introdutcion to net promoter score® and net promoter … · introdutcion to net promoter score®...

IntrodutciontoNetPromoterScore®andNetPromoterSystem®

InsightSofa–automatecollectionandevaluationofNPS®

IntroductiontoNetPromoterScore®andNetPromoterSystem®

Updatedissue:2016

InsightSofa.comisamemberofROUCEKGroups.r.o.

Allrightsreserved|2016

Theaimofthisshortpublication isabasic introductiontoNetPromoterSCORE®,a

methodformeasurementandevaluationofCustomerfeedback.Itwillexplainhowto

measure thismetric,how to calculate it andhow toproject its results to companymanagement.Itsgreatestadvantages(anddisadvantages)willbebriefly introduced

and in the end, the differences between Net Promoter Score® and Net Promoter

System®willbeexplained.

NetPromoter,NPSandNetPromoterScore®areregisteredtrademarksofSatmetrix

Systems, Inc.,Bain&CompanyandFredReichheld.AllrightstothispublicationarereservedforInsightSofa.com.



For starters… You'veprobablyalreadyheardthetermNetPromoterScore®.It'sperhapsthemosteffectivemethod tomonitor customer satisfaction,quantify it and integrate it into

companymanagement.Muchof theavailable research showed that thegrowthof

customersatisfactionandloyaltyleadstoademonstrableincreaseinturnoverandtoso-calledhealthyprofits.WhenstartingtotalkaboutNetPromoterScore®,wecan't

beginotherwisethanbymentioningFredReichheld,thefatherofthismethodology,

whichisadoptedeverydaybymanytopcompaniesaroundtheworld.

FredReichheldworkedattheBain&Companyconsultingfirmsince1977.Sincethen

he's been focusing on research of customer satisfaction and customer loyalty inconnectionwiththecompanymanagementandassociatedeconomicindicators.He's

probablybestknownforhisworkonNetPromoterScore®andconsideredthefounder

of thismethodology. Hismost famous book "The Ultimate Question" explains thestrengthofthe"singlequestion"andisasteppingstoneforthedevelopmentofNet

PromoterScore®.Hiscontinualexplorationoftheimpactofcustomerloyalty(notto

beconfusedwithsatisfaction)onthebusinessmodelsofcompaniesawardedhimwithtitles such as "the high priest of the loyalty cult" (The Economist, 2001) or his

appointmentamongthe25bestconsultantsintheworldbytheConsultingmagazine

(2003).



NPS as a number (Net Promoter Score®) NetPromoterScore®isextremelypopularinmanyareasofcorporatemanagement:marketing,sales,customerservicecenters, topmanagement-virtually inanyarea.

Especiallybecauseit'seasilymeasurableandtheresultscanbecomparedovertime

orusedinbenchmarkingamongindividualcompanies.

NetPromoterScore® isonlyapart -albeitavery importantandperhaps themost

famouspart-ofthewholetheNetPromoterSystem®.NetPromoterScore®isasinglenumberexpressingthedegreeofloyaltyofcustomerstotheorganization.Customers

areaskedhowmuchtheywouldrecommendyourcompany/product/servicetotheir

familyandfriendsonascaleof0-10.Doesthatseemsimpletoyou?Basically,youareright-that'swhatthemetricisbasedon.Butasweshowbelow,ifyoucombinethis

simple sentencewithadditionalquestions (preferablydependingon theevaluation

score) you'll start getting very interesting data based on actual opinions of yourcustomers.Let'stakeamomenttogobacktoNetPromoterScore®.

Dependingontheratingtheyawardedonascalefrom0to10,yourcustomersareclassifiedintothreebasicgroups:detractors,passivesandpromoters.

Let'stakeacloserlookateachgroup.



DetractorsDetractorsarecustomerswhoindicatedtheirloyaltytoyourorganizationbetween0

and6onthescale.Theycertainlyaren'tsatisfiedcustomers.Theyaretellingyouthatafteranexperiencewithyourcompany,productorservice,theywoulddefinitelynot

recommendittotheirfriends.Itisadvisabletotrytoworkwiththesecustomersto

addresstheirbadexperienceassoonaspossible.

