If you’re in a business where long-term relationships matter – and that’s most businesses – then a company-wide plan for improving your Net Promoter Score (NPS) is worth considering.
A previous post introduced NPS, explained how it’s calculated, and described how a company’s reliance on “bad profits” can result in a low NPS and a customer base that might be actively seeking other sources for the services you’re providing. So there’s a strong case for implementing a plan for bringing up your company’s NPS.
Fred Reichheld’s book, The Ultimate Question: Driving Good Profits and True Growth (Harvard Business School Press, 2006) explains how he developed the NPS format and presents a plan for getting started. There are software packages and consulting firms that can help, as well. But the points that follow here will provide a general framework for determining how NPS might help your company.
The Mechanics of NPS
To briefly review, NPS is a measurement of customer loyalty and a means for positioning a company for consistent growth based on “good profits.” Good profits are generated by “win-win” customer relationships, where clear value is created for the client. “Bad profits” occur at the expense of a customer relationship where the buyer feels mistreated. (e.g., pushing unneeded product warranties, unanticipated extra charges, “fine print” tactics, shoddy service and support.)
Customers are asked one question: On a 0 to 10 rating scale – where 10 is “extremely likely” and 0 is “not at all likely – how likely would you be to recommend this company to a colleague?
Respondents are placed into one of three groups:
- Promoters (9–10 rating)
- Passives (7–8 rating)
- Detractors (0–6 rating)
The percentage of Detractors is then subtracted from the percentage of Promoters to obtain a Net Promoter Score (NPS). A positive score is always good, and anything above 50 is considered excellent.
Getting Started with NPS
- Determine exactly what the score will reflect. Is your business based on transactions, or is it service-oriented? In the former case, your question would be along the lines of, “how likely is it you would recommend our cleaning supplies to a colleague?” If you’re in a service business the question might be, “how likely is it that you would recommend out staffing services to a colleague?” You need to be specific enough with the question to make sure you can link what you learn back to a plan for making improvements.
- Decide how data will be collected. You can ask for input online, but this is a case where telephone contact might be more effective. You can include the question as part of a customer service follow-up call. Make sure you have a reliable system in place for collecting and storing the information.
- Compute the score and analyze the data. Your score will provide a snapshot of overall customer sentiment, and should also help you identify areas that need improvement. You need to understand what’s influencing the scores given by the respondents. Are certain products dragging down your score? Do customers served by certain support staff consistently give high remarks? You can act on these observations very easily. But remember, respondents are encouraged to elaborate on the scores they give. Negative comments should be investigated and corrective action taken where needed. By doing so you might even nudge the respondent into the Promoter category.
- Follow-Up with Employees. No matter how bad or good your initial NPS turns out, be certain to share the information with employees. Staffers with regular customer contact should be made especially sensitive to potential trouble spots. Specific plans should be developed for improving on areas that pulled your score down, and steps should be taken to duplicate the experiences of customers who assigned high scores.
Part of the appeal of NPS is its relative ease of implementation. It’s simple and cost-effective, yet the benefits of understanding exactly how your company can improve are significant. As cited in an earlier post, a 12-point increase in NPS will, on average, result in a doubling of a company’s growth rate. But remember, those 12 points will be the result of concerted, company-wide efforts to improve the customer experience.
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