What is NPS?

The Net Promoter Score (NPS) is the widely known business metric that measures customer loyalty, initially developed by Fred Reichheld and Bain.  It is effectively summed up by one question (with slight variations):

How likely are you to recommend our company/product/service to a friend or colleague?

Responses are measured on a scale from 0-10, 0 being "not a chance" and 10 being "you guys are the best".  It's also typically followed-up with an optional, open-ended question to capture qualitative comments.

 

 

Why even do NPS?  It's all in the economics!  

 

         

 

It revolves on the concepts of "buyer" and "referral" behavioral economics.  In a nutshell, "Promoters" have a propensity to spend more than the average customer and fuel incremental business growth by recommending about their purchase/experience. According to a Satmetrix study on the bank industry, branches with a NPS score greater than 60% had a 27% in median growth of operational income where as the branches with less than 60% had just 1%.

 

Cool.  How do I implement this thing you call NPS?

What's great about NPS is it's simplicity.  Its one core question to survey, standard rating 1 through 10:  That's it.  The logistics of delivery and response collection can be as basic as a guerilla email campaign with reporting on a spreadsheet, or as elaborate as a survey management platform hooked up to an enterprise Voice of the Customer system.  And there's also the nice, well-packaged solution in-between that gives the best bang for buck in terms of survey automation and reporting.  Beyond instrumentation, there's a plethora of best practices and literature about tradeoffs, optimizations and such to get into with NPS-but we'll save it for future blogs! In the meantime to learn more, we recommend the book that began it all, Reichheld’s Ultimate Question.

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