Have you ever liked a company so much, you had their logo tattooed on your arm? Me neither, but it happens. Just ask Harley Davidson and their army of fans who keep the Harley logo consistently on the list of top 50 tattoo designs. As far as customer advocacy goes, I’d consider a tattoo an epic win. Fortunately for those of us with less interesting logos, tattoos aren’t the only way to gauge customer satisfaction. Many companies have instead adopted the Net Promoter Score (or NPS) system.
What is NPS
The Net Promoter Score, or NPS®, is based on the idea that a company’s customers can be divided into three categories: Promoters, Passives, and Detractors. By asking one straightforward question, “How likely is it that you would recommend [company] to a friend or colleague?” users of the system can track these groups and get an accurate measure of the company’s performance through the eyes of the customer. Customers respond with a number between one and ten and are categorized into the appropriate group:
- Promoters (score 9-10) are loyal and will keep buying, refer others, and help the company grow
- Passives (score 7-8) are satisfied but unenthusiastic they are likely open to competitive offerings.
- Detractors (score 0-6) are unhappy customers who may damage the brand and spread negative word-of-mouth.
To calculate NPS, one takes the percentage of customers who are Promoters and subtracts the percentage who are Detractors. For example, a company with 25% Promoters, 60% Passives and 15% Detractors, would have an NPS score of 10. In theory, a company could have a score anywhere between -100 and 100. Excellent companies generally score between 30-50.
It probably won’t surprise you, for example, that Amazon has an outstanding score of 76 and Trader Joe’s comes in at 73. Harley Davidson also uses this approach (in addition to counting tattoos) and recently boasted a score of 81. You probably also won’t be shocked to learn that the consumer wireless phone industry has an average score of -3. A recent study by Amdocs, the leading provider of customer experience systems and services, revealed a direct link between Net Promoter Score and revenue growth.
Advantages of Using the NPS Method
For companies interested in tracking and improving their customer satisfaction results, NPS is an attractive approach because:
- It is simple – Asking customers just one, easy to understand, question takes a lot of the hassle out of the traditional customer survey. Anyone can do it without the need for a consulting firm or sophisticated software.
- It is useful over time – Because the question stays the same, it is easy to get an apples-to-apples comparison of how your company is doing over time.
- It signals commitment to service – Publicly sharing your NPS score signals to both customers and prospects that you are interested in creating raving fans. It is also a great trap for competitors who may not want to measure or share their performance.
- Employees have no where to hide – Great companies want their employees to know that their performance will be measured through the customer’s point of view. The NPS metric makes that perfectly clear.
Things to Consider
Like every approach to measurement, there are a few things that companies should keep in mind with NPS:
- People may think of it as a 1-100 rating system. Some people hear that a company has an NPS score of 50 and think that sounds terrible because they automatically assume that the scale is between one and 100. A little education about how the system works is necessary for people to understand that the scale is actually -100 to 100 and that 50 is really very good.
- It doesn’t tell you what to fix – The single question alone may reveal that you have too many unsatisfied clients, but it won’t tell you how to change things. For that, you actually need to reach out to your Detractors and ask them.
- You may need more buckets – Some businesses may find that the NPS metric is more instructive if customers are broken down into smaller categories. For example, do new clients rate you differently than those who have been around for some time? Is there a difference in score between your largest and smallest accounts? Looking at the data this way may reveal useful information about how you are perceived by different categories of customers.
Whether you choose the NPS system or another method of measuring customer satisfaction, understanding your customer’s experience from where they sit is the first step in providing world-class service.
ShoreTel uses the NPS system, how do you gauge customer satisfaction?