Monday, June 6, 2016

How good is your Net Promoter Score (NPS) ?

Customer Satisfaction Surveying became popular during the 1970’s and was recognized as an important business indicator and marketing tool from that time onwards. The two main thrusts of the process were that;


    1. The undertaking of the process itself sends a message to customers that you understand the importance of ensuring that customers have a positive experience.

    2. Whilst current sales results are the best indicator of how a business is performing today, customer satisfaction survey results give an indication of how well the business might perform in the future.


Up until 2003 there wasn’t a standardized survey, so it was difficult for companies to understand whether their surveying results were good compared to their peers. In 2003 Richard Reichhold published an article in the Harvard Business News called “One Number You Need To Grow”. The number he was referring to was the Net Promoter Score or NPS. He advocated that whilst it was fine to ask other more specific questions in surveys, there was one key questions that determined really how satisfied a customer was. 

“How likely is it that you would recommend our company/product/service to a friend or colleague? “

This is a clever, psychological question when you think about it. Reichhold is not just asking the respondent how satisfied they are, but is piling on added pressure of recommending a company/product/service to someone else.

So how is the NPS scored and calculated? The customer is invited to give a score of 1 to 10 in response to the question above. 



Scores of 9 and 10 are defined as ‘Promoters”, scores of 7 and 8 are defined as passives and scores of 6 or below are defined as detractors. The NPS is calculated by subtracting the % of detractors from the % of promoters. 






So the range of NPS can be from -100 (all detractors) to +100 (all promoters) and anything in between. The % of passives are not used in the calculation at all. The idea is that the 9’s and 10’s are going to go around sharing their positive experiences they had with your company and its products/services and the detractors are equally going to share the negative experiences they received. The passives are not committed or motivated to do either, so are therefore not considered.

So the NPS enables us to compare one company’s performance to others around the world and in all business sectors? Well no it doesn’t, but you can compare to similar business in the same geographical area.

This “Deep Insight” blog gives a good insight into the factors that can affect you NPS and which might be considered a good NPS score.

http://blog.deep-insight.com/what-is-a-good-net-promoter-score/

So what is a good score? For sure -100 is really bad and +100 is amazing, but the article above suggests that for their clients a score of +30 or above would be considered excellent. They do point out that most of their clients are in Europe or Australia where they believe that their clients score typically 1 point lower that in the US for example. So we might say that you need to be scoring above 40 in the US to be considered very good.

A couple of other points I’d like to add from our experience at Wenzel America;

    1. Sample size is important for a reliable and statistically sound result. It is recommended that you get at least 100 survey results per evaluation period. 

    2. The most important comparison of your NPS is to your own results in previous periods. If you NPS score is growing over time, there’s a fair chance that that your business is growing and will continue to grow if that is the case.


    3. Add a few other questions in addition to the all-important NPS question so that you can find out more specific feedback about products and services. BUT, don’t ask too many (less than 10) – too many questions will stop people completing the survey (how many times did that happen to you?)

    4. Emailing a link to your customers to an online survey will increase the amount of respondents. We use Survey Monkey – I would give them a 10 – easy to set up, good statistical analysis, good value for money. 

For a relatively small company like ours we have to work very hard to satisfy our customers. We have a large territory and a small (but dedicated) team and sometimes we can be overwhelmed, but I am pleased to report that over the last 2 years our average NPS is 45.4 and we remain committed to improve it.

Andy Woodward 
President, Wenzel America

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