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KPI of the Day – Marketing: % Net promoter score

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NPS

Definition

Measures the net difference between promoters and detractors, of all customers that express an opinion. Important to note: Net Promoter, Net Promoter Score and NPS are registered trademarks of Fred Reichheld, Bain & Company and Satmetrix.

Purpose

To monitor the level of customer satisfaction, by evaluating the extent to which customers act as brand ambassadors.

Recommendations

Customer satisfaction is no longer the ultimate goal of companies in their relationship with clients. Going beyond the satisfaction level, the % Net promoter score outlines the percentage of clients who would further recommend the company’s products and services.

NPS divides customers into 3 categories:

Promoters – are considered loyal clients that will keep on buying the company’s products and services and will recommend other people to do the same.

Passives – are satisfied clients, but would not further recommend the company’s products and services. “Passives” can easily be convinced by similar products and services on the market.

Detractors – are unsatisfied customers, who most certainly would not further recommend the company’s products and services.

At a first glance, it seems very easy to quantify % Net Promoter Score. You simply subtract the percentage of detractors from the percentage of promoters. A survey consisting of one question is used to capture this data:

“How likely is it that you would recommend us to a friend?”

However, there is at least one noteworthy challenge in measuring this KPI, which is to distinguish between a customer’s satisfaction with one service, like Customer Care and his loyalty to the company or brand. This is why companies also use bottom-up and top-down surveys, for further inquiries that help generate a more precise diagnostic.

Nowadays, NPS is used by many large companies as a customer feedback tool. It gives an unambiguous number that is easy to understand for all employees and useful as input for managers to steer the company. NPS also gives a good indication of growth potential and customer loyalty for a company or product.

To understand the motivations of Promoters and Detractors, it is recommended to accompany the NPS question by one or more open-ended questions that probe the underlying reasons behind the given score.

This allows managers to make the appropriate adjustments to increase the future NPS, either by boosting the percentage of Promoters, either by reducing the proportion of Detractors (or better yet, a combination of both).


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