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What is Net Promoter Score? Is it the right way to measure your customer satisfaction?

Tuesday 2nd June 2015


NPS is a growing methodology for assessing customer’s likelihood to recommend. Many people will be familiar with the prescriptive question relating to NPS which now appears on many customer surveys:

'Based on your experience, how likely would you be to recommend to family or friends?'

Customers are asked to provide a score from 0 (highly unlikely) to 10 (highly likely).

Customers who score:

9 or 10 are ‘Promoters

7 or 8 are ‘Passives

0 to 6 are ‘Detractors

The NPS is calculated by subtracting the % of detractors from the % of promoters.

Here’s a simple illustration:

63% of your customers score 9 or 10 (Promoters)

22% score 7 or 8 (Passives)

15% score 0 to 6 (Detractors)

63% - 15% = 48 NPS

NPS now has an enormous following for several reasons:

  • It is a prescriptive question and the results can be benchmarked across a wide range of industries and organisations.
  • 60+ NPS is recognised as an exceptional score and an aspirational target for organisations to aim for.
  • As the ‘detractors’ are subtracted when calculating NPS, the scores can vary significantly. Scores can vary from -100 to +100. So concerted improvements in the customers’ experiences can translate to significant uplifts in NPS.

Is NPS an accurate measure of customer satisfaction?

Surprisingly, for many the answer is ‘no’! NPS is a measure relating to customers’ propensity to make a recommendation, which is indicative of their customer satisfaction - this is not as accurate as other forms of customer satisfaction research.

NPS does not distinguish between a customer providing a rating of ‘0’ and ‘6’. It classes them both as ‘detractors’ and follows the assumption that neither would recommend the company. However for customer satisfaction purposes, there is a marked difference between a customer that rates ‘0’ and one that rates ‘6’. The same principle applies at the other end of the scale; both scores ‘9’ and ‘10’ are ‘promoters’ and therefore not differentiated.

Here is an example of how this could be presented for 2 different companies if they both surveyed 1,000 customers:

Scenario

Company A - 60% provided a rating of ‘10’ and 40% provided a rating of ‘6’

Company B – 60% provided a rating of ‘9’ and 40% provided a rating of ‘0’

Net Promoter Score Results

Company A – 20 (60% promoters – 40% detractors)

Company B – 20 (60% promoters – 40% detractors)

Customer Satisfaction Rating Results

Company A – 84%

Company B – 54%

Evaluation

As you can see, whilst NPS rates companies A and B the same, the customer satisfaction rating recognises a significant difference.

There is a wide range of ways to measure customer satisfaction; recommenders, loyalty, value, effort and ease of doing business to name few. Performance in People provide advice and guidance on the most appropriate methodology for your business. Give us a call today: 01983 568080.

Mystery Shopping | Training | Audits | Customer Surveys

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