In today’s business world regardless of what field you’re in, NPS has grown to be a popular metric utilized by organizations worldwide that translates customer loyalty into a concise calculation. It is primarily utilized to aid a company in tracking its performance through the eyes of their customer base. Ultimately, the score proves to enable an organization not only to track the progress of its own success with regard to marketing initiatives from year to year, but also as a method to compare it against other organizations in a similar field.
So what exactly is NPS?
NPS is in essence based solely on consumers’ likelihood to recommend the organization. In specific, the calculation is traditionally derived from the question ‘How likely are you to recommend (the organization) to others?” Customers are asked to rank that likelihood on a scale. While the scales utilized may vary across organizations, the outcome is still the same in that the scale provides a way to differentiate loyal customers from disloyal customers. Loyal customers (or promoters) are considered very likely to recommend the organization to others, while disloyal customers (or detractors) are not likely to recommend the organization.
For instance, based on a 0-10 scale, customers providing a score of 9 -10 may be considered extremely likely to recommend and therefore categorized promoters. On the contrary, those ranking the organization from 0-6 are not as likely to recommend, and therefore categorized as detractors. Simply put, NPS is calculated by subtracting the detractors from the promoters.
% Promoters - % Detractors = NPS
While organizations may typically choose a 0-10 scale to calculate their NPS score, other scales may also be used. It is important however to consistently apply the same scale each time NPS is calculated for an organization to ensure accuracy from year to year. To effectively assess how your organization’s NPS ranks among other organizations in your field, the same scale should be applied to calculate your NPS as the competition.
So is NPS the only way to measure customer satisfaction?
While NPS proves an effective tool to gauge customer loyalty over time, it is not the only method to examine the topic. Like any metric, it may in fact prove best when utilized in conjunction with other tools such as the customer loyalty index, overall satisfaction, repurchase intent, and performance benchmarks specific to the organization overall.
For more information about NPS, go to http://www.isixsigma.com/library/content/c071210a.asp?action=print
