Net Promoter Score (NPS) is a popular benchmarking tool that gauges the loyalty of a company's customer relationships. It was developed by Fred Reichheld, Bain & Company, and Satmetrix in 2003. The score is calculated based on responses to a single question: 'How likely are you to recommend our company/product/service to a friend or colleague?' The scoring for this answer is most often based on a 0 to 10 scale.
In the context of business, NPS is used as a measure of customer loyalty and is highly correlated with revenue growth. NPS is not industry-specific and can be used by any business that interacts with customers or clients. The simplicity of the NPS metric allows businesses to easily understand and communicate their customer loyalty level.
The Net Promoter Score is calculated by subtracting the percentage of detractors (customers who gave a score of 6 or lower) from the percentage of promoters (customers who gave a score of 9 or 10). Customers who gave a score of 7 or 8 are considered passives and do not directly impact the NPS.
An NPS that is positive (i.e., higher than zero) is considered good because it means that you have more promoters than detractors. A score of +50 is generally considered excellent.
There are several software tools available that can help businesses implement and manage their NPS, such as SurveyMonkey, Qualtrics, and Medallia.
The main benefit of using NPS is its simplicity. It's easy to understand and communicate throughout an organization. It provides a clear measure of a company's performance through its customers' eyes. It also helps identify unsatisfied customers, enabling the company to address issues and improve.
In conclusion, Net Promoter Score is a valuable tool for measuring customer loyalty. It's simple, easy to understand, and can be used by any industry. By regularly tracking NPS, businesses can identify areas for improvement and work towards enhancing customer satisfaction.