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Net Promoter Score

Net Promoter Score quantifies your customer loyalty
Net Promoter Score is a widely used model for loyalty segmentation. And for good reason.

More than 2 in 3 Fortune 1000 companies use Net Promoter Score. This is because NPS is both a simple and effective tool. So simple in fact, that it is based on just a single survey item:

“How likely are you to recommend us to a friend or family member?” (B2C) or “How likely are you to recommend us to other potential customers?” (B2B).

The response to this item will tell you something about your company’s ability to generate bottom line growth. That’s the value of NPS.

How Net Promoter Score works

By indicating how likely they are to recommend your company, your customers are actually self-segmenting. Their responses sort into three categories:

  • Promoters (rate you 9-10): are loyal customers who repeat-purchase from you and also recommend your business to friends and family
  • Passives (rate you 7-8): are satisfied customers, but with no particular preference for your business. That also makes them susceptible to competitor offerings.
  • Detractors (rate you 0-6): are dissatisfied customers who have already defected from your business or will soon do so.

To obtain your NPS, simply subtract the percentage of Detractors from the percentage of Promoters. Say your percentage of Detractors is 10%, and you have 40% Promoters, then your Net Promoter Score is 30. So how can you use that score? We’ll get to that.

Use your Net Promoter Score to set loyalty on the agenda

The advantage of a Net Promoter Score is that it’s easy to understand. It’s a simple number that can go either up or down. That makes it easy to communicate in-house, and it can be used for placing loyalty on the agenda organisation-wide.

That said, we don’t recommend using a Net Promoter Score as your only loyalty metric. Because NPS is so simple, it tells you nothing about why your score is going up or down. It also can’t tell you about a single customer’s willingness to buy from you again. This is why you should supplement NPS with other survey items or metrics if you want not only to measure, but also to understand, the driving factors for your customer loyalty.

Studies have shown a link between companies’ Net Promoter Score and ability to create growth. If you are interested in the company’s growth, your NPS should therefore also be of interest to you.

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