Butnothingisassimpleasitmayseematfirstglance.Puttingthecustomerintothe

detractorsgroupjustonetimedoesnotnecessarilymeanthatthecustomerisyourdetractoroverall.Letmegiveyouanexample:

Yourregularcustomerregularlyvisitsyourwellnessstudio.Heusuallyordersamudbathandisverysatisfied.OnedayhedecidestotrytheThaimassagewhichdoesnot

satisfyhimverymuch.Ifyourcallsforasurveyaresetuptoactivatedependingonthe

useofaspecificservicebythecustomer,it'slikelythatafterleavingthemassage,thiscustomerprobablydoesnotgiveyouaveryhighsatisfactionratingandcanbecome

your"short-term"detractor.

Thisexampleshowsan importantcaveat -alwayswatchNetPromoterScore®over

time. If you view the average ratings of a customer (or customers) you'll get an

accuratepictureofyourcustomerloyaltyandtheactualvalueofyourNetPromoterScore®.

Detractorshaveagreatpropensitytoswitchtocompetingservices,stopusingyourserviceorevenspreadnegativemessagesaboutyou.Surveysdemonstratedthatover

80percentofthenegativereportsthatarecirculatingaboutyourcompanycomefrom

detractors.



It is therefore important towatch them and address all their requests in a timely

manner.

PassivesPassivecustomersarethosewhoratedtheirloyaltytoyourorganizationbetween7

and8on the scale. Theseare customerswhoaren'tdissatisfied,but they certainly

knowhowyoucouldmakeyourservices/productsevenbetter.Idonotrecommendunderestimating thiscustomergroup.Theopinionsofapersonwhocan findsome

weaknesses is always worthmore to you than one who is completely satisfied or

chronicallydissatisfied.

Passivecustomersdon'tspreadnegativemessagesaboutthecompany,havealower

propensitytoswitchtocompetitionandaremoreeasilysustainable.

PříznivciPromotersarethecustomerswhoaremostloyaltoyourorganization.Theyratedtheirloyalty between9 and10on the scale. These customers spreadpositivemessages

aboutyourcompanyamongtheirfriendsandtheyaretheleastlikelytoswitchtoa

competitor.It'seasytosellthemallyournewproducts/servicesandimprovements.Youshouldreallypamperyourpromoters.Remembertherulethatretainingacurrent

customeris10timescheaperthangettinganewone.



The method of calculating Net Promoter Score® NetPromoterScore isnotthespecificnumberthatthecustomermarksonascalefrom0to11.NetPromoterScore®indicatestheoverallresultforyourorganization,

whichisakindofsingle-numbermetricthatsummarizestheloyaltyofyourcustomers.

Let'sseehowtocalculatethisnumber.

NetPromoterScoreisthedifferenceofthepercentageofpromotersanddetractors.

Theoppositeextremesthereforearethateitherwehavea100percentofpromoters

or100percentofdetractors.NetPromoterScore®valuesmaythereforehaveavaluebetween-100to100.Ifwehavemorepromotersthandetractors,theNetPromoter

Scorevaluesarepositive;ifthereisamajorityofdetractors,theyarenegative.

Surely you're asking -what is the normal value formost companies?What values

shouldyouachieve?Thereisnoexactanswer.Ofcourse,thehigherthebetter.Look

atthetablebelowtomentionafewexamplesofwell-knowncompaniesandtheirNPSvalues.



Company NetPromoterScore®

Apple 78

Amazon 71

eBay 69

Facebook 65

Google 63

SAP 60

Sony 41

Adobe 36

AT&T 9

Net Promoter Score = perception in context I've been reconsidering for a long timewhether our introduction toNet Promoter

Score®shouldincludethischapter.ButfinallyI'veseenthatwe'llencounterthisissue

soonerorlater,soIdecidedthatyoushouldlearnitearlyon.NPSisundoubtedlythebesttechniqueformeasuringcustomerloyalty,butlikeeverythingelsethismetrichas

its negative aspects. However, if you understand them well and perceive NPS in

context,itwillworkexactlyaccordingtoyourwishes.

What do I mean by perception in context? Unsurprisingly, the simplicity of this

methodology (which is already beginning to understand that the greatest strengthNPS)isalsoitsmostcriticizedpart.Itisquiteobviousthatthescalefrom0-11doesnot

fitall respondents,willdependonrespondents'personalitytypesandsocialstatus.

