What is NPS^®?

The Beginnings of the Net Promoter Score

The Net Promoter Score has matured but remains true to its roots. For many years, this key figure has accompanied companies 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? Who defined the ultimate question about customer loyalty in the Web 2.0 age?

In 2003, the American Fred Reichheld—a partner in 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^®, which he then presented in the Harvard Business Press bestseller, "The Ultimate Question". 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.

Today NPS, Net Promoter, and Net Promoter Score are registered trademarks of Satmetrix Systems, Inc., Bain & Company, and Fred Reichheld.

A Brief Overview of NPS

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:

1. You are encouraged to consider new, different points of view.
2. You can discover unknown problems.
3. 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, there are still many companies that 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:

1. 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.
2. 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.
3. 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.
4. 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:

Five Questions about NPS

You have now gained some insight into the Net Promoter Score. But that's not all. The following questions give us an even deeper insight into NPS:

1. How Is NPS Calculated?: The survey is long done and dusted. But how do you generate the NPS value? In the first step, all the answers collected are saved in a table. Using this table, the participants are divided into detractors, promoters, and indifferents. Next, you determine the percentage of promoters and detractors based on all your responses. When this is done, you should then subtract the percentage of detractors from that of the promoters. What remains is a number: The Net Promoter Score.
2. Out on the Mainline or Stuck in a Siding—What Image Does NPS Have in Germany?: In Anglo-Saxon countries, NPS has long been part of the road to success. For many companies, it has established itself as the indicator of the popularity and success of a company, brand, or product. In the USA especially, companies use NPS as a figurehead and advertise it publicly to their customers. German companies, on the other hand, are somewhat hesitant. Even if the NPS has found its way into the German marketing department, it is little known to customers.
3. Why is it Worth Getting in Touch with Detractors?: Once the NPS is determined, many companies concentrate on communicating with their promoters. The feedback from critics also contains valuable information. Companies that want to transform a grim view into a long-term polished reflection should, therefore, by no means give detractors the cold shoulder and instead respond to their feedback. What exactly is it that makes a customer dissatisfied? It is often helpful to know which bed the monster is hiding under before it pops out. Anyone who takes criticism seriously from the start can react to it in good time.
4. Is a Net Promoter System Worth it When Resources Are Scarce?: Even with tight budgets, implementing NPS makes sense. Many companies still wrongly shy away from this. Often they fear that they do not have the necessary resources. But even with a small budget, minimal IT capacities, and few employees, companies can use the Net Promoter System effortlessly. Even better: In the long term, it can even increase sales, and with it, corporate success.
5.  How Can NPS be Improved?: The answer is very simple—by catching the customer at the right moment. Because choosing the right moment to request customer feedback determines the success or failure of the survey. But how do you choose the right touchpoint and, therefore, the point when the customer comes into contact with the company, brand, or product? As a rule, one divides the customer journey into different stages. It therefore makes perfect sense to ask the customer for their feedback at the end of each individual step. If you ask at the right moment, you can not only improve the NPS at the respective touchpoint but even the overall score.

As a company, what would I like to know from my customers? This question should come first when determining the right touchpoint. It ensures that you collect feedback that also helps improve the customer journey. In practice, five touchpoints have emerged that are suitable for collecting relevant feedback and thus influencing the NPS.