentage of your detractors from the percentage of promoters. NPS Scores fall in a range of -100 to 100.

What does NPS really mean?

The creation of NPS is credited to Fred Reichheld and Bain & Company, who relate that the very basic foundation of NPS is loyalty.

“In 2003, Fred Reichheld, a partner at Bain & Company, created a new way of measuring how well an organization treats the people whose lives it affects—how well it generates relationships worthy of loyalty.”

While the numbers are very important, don’t get caught up on the semantics of the name. Many companies use their own version of the system that still encapsulates NPS. Reichheld himself discussed this in his book, “The Ultimate Question 2.0”:

“NPS is a flexible, adaptable, open-source system. There’s as little orthodoxy as possible in the system. Most companies have found that the zero-to-ten scale works best, but it’s not the only one possible […]

No matter what you call it, NPS is all about loyalty. Loyalty is a pretty emotional word to use in a business concept. But it’s here for a reason: It predicts your business’ growth.

Q: Why does your NPS matter?

A: It affects profitability and your competitors are probably using it already.

The Harvard Business Review highlighted the important connection between loyalty and profitability:

“True loyalty clearly affects profitability. While regular customers aren’t always profitable, their choice to stick with a product or service typically reduces a company’s customer acquisition costs. Loyalty also drives top-line growth. Obviously, no company can grow if its customer bucket is leaky, and loyalty helps eliminate this outflow.”

If you’re not aware of your NPS, you’re not going to realize your “bucket” is leaky. You’re essentially pouring your customers into the bucket of the competitors willing to strategize around NPS.

If you don’t use NPS information to your advantage, your competitors will. Look at this huge list of NPS users.

That list is only going to get longer. As we’ve discussed here at Bizrate Insights, in Q3 of 2016, “67% of marketers are increasing their budget to improve the customer experience and their loyalty initiatives.”

Q: What’s your NPS and what do you do next?

A: Work with an official NPS vendor and get started on your Net Promoter Score®.

Bizrate Insights is an official Net Promoter Score vendor. Not only do we help retailers measure and track NPS, but we do it across all customer shopping and buying touchpoints.

Our Online Buyer Solution lets you measure feelings of loyalty both at the point of sale, as well as at fulfillment. This gives you a nimble view of your customer’s emotional journey.

Forrester’s research for Bizrate Insights highlights the importance of this flexibility: “Understanding customer interactions across all touchpoints is a barrier for 42% of the marketers we surveyed.

Thirty-two percent of the marketers also note that aligning their loyalty strategy with the overarching business strategy is hard. And almost as many again grapple with how to accurately measure their customers’ loyalty.”

Bizrate Insights can provide your NPS across multiple touch points. We also round out your NPS with more than 20 metrics on performance to shed light on your NPS rather than seeing your NPS in a vacuum.

How do you take your score, learn from it, and put it to work for your business? Reach out to a Bizrate Insights business consultant here.

 

“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.”

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