What a Net Promoter Score is and how it could be useful for you
I had the opportunity to attend the 2012 International Business Marketing Association Conference in Chicago early this month. One keynote speaker was Fred Reichheld with Bain & Company and the author of “ The Ultimate Question 2.0.”
The book title refers to a question of ultimate importance: ‘On a zero-to-ten scale, how likely is it that you would recommend us (or this product/service/brand) to a family member, friend or colleague?’
As Reichheld explains, the phrasing of that question is ‘a shorthand wording of a more basic question, which is, “Have we treated you right, in a manner that is worthy of your loyalty?” But the question really wasn’t [and isn’t] the heart of things. After all, no company can expect to increase its growth or profitability merely by conducting surveys, however the question or questions might be phrased.
He provides a cohesive, comprehensive, and cost-effective management system that has three central components:
- Categorizing customers into one of three categories (i.e. Promoters, Passives, and Detractors) through a simply survey
- Create an easy-to-understand score based on that categorization
- Frame that for everyone in the organization so people can be accountable for change because measurement creates accountability.
With regard to the scores themselves, Promoters are those who provide a rating of 9 or 10, Passives 7 or 8, and Detractors 6 or less. An example, let’s say 100 customers respond: 35 Promoters, 45 Passives, and 20 Detractors. The net score is determined by subtracting the total number of Detractors (i.e. 20) from the total number of Promoters (i.e. 35) and that is 15. That is a baseline against which subsequent efforts to increase Promoters and decrease Detractors are measured. Reichheld calls it the Net Promoter Score (NPS).
In my opinion, with all due respect to the importance of the NPS metrics, the implications of the measurements are of far greater importance. Think of the measurements as a mirror, one that reflects multiple realities. Only by understanding those realities – and how to respond to each effectively – can appropriate change initiatives be initiated to achieve and then sustain a never-ending process of improvement. Flexible it may be, but without the following elements, NPS just won’t work. They are:
- Companies must systematically categorize Promoters and Detractors in a continuous, timely, and accurate manner. I think it is also important to note when Promoters become Passives and when Detractors become Passives. Most important might be to UNDERSTAND WHY.
- Companies must create closed-loop learning and improvement processes and build them into their daily operations. In other words, NPS is not, and must never be viewed as, a customer relations improvement initiative or even a program. It must become and then remain an “organic” system.
- CEOs and other leaders must treat creating more Promoters and fewer Detractors as mission critical. I’d say “mission imperative”. As Peter Drucker once observed, ‘Without customers, there is no business.’
The NPS approach is a business philosophy, a system of operational practices, and a leadership commitment, not just another way to measure customer satisfaction: that is the critical difference. The first half of the book explains the system; the second half shares stories of how different companies have embraced the idea. Check it out, it is definitely worth the read.