KPI of the week: Net promoter score
Some businesses go to great lengths to compose what can be quite long-winded satisfaction questionnaires in order to gain an insight into what customers really think. Such surveys can be pretty complicated for customers to complete and, if we’re being honest, the results can be quite hard to interpret. The net promoter score (NPS) was developed to get round this problem – and it couldn’t really be much simpler.
Customers are asked a single question; namely, “how likely is it that you would recommend our business to a friend or colleague?” There you go – really simple! The customer then chooses a score from zero to 10 with zero indicating that they are not at all likely to recommend the business and 10 indicating that they’re extremely likely to do so. Now comes the interesting bit.
Anyone who gave you a score of between zero and 6 (yes, that’s 6!) is referred to as a ‘detractor’. Detractors are unhappy customers who can cause reputational damage to your business through negative comments.
Those customers awarding a score of 7 or 8 are termed ‘passives’. They’re broadly satisfied but are open to offers from your competitors. All in all, they’re pretty unenthusiastic about your business and, as such, are unlikely to sing your praises to their friends and colleagues.
Now let’s turn to the customers awarding you a 9 or a 10. These are the guys who have a real enthusiasm about your business and will keep buying from you, spreading the good word about what you do. They’re your ‘promoters’.
To calculate your NPS, let’s use an example. Suppose that you have 100 customers (a mathematically convenient number for the purpose of this exercise!) and that you asked them all the question “how likely is it that you would recommend our business to a friend or colleague?” Let’s suppose that the results are as follows:
Number of customers scoring your business 0-6: 10
Number of customers scoring your business 7-8: 20
Number of customer scoring your business 9-10: 70
Because there were exactly 100 customers, we can say that 10% of them are detractors, 20% are passives and 70% are promoters.
Now for the calculation of your NPS… exciting stuff!
Take the percentage of promoters (70%) and subtract from this the percentage of detractors (10%) and your NPS is………60%.
Companies with a higher NPS grow much more quickly. There’s also a considerable difference in buying behaviour demonstrated between (in particular) detractors and promoters. Some notable NPS scores from companies operating in the UK (these are 2011 figures) are Apple (67%), First Direct (61%), LG (39%), Samsung (35%) and Sony (30%).
The NPS doesn’t tell you, of course, why customers like/dislike what you offer, so supplementary questions could be asked such as ‘what do you particularly like/dislike?’ and ‘what could be improved?’
Carrying out this exercise could be a real eye-opener and you could set targets for improving the NPS over time. Perhaps the same question could be asked at regular intervals.