Through the years, business analysts have studied and formulated ways to correctly measure customer satisfaction, growth, and loyalty. In 2003, Fred Reichheld of Bain & Co. formulated Net Promoter Score (NPS),claiming in a Harvard Business Review article that it’s the “One Number You Need to Grow.” Essentially, NPS is a customer satisfaction score that’s derived from answering the question, “How likely is it that you would recommend X to someone else?” The idea is, if you like a certain product or brand, you will most likely recommend it. Furthermore, there could be varying degrees by which you will recommend it to others.
Since its conception, business stakeholders have used NPS to make important business decisions relating to customer relationships, and as a way to measure a company’s performance through the customers.
What is Net Promoter Score?
NetPromoter.com explained this simply. First, each customer is categorized as Promoters, Passives, and Detractors. Each customer answers the question “How likely is it that you would recommend x to a friend or colleague?” using a 0-to-10 point rating scale and are categorized as follows:
- Promoters (Score 9-10) are “loyal enthusiasts who will keep buying and refer others, fueling growth.” Promoters can serve as free marketing agents for your product, bringing in new customers almost without acquisition cost.
- Passives (score 7-8) are “satisfied but unenthusiastic customers who are vulnerable to competitive offerings.” Yes, they may be satisfied, but not satisfied enough to be enthusiastic about promoting the product.
- Detractors (score 0-6) are “unhappy customers who can damage your brand and impede your growth through negative word-of-mouth.” These customer do not only lose you sales, but could create a damaging effect on your brand’s reputation
Essentially, the more “Promoters” you have, the better your NPS should be, and having more “Detractors” means your customer base is generally unsatisfied and something has to be done to your company or your product’s performance.
NPS therefore is equal to % Promoters minus % Detractors
Criticisms of NPS
While NPS has been widely used by business stakeholders, it has also been questioned a lot by market research experts and academics. Some of the disputes include the following:
- There’s no scientific evidence that the “likelihood to recommend” is a better predictor of business growth compared to other customer-loyalty questions like overall satisfaction, likelihood to purchase again, etc. (Russell Hayes, 2008)
- External factors may influence the customers’ response to the “recommend” question, and may likely to change over time.
- Others questioned that by collapsing the 11-point scale to only 3 components, (Promoters, Passives, Detractors), significant information is lost and statistical variability of the result increases. (Business Week, 2006)
Having considered the above disputes, one has to wonder if NPS is indeed the “one question you need to grow”, and to base the way companies manage customer relations, loyalty, and growth on just one “super score” or performance indicator.
What is a Customer Satisfaction Survey?
A Customer Satisfaction Survey (CSS), meanwhile, normally has 5 to 10 questions related to customer experience, satisfaction, and service delivery. The simple objective is to measure how happy a customer is about your product/service.
Surveys usually use a rating scale of 1 to 10, and are carefully customized to capture what’s essential to a specific product or company. Various CSS use different methodologies, and rating scales, and formats. Therefore, it is important that you employ a market research expert to design and implement your CSS for you.
Unlike the NPS, which is simply based on one question, a CSS needs to ask more questions to identify an overall rating.
Customer Satisfaction Survey vs. Net Promoter Score
The debate goes on, but many market research experts have used both scores to complement the other. Often, the “would you recommend” question is embedded in a CSS, allowing for better understanding of, not only the customer’s likelihood to promote the product, but also his overall satisfaction on the overall service and delivery.
Essentially, the bottom-end is your customer’s satisfaction and how it translates to him promoting the product to his peers. This is a tricky KPI to measure, but combining various formulas will allow you to understand the different levels of the satisfaction spectrum, and implement ways to make your product better.
Nowadays, the traditional landline phone customer service that businesses have may not serve your customers well—considering that we’re living in the technology era. Having customer support in other types of network such as through online and mobile are some of the customer assistance services we have, which can take your entire customer service to a whole new level. Learn more!