Soonyou'llobservethatdifferentratingsaregivenbypeoplefromvariousgeographicpartsoftheworld,variousreligiouscultures,etc.SometimespeoplejustchooseNPS



valueof10,eventhoughtheyarenottoohappy.Somegroupschoose7whenthey

areverysatisfied,justtoleaveafewpointsofheadroomforimprovement,whichtheythinkcanbealwaysdone.ButifyouperceiveNetPromoterScore®inthecontextof

thesevariousgroups,itwillstillprovideyouwithhighqualityandaccuratedata.Let's

lookatsomeexamplesforbetterunderstanding.

Widercontext

Imaginethatyouvisitawellnesscenterwithyourspouseorpartnerfortheweekend.Thewholestayisverypleasant,yougetagreatdealofrest,servicesaretop-notchand

you don’t have the slightest problem agreeing on your choice procedures. After

returningyou'resohappythatyoudecidetoorganizeacorporateteambuildingatthesamelocation.However,whenyougettherewithyourco-workers,youcannotagree

asagroup,whatyouwanttodo.Thusonehalfchoosestheirownentertainment,the

other half chooses procedures. Despite the fact that the services provided by thewellness center are still top-notch, the rating indicated by the participants of

teambuildingwillprobablydifferfromthescoresindicatedbyyouandyourspouseor

partner.

Solution:Identifythegroupsofyourcustomers,segmentthetotalscoreandanalyze

accordingtothesetargetgroups.Suchanalysiswilltellyouwhattoconcentrateoninordertoimproveyourservicesasmuchaspossibleandtoadaptyourservicestothe

greatestnumberofguests.

.

Personalcontext

Someonewhovisitsthewellnesscenterveryregularlyandhisbodyisaccustomedtotheseprocedureswillchooseadifferentratingonthesamescalefrom0to11than

someonewhovisitsthewellnesscenterforthefirsttimeandiscompletelysurprised



by the result. The same serviceswill be rated differently by someonewho is very

criticalthanbyapersonwholikestopraiseanythingtheyeverexperience.

Solution:Thesolutionhereisveryeasy.Justlikestatisticsonlystartstomakesense

onceyouhavea lotofdata,NetPromoterScore®worksthesame.Donot letyouroverallNPSbeaffectedbyindividuals,buttoexploreitonlyonceyouaccumulatea

highenoughnumberofratingsthatarenotaffectedbyeccentricrespondents.

Culturalcontext

When we were asked to measure customer satisfaction for a particular internet

organizationthatprovidesitsservicesprimarilyinEurope,NetPromoterScorewastheperfectmetricforthem.Afterdeploymentandcollectingasufficientamountofdata

we have found an interesting fact. Even though the services provided throughout

Europearecompletelyidentical,incountrieswhereNetPromoterScorehasbeenusedfora longtimebyvariouscompanies,theoverallscorewaslowerthanincountries

whereNetPromoterScore®isnew(mainlyinEasternEurope).

Solution: Do not look at Net Promoter Score® as a whole, but rather watch it

dependingonthegeographicalareaofyourcustomers.Watchitacrossatimeperiod,

butincomparablelocations.Andyes,ifyouwantanoverallNPSbenchmark(inthiscaseinEurope),selectcompaniesthathavethesamegeographicscope.



Net Promoter Score® – as a journey, processes and the system

Up to this pointwehavediscussedNet Promoter Score®only as a number,which

indicatesthedegreeofcustomerloyaltytoyourcompany.Yes,itisthemostimportantindicatoroftheentireNetPromoterSystem,butit'sonlythebeginningofyourjourney

totransformyourorganizationintoacustomer-orientedcompany.Onlythecomplete

NetPromoterSystem,implementingit,complyingtoit,closingthefeedbackloopwithcustomersandthereflectionoftheseactsintoyourdecisionswillactuallyprovidea

powerfultoolthathasenormouspotentialtoadvanceyourentireorganizationinthe

right,healthydirection,faraheadofcompaniesthatarenotcustomer-driven.IfweonlymeasuretheNPSvaluebutdonotknowhowtouseitandwhatmeasurestoapply

basedonthatvalue,NetPromoterSystem®methodologywillnotwork.

