NPS Best Practices

How to Calculate Net Promoter Score® like a Professional

Written by: Kushal Dev | Co-founder, Customer Guru

Net Promoter Score® is a customer loyalty metric developed by Fred Reichheld, Bain & Company, and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow” where he tells us about the chief executives—from Vanguard, Chick-fil-A, State Farm, and a half-dozen other leading companies— who had gathered to swap insights that would help them further enhance their loyalty efforts.
He says, “As part of their research into customer loyalty and growth, my colleagues and I looked for a correlation between survey responses and actual behavior—repeat purchases, or recommendations to friends and peers—that would ultimately lead to profitable growth. Based on information from 4,000 consumers, we ranked a variety of survey questions according to their ability to predict this desirable behavior. The top-ranking question was far and away the most effective across industries:

How likely is it that you would recommend [company X] to a friend or colleague?”

The beauty of Net Promoter Score® is that it is simple to calculate and it focuses on addressing customer concerns. It’s action-oriented, not research oriented. To calculate the Net Promoter Score®, the would you recommend question is measured on a scale of 0 to 10 and customers who score are classified in three categories:

Promoter (Score 9 and 10): Your raving fans who buy from you, refer others and then come back to buy some more.

Passive (Score 7 and 8): The fence sitters. They jump to next available option. They are more or less oblivious to your existence.

Detractor (Score 0 to 6): Boy, are they angry! They cost you money. They bad-mouth you.They make sure that anyone in the 2nd degree of connection does not do business with you.

NPS is calculated as follows

Net Promoter Score = % Promoters – % Detractors

Once you join the Net Promoter Score® bandwagon, you are amongst the likes of Apple, Hertz, Electrolux, Paypal and many industries leaders. So what got them to begin using Net Promoter Score®? The answer could be the effectiveness of Net Promoter Score®, but it’s not only that. Read the Ultimate Question 2.0 to get detailed insights on how to implement Net Promoter Score® and how some of the companies have used NPS to revolutionise the way they do business.

According to a research of competitors in an industry by Bain, a Net Promoter Score® leader outgrew its competitors by a factor greater than two times. In other words, a company’s Net Promoter Score® is a good indicator of its future growth.

Collecting the customer feedback and calculating the Net Promoter Score® is just the tip of the iceberg. The real beauty is to operationalise it within the organisation. To succeed with Net Promoter Score®, one must focus on evaluating one’s customer feedback data effectively and deriving actionable insights to delight customers. Organisations striving for Net Promoter Score® success must realize that Net Promoter Score® is not just about measuring customer loyalty, but is a way of doing business!

NPS should be seen as a change agent that transforms an organization into a customer-centric one.

The following three pointers as highlighted are critical to ensuring success with Net Promoter Score®.

Get senior management to buy in

There is no magic potion to making an organisation customer-centric. It’s an on-going process with a dedicated investment of time and energy. For the entire organisation to be consistent, it’s important that everybody understands that the senior management is behind the customer experience program. Once sold on the idea, the top management should send a clear message in words and in action. It should support setting the right processes, taking action on poor feedback, and giving a pat on the back for good feedback.

Make it the pulse of the organisation

Both action and performance of individuals should be judged on its impact on customer experience. It should be the language of communication within the organisation. Employees across departments should be clear on what impacts customer satisfaction most and how their actions effect the satisfaction levels of customers. This can be achieved by implementing an easy to quantify metric like NPS, and with more focus on action than analysis – remember, what gets measured, gets improved!

Understand that it is long-term

Implementing Net Promoter Score® and becoming customer-centric is like hitting the gym. It’s not a one-time investment with lifetime returns, but is small investments every day for lifetime returns! The idea is to make small changes in the direction that matters most, analyse its impact and iterate. Real results are the best measure of the success of an initiative.

So is Net Promoter Score® the ultimate tool you would like to use to change the way you do business?

Read here the 5 steps and start your journey to Net Promoter Score® success.

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