The Net Promoter Score® is a customer loyalty metric originally formulated by Fred Reichheld, Bain & Company and Satmetrix in 2003. It segments customers into three types based on a 0 to 10 scale: passives, detractors and promoters.
With the Net Promoter Score companies can gauge the health of their customer experience program, and in turn work to improve their customer experience with the Net Promoter System®.
The Net Promoter Score & Net Promoter System
The Net Promoter Score is a customer satisfaction, customer experience and loyalty indicator that measures the likelihood of customers to recommend a company, product or service to a friend or colleague. The Net Promoter Score asks one question which rates responses based on a 0 to 10 scale.
The Net Promoter Score is a simple-to-understand metric, which is why many businesses, including Fortune 500 companies, use it to keep track of their customer loyalty and retention. The Net Promoter System takes the Net Promoter Score to the next level and turns results into action. With the Net Promoter System, companies can determine the loyalty of customers in real-time and act immediately to improve each customer’s experience.
Widely used by Fortune 500 companies, the Net Promoter System and Net Promoter Score create tangible, usable feedback to help companies change what matters most—customer loyalty.
Want to learn more about Fortune 500 Net Promoter Scores? Check our eBook that tackles five key Net Promoter industries (technology, financial services, travel & hospitality, multi-channel retail and telecommunications) and five Net Promoter leaders.
Calculating the Net Promoter Score
The Net Promoter Score question is easy. On a scale from 0 to 10, it asks customers:
“How likely are you to recommend (this company, this product, this experience, this representative) to your friends, family or business associates?”
Depending on their response, customers are divided into three categories based on the Net Promoter Score: detractors, passives, and promoters.
Least satisfied customers. May not purchase again and could spread negative word of mouth if something isn’t done to improve their experience.
Are typically satisfied, but not to the extent that they become loyal. Susceptible to competitors’ offers, but will spread neither negative nor positive word of mouth.
Loyal and enthusiastic customers. They will spread good word of mouth about your company and can be brand advocates.
The Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters, yielding a score between -100 to 100.
A Net Promoter Score of -100 means every respondent is a detractor while a Net Promoter Score of 100 means everyone is a promoter. The Net Promoter Score is an indicator of your company’s health and is the first step to improving your customer’s loyalty.
The Net Promoter Score is asked within Net Promoter surveys. Net Promoter surveys consistent of relationship and transactional surveys. You can learn more about how to create a Net Promoter Score survey in our Fine Art of Surveying eBook, along with other vital information such as:
✓ How to create the perfect Net Promoter Score survey
✓ When to send Net Promoter Score surveys
✓ Who to send Net Promoter Score surveys
✓ What media to use to send Net Promoter Score surveys
The ROI of Net Promoter Score
According to Gartner, 80% of future revenue comes from 20% of existing customers. In the future, customer experience will become the true competitive differentiator for customers. Companies must create an exception customer experience to drive retention rates up and effectively monetize their customer base.
The Net Promoter Score is your ticket to taking control of your customer experience and maximizing relationships with current customers to increase retention, reduce churn and improve business processes.
Using the Net Promoter Score scale in correlation with Customer Lifetime Value (CLV), companies can determine which customers are promoters and offer the greatest opportunities for profitable growth. You can learn more about the economics of using Net Promoter Score to combat churn and improve retention in our NPS 101 series.
The Net Promoter Score scale can also show missed opportunities for promotion among passives and even detractors and in unison with survey drivers, present which aspects of your business generate detraction and promotion among customers.
Companies use the Net Promoter Score in this way to determine root cause, which helps identify business critical issues that are impacting your bottom line.
Taking Net Promoter Score to the Next Level
The Net Promoter System takes the Net Promoter Score to the next level. It is an essential tool for making a lasting impact on churn and retention. In addition, a good Net Promoter System should allow companies to do four things:
✓ Measure and analyze customer feedback
✓ Act to close the loop and optimize business processes
✓ Monetize Net Promoter to correlate with revenue and measure retention and referrals alongside the Net Promoter Score
✓ Grow your existing customer base through referral marketing, up-sales and cross-sales
At CustomerGauge, we believe that every company needs a Net Promoter System. Why? Because Net Promoter® is simple, actionable and supports future growth.
Net Promoter is Simple
Net Promoter Score surveys are short (at least we strongly recommend they be), and are easy and quick to answer. This provides companies with high response rates and surveys that can be conducted at any point along the customer journey – if you have the right tool!
In addition, the Net Promoter System is simple. Within one platform it provides easy to understand loyalty scores, root causes and comments avoiding the need for complex market research that often convolutes data.
Net Promoter is Actionable
Net Promoter Score data isn’t complicated. With just one score, customer comments and the reasons for the score, all received in real-time, companies can act immediately to create better experiences.
Actionable data means companies can dig deeper with customers into root causes, resolve problems together, foster new sales, and lift responsiveness by proving to customers that their voice matters.
Waiting months for feedback to be collected isn’t very useful for today’s problems, but with a Net Promoter System, acting on feedback can be a daily achievement.
Net Promoter Supports Future Growth
Proven to be strongly correlated with growth by Fred Reichheld (the creator of the Net Promoter Score) and other researchers, the Net Promoter Score and Net Promoter System give companies the power to turn customers into predictable recurring revenue.
With the Net Promoter System, growth becomes operational. It provides companies with the tools to help customers stay longer, spend more, buy additional products, refer new customers and create cheaper-to-service customers.
CustomerGauge—Monetized Net Promoter
At CustomerGauge we employ the Monetized Net Promoter methodology, which uses the Net Promoter Score and Net Promoter System to measure customer feedback, act in real-time and grow your customer base.
The Monetized Net Promoter model takes everything you know from the heritage Net Promoter System and expands it to include vital metrics such as referrals, revenue figures and growth predictors. If you'd like to learn more about the Monetized Net Promoter System dig deep into our definitive guide.