What is NPS®?
The Definition and Interpretation of the Net Promoter Score®
The NPS (Net Promoter Score) is a key figure that provides information about the satisfaction of customers with a company and thus also about its success. In a short, standardized survey, customers are asked to state how likely they are to recommend a company or product to others and to give reasons for their rating. These ratings build the basis to subsequently calculate the Net Promoter Score.
For many years, the NPS has accompanied companies for many years as a key performance indicator on their way to a better understanding of both customers and increasing customer loyalty. But where did the idea come from to use numbers to display customer satisfaction?
In 2003, Fred Reichheld—a partner at Bain & Company, the world’s largest management consultancy—started looking for a method to measure customer loyalty and the willingness to recommend. Together with his research team, he sent 20 different questionnaires to thousands of customers in six types of industries. During his investigation, it became clear that there is no need for complex studies to measure customer loyalty. Instead, one or two questions, continuously asked, are sufficient to determine the willingness to recommend. Based on his research, Reichheld finally developed the Net Promoter System®. In the years that followed, the NPS was continuously developed and has since made its triumphant advance not only through large but also small and medium-sized companies.
The Net Promoter Score—More Than Just a Number
Why is NPS so important? NPS is more than just a key figure, as it heralds a change in perspective. Instead of just cooking their own soup, companies open their eyes to the customer. They ask customers whether they like the metaphorical soup, whether they would recommend it to others and which additional ingredients would refine the taste. This gives companies an insight into their customer’s tastes. The benefits flow from it in three ways:
- You are encouraged to consider new, different points of view.
- You can discover unknown problems.
- As a result, you can better assess your strengths and weaknesses.
Most NPS surveys do not anonymize participants. Companies can thus clearly assign the answers to their customers. They can draw conclusions from the link between customer profile and response and, for example, contact critics, if necessary. This is crucial for successful customer relationship management and consequent customer retention.
Four factors that Speak in Favor of the Net Promoter Score
Despite many advantages, many companies still forego customer surveys due to a lack of time and scarce resources. But in doing so, they are wasting valuable potential. Like salt in the soup, NPS is an essential ingredient in a successful company’s marketing recipe. The knowledge provided through NPS enables a company to act.
Four reasons in favor of NPS:
- NPS is easy and quick to collect. Simply asking about the value takes two minutes at most. The number of participants is usually correspondingly high.
- At the push of a button, companies can easily recognize and read both positive and negative opinions. Complainants and fans of a company become visible.
- If critics or emigrants have “come out”, they can be challenged or won back with targeted measures. Proponents can use public relations to report positively about the company or brand.
- Companies can be compared with one another using the standardized question and answer specifications. NPS is therefore an essential key benchmarking figure. This is because companies find out where they stand in comparison with their market competitors.
Milestones in Dealing with NPS
Loyal customers don’t come overnight. It is often a long road with many ups and downs until a company has built a loyal fan base. If you want to break an NPS high score, you should remember that the journey is the goal. Companies can use the following steps to increase their customer satisfaction in small steps: