NPS – Net Promoter Score is one of the most popular measures for understanding your business. If your Mentor or advisor hasn't mentioned it, then you have probably already helped someone else measure theirs. So why is it so popular? Here, we explain NPS, including what it is, why it matters, and how to measure it. The Net Promoter Score became popular in 2003 following an article in the Harvard Business Review. However, the concept itself was pioneered by a rental car agency that sought a quick way to monitor customer satisfaction.
Enterprise rentals had over 5000 branches in the USA. Each month, it asked every customer just two questions; one about how satisfied they were with their experience and the other about whether they'd rent again. Because the poll was so easy and quick, the business had a real-time view of their performance through customers' eyes. The measure has now become one of the most widely used business metrics.
Net Promoter Score looks at customer satisfaction, but its power is that it can predict business growth. It does this by pinpointing when customers are most enthusiastic about your company. That way, you can see precisely what's working and what's not.
The system prioritises those customers that give the highest ratings for their experience and likelihood to recommend. In contrast, customers who give mediocre ratings have little influence on the score. Very low ratings have a major impact.
This weighting of each type of rating reflects how much influence such groups of customers have over the growth of your business. When you have 'raving fans,' word spreads quickly. You're clearly doing well and are creating something destined for popularity. On the other hand, 'haters' can have an outsized effect.
The drivers of business growth are more complex and nuanced than just customer satisfaction. However, Net Promoter Score is a tangible, straightforward and powerful proxy. Additionally, its simplicity and speed can empower employees to make their own difference to the brand.
Measuring net promoter score can be as simple as you need it to be. Bain and Company explain it as follows:
To calculate NPS, start with the ultimate question, "How likely are you to recommend us to a friend or colleague?" and score the answers on a zero-to-ten scale. Your Net Promoter Score is simply the percentage of customers who are promoters (those who scored 9 or 10) minus the percentage who are detractors (those who scored 0 to 6).
Some companies add follow-up questions, such as, "What could we do to improve your experience' and others. Additional insights need to be balanced against making the survey too tiresome for customers to complete.
Research over the last 20 years has found this eleven-point scale to best for reflecting customers' behaviour. However, counting anyone who gives a six or below as a 'detractor' is a point of difference and can be uncomfortable. The point is to find what is likely to build loyalty and advocacy. Unfortunately, middle-of-the-road customer experiences are more likely to impinge growth than power it.
Seeing your NPS score tick into the negatives can certainly be demoralising. Some are suspicious that New Zealanders might be more hesitant than Americans to give very strong ratings – especially high ones. However, anecdotally, we seem to be becoming more comfortable with NPS questions and what they mean. Regardless, to harness NPS for your staff, positioning is important.
For example, Business Mentors’ Net Promoter Score is up to 82% and has consistently been over 80%. This doesn’t simply mean that 80% of our community likes what we do. Instead, it means that when everyone’s opinions are considered, most of them are absolutely delighted with their experience and would recommend the service with exceptional levels of enthusiasm. It’s a clear recognition of the high quality of our Mentors and their work. Thank you!
NPS is best framed as an opportunity to spot performance that goes over and above expectations — creating raving fans, magic moments and instances of delight. Staff deserve celebration for a high NPS, so they look for ways to lift it together. On the other hand, NPS can feel punitive if presented as a blunt measure of whether performance is up to scratch.
If you take time to celebrate your wins, then your team will be incentivised to keep momentum with a strong NPS score. You'll be able to see when customers are truly impressed and look for options to repeat those successes. Our blog has ideas about how to give your competitive advantage to customer service. However, for guidance that's tailored specifically to your situation, talk to your Business Mentor. They'll be able to help you stand back and see how measures like the Net Promoter Score fit into the big picture of your unique business journey.