Net Promoter Score - Explained
What is a Net Promoter Score?
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Table of ContentsWhat is a Net Promoter Score?How is a Net Promoter Score Used? Academic Research on Net Promoter Score (NPS)
What is a Net Promoter Score?
The Net Promoter Score is a management tool to measure customer satisfaction and customer loyalty. It measures how likely the customers of a company are to recommend the product or service of the company to a friend or colleague. The Net Promoter Score measures the loyalty of a consumer to a provider. This can be used for measuring the loyalty that exists between manufacturer and consumer, service provider and customer or employer and employee. This measuring tool is widely accepted by the Fortune 1000 companies as an alternative to traditional customer satisfaction research.
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How is a Net Promoter Score Used?
In a Net Promoter Score survey, the questions are asked to the consumers, customers or employees to gauge their satisfaction level. The questions are asked by the provider. The Net Promoter Score can be as low as -100 and as high as +100. When all the respondents respond negatively, the score stands at -100. The negative respondents are called a detractor. When all the respondents answer positively the score reaches +100 and the positive respondents are known as promoters. In general, a positive Net Promoter Score is considered to be a good score and a +50 is an excellent score. Fred Reichheld, Bain & Company and Satmetrix developed the Net Promoter Score in 2003. The article was published in Harvard Business Review with the title "One Number You Need to Grow". The article was written by Fred Reichheld. The Net Promoter Score survey is based on only one question, On a scale of zero to 10, with 10 being highest, whats the likelihood that you would recommend our company/product/service to a friend or colleague?. The respondents who respond with a score of 9 to 10 are called the promoter. They are most likely to remain a loyal customer for long, buy more products or make positive referrals. The customers who respond with a score of 0-6 are the detractors. They are less likely to make positive referrals or buy additional products. The responders who come up with a 7 or 8 are called the passives. They fall between the promoters and the detractors. The score is calculated by subtracting the percentage of detractors from the percentage of promoters. The passives are disregarded from the equation. Generally, the survey question is followed by an open-ended question asking the respondents to elaborate on the reasons behind the score. These follow-up exercises are often done by the companies over the phone, where the staffs of the company reach out to the customers and ask them to explain the reason behind the score. Reichheld argued, the survey question followed by a why should provide all the information that is needed to identify the scopes of improvements. However, it is often difficult to analyze the descriptive answers without human bias. The companies generally add some more questions to the original survey question to address the issue. The additional questions can be framed to understand the customers perception of various products, services, and business line. This helps the companies to estimate the importance of these other parts of the business in the overall score. It also helps them to identify the issues and scope of improvement. Companies use software for measuring the Net Promoter Score. The software provides a detailed metric, report and its analysis.
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