Net Promoter Score Market Research
Former NYC Mayor Ed Koch often stood at street corners greeting passersby with the slogan “How’m I doin’?” Like politicians, business managers might ask a similar question to quickly gauge the performance of their companies and products.
Is one metric enough?
The Net Promoter Score, or NPS, is based upon one question: How likely is it that you would recommend (a company/product/service) to a friend or colleague?
The Net Promoter Score posits that every company’s customers can be divided into three categories. On an 11-point rating scale from 0 to 10, where 10 is Extremely Likely and 0 is Not at all Likely,
NPS is simply the percent of Promoters minus the percent of Detractors. Passive ratings (7 or 8) are not part of the calculation. While any net positive number is considered good, there is always room for improvement.
Examples: if 16% rate a product a 9 or 10, 9% rate it 6 or below, and 75% are Passive, the NPS would be 16 minus 9, or 7. Note, however, that the same score of 7 could be obtained from two far more passionate groups, such as 48% Promoters and 41% Detractors.
But is this single metric all that is needed to monitor the success of a company or its products?
The primary purpose of the NPS methodology is to evaluate customer loyalty, but it is often used in lieu of, or as a complement to, customer satisfaction research.
Without follow up questions, it is nearly impossible to understand what factors account for the ratings. Therefore, it is common to further explore the reasons or experiences behind the feelings of one’s customers as well as to analyze them by their demographics (age, gender, income, location). This can be accomplished with open ended questions (e.g. a box for “comments”) or with a series of multiple choice questions, or a combination of both.
In the previous examples, an office product or store selling mostly commodity type products might have a majority of customers who are Passive about a company or its products. On the other hand, customers who are asked to recommend a particular coffee/fast food chain or credit card might have a much greater or lesser degree of loyalty.
Is NPS for you?
Customer loyalty is important since it often leads to repeat purchases which are less impacted by competition, pricing or other market factors. In addition, maintaining a current customer is far less expensive than acquiring a new one. As such, it is not only important to keep current customers happy, but even more important to try to move Detractors “up the scale” (ideally all the way to Promoters) — and then to periodically monitor any changes in NPS due to such efforts. That would provide a benchmark or baseline measurement unique to your company.
If you do not know where your company or its products stand in the marketplace it would be reasonably fast and inexpensive to incorporate a single question into the customer service process. This information could be collected via phone, mail, email or social media, just to name a few methods.
What’s next?
An analysis of responses can lay the foundation for follow up questions (and their possible answer choices). Examples: How satisfied were you with the time it took to install your new device? How satisfied were you with the information provided by our customer service rep? How often do you purchase our product?
Adjustments to procedures, policies, customer acquisition and retention, marketing messages and more can all be made based on findings. After an appropriate time (semi-annually, quarterly or even more frequently), NPS can be measured again to learn if the score has improved – and why!
Unlike some other market research techniques, Net Promoter Score does not examine other companies or their products. There are no comparisons; just the indication of loyalty to yours.
