Net Promoter

The metric was developed by (and is a registered trademark of) Fred Reichheld, Bain & Company and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article 'One Number You Need to Grow'. The Net Promoter Score is calculated based on responses to a single question: How likely is it that you would recommend our company/product/service to a friend or colleague? The scoring for this answer is most often based on a 0 to 10 scale. Those who respond with a score of 9 to 10 are called Promoters, and are considered likely to exhibit value-creating behaviors, such as buying more, remaining customers for longer, and making more positive referrals to other potential customers. Those who respond with a score of 0 to 6 are labeled Detractors, and they are believed to be less likely to exhibit the value-creating behaviors. Responses of 7 and 8 are labeled Passives, and their behavior falls between Promoters and Detractors.:51 The Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. For purposes of calculating a Net Promoter Score, Passives count toward the total number of respondents, thus decreasing the percentage of detractors and promoters and pushing the net score toward 0. Companies are encouraged to follow the likely-to-recommend question with an open-ended request for elaboration, soliciting the reasons for a customer's rating of that company or product. These reasons can then be provided to front-line employees and management teams for follow-up action. Local office branch managers at Charles Schwab Corporation, for example, call back customers to engage them in a discussion about the feedback they provided through the NPS survey process, solve problems, and learn more so they can coach account representatives. Reichheld and Markey say the rating and answers to the 'Why?' question provide all that is needed to identify reference customers and improvement opportunities. While this may be the case, the lack of any easy way to automatically analyze the verbatim answers without human bias is problematic. The response of many companies to the problem has been to add additional questions with rating scales. Additional questions can be included to assist with understanding the perception of various products, services, and lines of business. These additional questions help a company rate the relative importance of these other parts of the business in the overall score. This is especially helpful in targeting resources to address issues that most impact the NPS. Companies using the Net Promoter System often rely on software as a service vendors that offer a full suite of metrics, reporting, and analytics.:48–49 The primary objective of the Net Promoter Score methodology is to predict customer loyalty (as evidenced by repurchase and referral) to a product, service, brand, or company.:49–51 Reichheld and Markey developed the methodology by comparing the ability of several different questions to predict future purchases and referrals of individual respondents. They chose the likelihood to recommend question based on the observation that it best predicted these customer behaviors in 11 of 14 industries studied.:49–51 They also found that differences in Net Promoter Scores among direct competitors in a market could explain substantial differences in revenue growth rates among competitors in a particular market.:61–65:77–81 Importantly, Markey points out that 'competitive benchmark' Net Promoter Scores collected through a carefully constructed double-blind Quantitative marketing research methodology provide the only valid basis for comparing scores. Net Promoter System also requires a process to close the loop. In closing the loop, the provider actively intervenes to learn more from customers who have provided feedback, and also to change a negative perception, often converting a Detractor into a Promoter.:175–198 The Net Promoter survey will identify customers who need some follow-up, including Detractors, and should automatically alert the provider to contact the consumer and manage the followup and actions from that point.