While it’s fair to say there’s a lot of debate about the validity of NPS (Net Promoter Score) as a commercial performance metric, it is nonetheless widely used by many as a measure of satisfaction and loyalty. However you look at it loyalty is a powerful buying consideration and referral from happy customers is still one of the best forms of marketing you can get.
It varies of course, but it’s estimated that over 80% of satisfied customers are willing to give a positive recommendation and that over half of new business acquisition has had some form of referral influence. Referred prospects typically have a higher closure rate, spend more and are less price sensitive. The bottom line – referral is good for your business.
Many organisations use NPS to try to quantify their customer relationship, specifically to measure levels of satisfaction and loyalty.
NPS is an extremely simple calculation to make. All you need is to drop the following question into any customer survey – “How likely is it that you would recommend our company/product/service to a friend or colleague?”. The answer options should be scored from 0 (i.e. not likely) to 10 (extremely likely).
To process the results, replies are classified into three groups: Detractors (scores of 0-6), Passives (scores 7 and 8) and Promoters (scores 9 and 10). The NPS score is a single figure calculated by subtracting the % of Detractors from the % of Promoters (strictly speaking the result is not a % although you often see it quoted as such). Positive levels of satisfaction are shown by positive NPS, the higher the better, and of course, the opposite is also true.
Although at any moment NPS is a single figure, it can vary significantly over time so average and trend are important considerations. It also requires a statistically significant data pool to be meaningful, the more the better.
Again, opinion varies but an NPS score of 5-10 is often viewed as average (if a little low). Highly serving companies can exhibit NPS in the range 50-80 (Apple, Amazon and First Direct all fall in this bracket). Negative NPS is of course possible – I’ll leave you to draw your own conclusions.
Oh yes – I thought you’d never ask! For the record our NPS is currently in the 60’s – thank you!