I’m pretty sure we all understand the importance of talking to our customers. But, how often do you talk to your customers? Maybe once a year? Perhaps once a month? And, how do you talk to them? Is it a phonecall, some type of survey or possibly an in-person meeting? Most importantly, what do you talk to your customers about?Most of us have either been involved in producing or responding to lengthy customer satisfaction surveys that seek to “better understand the customer” and “increase customer loyalty.” Unfortunately, these same surveys are notoriously ineffective when it comes to boosting customer loyalty - with poor response rates, alienated customers, and lackluster data.
Imagine if you could ask your customers just one simple question that could fuel unprecedented customer loyalty and determine your business’ future. This concept, termed Net Promoter Score (or NPS) focuses on asking this one question – Would you recommend us to a friend? – in a regular, systematic and timely manner.
In his new Harvard Business School Press book, The Ultimate Question: Driving Good Profits and True Growth , Fred Reichheld, introduces NPS as the radical new tool that is being rapidly deployed by leading firms to transform ordinary customers into promoters – the drivers of sustainable growth.
NPS is based on the premise that your customers can be divided into three unique segments based on their response to the “ultimate question” given a 0-10 point scale (with 0 being very unlikley and 10 being extremely likely).
- Promoters – loyal enthusiasts who keep buying and urge their friends to do the same
- Passives – satisfied but unenthusiastic customers who are easily wooed by the competition
- Detractors – unhappy customers trapped in a bad relationship
The NPS is the percentage of customers whose answers identify them as promoters minus the percentage whose response indicates they are detractors.
NPS = % promoters – % of detractors
According to Netpromoter.com, efficient growth companies such as Amazon.com, eBay, Costco, Vanguard, and Dell operate at NPS efficiency ratings of 50 to 80%; while the average firm sputters along at an NPS efficiency of only 5 to 10%.
What is your NPS baseline? If you have your own NPS stories, we’d love to learn more.
