What your business wants is a customer to tell their friends how good your company is, how fantastic your products are and how wonderful you are to work with – word of mouth sells more. Naturally this is the best marketing as it is free and it really works!
When our friends rave about a fabulous new product, such as skin cream for example, we trust their opinion implicitly and buy it. If we find it to be the worst cream we’ve ever laid eyes on, we will automatically tell anyone who will listen how awful it was, throw it in the bin and never buy it again.
So when you want to find out what people really think about your business you do some research. Here’s a great way!
What you need
- A Net Promoter Scoring System
- Heaps of customers to rate you (survey)
- Energy to change what you do
What is the Net Promoter Score (NPS)?
If you thought NPS sounds like something a management consultant firm would come up with, you’d be right. Bain & Company’s Fred Reichheld developed NPS and shares the trademark with Bain and Satmetrix. It’s not quite as complicated as it sounds though, even if they are big names and words!
The Net Promoter Score®, popularized by Fred Reichheld in his book The Ultimate Question: Driving Good Profits and True Growth, is one of the simplest loyalty measures. Customers are asked “How likely is it that you would recommend us to a friend or colleague?” and then provide a rating from 0 (“Not at all likely”) to 10 (“Extremely likely”).
The Net Promoter score allows you to categorize customers into three groups based on their willingness to recommend your company or product to a friend or colleague:
- Promoters (score 9-10) Those who will worship your company and shout from the rooftops
- Passives (score 7-8) Those boring people who like you but don’t tell anybody
- Detractors (score 0-6) Those moany, belligerent types who never have a good word to say about anyone (otherwise know as grumbleweeds)
Clearly you want to have many more promoters than detractors. So your net promoter score – which you want to be big – is the number of promoters less the number of detractors (for the purposes of scoring you can ignore the passives as they don’t do anything and are irrelevant)
How to Calculate Your Net Promoter Score
Let’s say 83 percent of respondents would recommend your brand to a friend versus 6 percent who would not. The score is calculated by subtracting the latter from the former and is based on a scale of one to 10 – so you would have a Net Promoter score of 77 percent. (The remaining 11 percent are “passives” and don’t count in the score.)
This simplified equation (for those who don’t do maths ad numbers) is how we calculate a Net Promoter Score for a company:
P — D = NPS
How does your NPS score compare?
Companies with the most efficient growth engines operate at NPS efficiency ratings of 50 to 80%. But the average firm sputters along at an NPS efficiency of only 5 to 10%. In other words, Promoters barely outnumber Detractors. Many firms — and some entire industries — have negative Net Promoter Scores, which means that they are creating more Detractors than Promoters day in and day out. These low scores explain why so many companies can’t deliver profitable, sustainable growth, no matter how aggressively they spend to acquire new business.