Studying (or not): why Net Promoter Score beats recommendation
Getting recommended is always satisfying. It’s an efficient way to attract new business. But recommendations alone are not enough. After all, recommendations are just one customer reaction to your products and services. What about the customers who’ve had a bad experience and aren’t afraid to let everyone know? So fostering recommendations alone does not drive growth. Jon Twomey of Student Support Group explains why the Net Promoter Score is such a valuable metric for marketers. The Net Promoter Score is covered in the Mastering Metrics syllabus, one of the three subjects required for the CIM Diploma in Professional Marketing.
Beyond recommendations
The Net Promoter Score®, is a powerful operational metric for reviewing customers’ likelihood to recommend your brand – or the reverse - which has a proven link to business growth.
Net Promoter was a concept introduced by Fred Reichheld, a partner at Bain and Company, in a 2004 Harvard Business Review article. It’s a measurement of the percentage of your customers who would be willing to recommend you (the Promoters), as opposed to them being neutral (the Passives) or negative towards you (the Detractors). The higher the percentage of Promoters and the lower the number of Detractors, the better! Its introduction has inspired change, helping to shift the focus from best practice anecdotes and research, to a more operational, continuous approach to improving customer loyalty.
Your Net Promoter Score (NPS®) forms the core of a measurement framework tightly tied to the customer journey, to gauge customers’ overall experience of your brand across all of their interactions with your business. Managing your organisation to improve your score can improve your business performance, whether you are aiming for faster growth or higher profits. If your organisation’s score is higher than that of your competitors, you will most probably outperform the market.
How is the Net Promoter Score calculated?
Net Promoter Scores are calculated using the answer to a single question with responses graded on a 0-10 scale.
How likely is it that you
would recommend [brand]
to a friend or colleague?
This is called the Net Promoter Score question or the recommend question. Respondents are grouped as follows:
- Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fuelling growth.
- Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
Net Promoter Score = % Promoters - % Detractors
To calculate your company’s Net Promoter Score, take the percentage of customers who are Promoters and subtract the percentage who are Detractors, so your score can range from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter).
Factors determining your brand’s Net Promoter Score include customer views on ease of use, access to support, company reputation, treating customers fairly and value for money.
NPS can guide improvement
Clearly asking whether customers would recommend your brand is not enough by itself. It’s important to find out the reason “why they feel as they do” about your organisation.
This qualitative feedback can then be captured and shared with:
- senior management to help develop future strategy and guide investment in appropriate resources to improve the value proposition
- managers to understand where improvements can be made to the product/service/process and to organise their implementation
- front line staff who can work with all three customer groups to:
- - appease Detractors with apologies and special deals to retain their business in the short turn and aiming to convert them into promoters over time
- - convert the Passives into Promoters by really understanding what aspects of our product/service they most value and deliver it
- - encourage the Promoters to tell even more friends/colleagues but also to share with us their ideas and innovations for further improvements
So when the Net Promoter Score is used properly, it becomes not only a way of measuring customer loyalty but also a process for continuous improvement.
Top NPS across all sectors
In 2015, over 11,000 UK customers were surveyed in a UK benchmarking study of Net Promoter Scores by Satmetrix®. The reports rank more than 60 brands across nine UK sectors, including financial services, insurance, television, mobile and internet providers.
Highlights from the 2015 UK report:
- First Direct +73
- Nationwide Building Society +43
- Freeview +38; Tesco Mobile +38
- Plusnet +37
- LV +34 / Hargreaves Lansdown +34
- Santander credit cards +28; Tesco Bank credit card +28
- Santander banking +27
Source: UK Net Promoter Customer Loyalty Benchmark Report 2015
NPS Leader First Direct’s Customer Services Director, Karen Walker says: “It is fantastic news to be ranked top for customer loyalty across all sectors, especially as the results are based on what our customers say about us. I believe the UK Net Promoter score truly reflects how consumers feel, which makes being ranked first out of 60 brands, 30 points clear of second position, all the sweeter.”
- Royal Bank of Scotland had the lowest loyalty score of all the companies analysed at -19
- Consumer banking has the biggest gulf between best and worst performers; First Direct scored +73 versus Royal Bank of Scotland with -19
- Tesco is winning back customers’ loyalty with extra services; Tesco Mobile had the highest mobile industry score at +38 and the consumer credit card from Tesco Bank (+23) was beaten only by Santander (+28).
- EE and Vodafone are bottom for both mobile and internet services. EE scored -7 for mobile and -17 for internet, with Vodafone respectively scoring -1 and -18. Given the shifting market and the increased bundling of services in the mobile and media industry they face tough competition
- Credit cards: Providing a customer experience focussed on community and reward is paying off for MBNA who’s score of +4 was enough to place them amongst high-street competitors including Lloyds, Barclaycard and Virgin Money.
- Freeview is streets ahead of digital TV competition with a Net Promoter Score of +38, 25 points ahead of subscription services including Sky, Virgin Media, BT, and finally Talk Talk – which had the only negative score (-11) in the top five.
NPS and you
Perhaps you’d like to consider:
- What’s your Net Promoter Score and how does it compare with the companies above?
- Has your score gone up or down over the last three, six, twelve months and what are the reasons for these changes?
This article from Jon Twomey of Student Support Group, draws on information adapted from a number of sources provided above. Net Promoter, NPS, and Net Promoter Score are trademarks of Satmetrix Inc, Bain & Co, and Fred Reichheld.
Further information & Mastering Metrics assignment support is available from Student Support Group. Please contact caroline@studentsupportgroup.co.uk or call 01784 463057.
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