|KPI Spotlight: The Net Promoter Score (NPS)
Let's look at one performance measure that is becoming increasingly popular with companies the world over to measure customer satisfaction: The Net Promoter Score (NPS).
The NPS score was developed in response to traditional customer satisfaction surveys, which are usually complex, expensive and hard to interpret. Instead, companies ask a simple question: 'How likely is it that you would recommend [company x / product y / service z] to a friend or colleague?'.
You then use a 10-point scale on which respondents can score from 0 (Not at all likely) to 10 (Extremely likely). The NPS score is based on the fundamental premise that every company's customers can be divided into three groups:
- Promoters (score 9 or 10)
- Detractors (score 1 to 6)
To calculate your NPS score you then subtract the detractors from the promoters:
NPS = % of Promoters - % of Detractors
This allows organisations to track and compare their NPS scores. What's more, extensive research has found a striking correlation between the customer's grouping and actual behaviour (e.g. repeat purchasing and referral patterns).
Furthermore, comparing the NPS of companies in the same sector seems to explain much of the variation in relative growth, meaning companies with a better ratio of promoters to detractors out-perform and out-grow their peers.
When I develop KPI systems for clients I often recommend to supplement the NPS score with two additional open ended questions: 'What do you particularly like about [our company / product / service]?' and 'What could we do better'?'. This way you not only get a comparative number but the relevant insights about what customer really like and what you could improve.
The NPS score is one of the 75 KPIs I discuss in detail in my book 'Key Performance Indicators'.