June 13, 2017
Just what B2B needs – another bloody acronym. But NPS (net promoter score) has actually been around for a while – the question is: is it all it’s cracked up to be?
What exactly is it?
As a descriptor net promoter score (NPS) was coined by author, speaker and business strategist Frederick Reichheld in the Harvard Business Review back in 2003. His claim was simple: NPS “… is the one number you need to grow”.
So what did he mean by this? According to Vanessa Thompson, senior vice president, CX insights at Bluewolf, NPS is a single measure of customer loyalty. “It’s one question – ‘How likely is it that you’d recommend [this company] to a friend or colleague?’ – that delivers a single numerical response from zero to 10, with those that score a 9-10 being ‘promoters’. You also have ‘passives’ and ‘detractors’. NPS aims to isolate the most satisfied customers so a company can focus on those customers in order to drive profitable growth.”
The main premise is that satisfied customers will either increase the amount they spend or will refer others to the business, or both. “This covers two business outcome strategies for profitable growth that many companies struggle with: new customer acquisition and up-sell or expansion within an existing customer base,” explains Bluewolf’s Vanessa.
According to Martin Häring, CMO at Misys, NPS is such a big deal in some companies that some CMOs and other c-suiters are currently remunerated according to their NPS score.
What are its benefits?
Were Reichheld’s bold claim ( "the one number you need to grow") well received at the time? Well, in a word, yes. “NPS was widely embraced by brands,” explains Dr Nektarios Tzempelikos, senior lecturer in marketing, IIMP Research Fellow, in the Lord Ashcroft International Business School at Anglia Ruskin University. “First, it’s a simple and easy-to-understand measure; there are no complicated algorithms or diagrams. It’s just a single question that’s used to predict customer loyalty. Secondly, the whole idea that NPS captures is very simple: if more customers are happy with your products or services than unhappy (or neutral), your company will grow.”
Customer satisfaction surveys commonly happen once a year. With NPS, organisations can capture a quick gauge easily
- Vanessa Thompson, senior VP, CX insights, Bluewolf
Because of its simplicity, NPS is also relatively easy to repeat regularly, with many companies running a survey once a month. “With a customer satisfaction survey, the process can often be long, and completion rates can be low, which in turn means executives pay less attention to the responses,” explains Vanessa. “Also, customer satisfaction surveys commonly happen once a year. With NPS, organisations can capture a quick gauge easily.”