And what do I mean by the journey, process and system? I'd like to list 7 basic

processes that lead to strong, functioning and well-tested Net Promoter System®.

TheseprocessesweredefinedbytheSatmetrixcompanywhichtogetherwithBain&CompanyisamongthefoundersofNetPromoterSystem.Thedetailsoftheindividual

processesgo farbeyondthescopeof thispublication,which is to introduceyouto

NPS,butwewillcertainlydetailtheprocessesinanotherpublication.

Process1–DefinewhatyouwanttoaskPropermeasurementaccordingtoNetPromoterSystem®requiresyoutodefineinthe

beginning"what"youwanttoaskyourcustomers.Whatdotheyhavetoevaluate,

whentheyshouldevaluateit,whatdoyouwanttolearn,perfectormodifybasedontheir feedback? Are you sure that your customers are able to give you sufficient

information?



Prepare the Net Promoter question and any additional questions that customers

shouldanswer.

Paytheutmostattentiontothisstep.Atthispointitisadvisabletocontactsomeone

who already has experiencewith Net Promoter System® and ask for advice. I canindeedguaranteeyouthatitwillpayoff.

Process2–WaituntilyouhavecollectedgooddataFocus on such customer groups thatwill bring you themost profit. Focus on their

feedbackinthebeginning.You'llthusfastergetgooddatathatwillnotbeaffectedbycustomerswhodonotbringyouanappropriateprofit.Overtime,asyournumberof

responsesgrows,you'llhavetopayattentiontothesecustomers,too.Butstartsimple.

Howcanyoucollectdata?Youwillneedanautomatedtoolthatdoesthehardwork

foryou.OneofsuchtoolsisInsightSofa(http://www.insightsofa.com).Thesoftware

automaticallycollectsandanalyzesfeedbackfromyourcustomersandprovidesyouwiththeviewthatyouwant.Youcancollectdatabothonlineandoffline.

Process3–UnderstandwhataffectsyourscoreWhatisitthatmostpromoterspraiseyoufor?Whatcausesanegativeratingamong

detractors?Youhavetounderstandwhatyourcustomersthinkyou'redoingverywell,

andwhatthinkyou'redoingwrong.Anautomatedtoolwillhelpyouagainwiththeanalysis.Onceyoulearnthis,startacorrectiveprocessesinyourorganization.

Process4–PerfecttheindividualcustomerloyaltyYour Net Promoter question gives you a great opportunity to improve customer

satisfaction. If your customer provides feedback on your services/products,



particularlyinthecaseofnegativefeedback,itisveryimportanttogetintouchwith

them immediately and try to resolve their dissatisfaction.Make sure to appoint apersonresponsibleforthis.Youwillseethatthiswillsignificantlyincreasecustomer

retentionandyouwillfeelthepositiveeffectofthisactivityverysoon.

Process5–PerfectthetotalcustomerloyaltyUnlikeindividualcustomerloyaltywhereyou'readdressingacomplaintofaspecificcustomer,totalcustomerloyaltyisaboutperformingcontinuouschangesinareasthat

customerscomplainaboutthemost.Listentothemandmakechangesthattheyask

forthemost.

Process6–CompareyourscoreBenchmarkyourscoreagainstyourcompetitionwithinthesameindustry.Setgoalsyouwanttoachieveandtakemeasuresthatleadtothesegoals.Lookatthechanges

inscoreafteryou'vetakenthemeasures.Diditimprove?Diditgetworse?Soonyou

willknowwhatleadstohighercustomersatisfactionandwhatdoesn't.Youareontherighttrack.

Process7–EnjoyyourbenefitsOnceyou'vesuccessfullygonethroughalltheprocessesdescribedabove,you'renot

justbeingdrivenbythescore,butyou'reapplyingtheentireNetPromoterSystem®.You're getting more and more customers who are loyal to your company. You're

creating more promoters than detractors. Many more positive comments than

negative ones are being spread about your company. Last but not least, you'regeneratingmuchhigherandmoresustainableprofits.Youareontherighttrack-the

NetPromoterway.

Soenjoyit!

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