Net Promoter Score - Explained
What is a Net Promoter Score?
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Table of ContentsWhat is a Net Promoter Score?How is a Net Promoter Score Used? Academic Research on Net Promoter Score (NPS)
What is a Net Promoter Score?
The Net Promoter Score is a management tool to measure customer satisfaction and customer loyalty. It measures how likely the customers of a company are to recommend the product or service of the company to a friend or colleague. The Net Promoter Score measures the loyalty of a consumer to a provider. This can be used for measuring the loyalty that exists between manufacturer and consumer, service provider and customer or employer and employee. This measuring tool is widely accepted by the Fortune 1000 companies as an alternative to traditional customer satisfaction research.
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How is a Net Promoter Score Used?
In a Net Promoter Score survey, the questions are asked to the consumers, customers or employees to gauge their satisfaction level. The questions are asked by the provider. The Net Promoter Score can be as low as -100 and as high as +100. When all the respondents respond negatively, the score stands at -100. The negative respondents are called a detractor. When all the respondents answer positively the score reaches +100 and the positive respondents are known as promoters. In general, a positive Net Promoter Score is considered to be a good score and a +50 is an excellent score. Fred Reichheld, Bain & Company and Satmetrix developed the Net Promoter Score in 2003. The article was published in Harvard Business Review with the title "One Number You Need to Grow". The article was written by Fred Reichheld. The Net Promoter Score survey is based on only one question, On a scale of zero to 10, with 10 being highest, whats the likelihood that you would recommend our company/product/service to a friend or colleague?. The respondents who respond with a score of 9 to 10 are called the promoter. They are most likely to remain a loyal customer for long, buy more products or make positive referrals. The customers who respond with a score of 0-6 are the detractors. They are less likely to make positive referrals or buy additional products. The responders who come up with a 7 or 8 are called the passives. They fall between the promoters and the detractors. The score is calculated by subtracting the percentage of detractors from the percentage of promoters. The passives are disregarded from the equation. Generally, the survey question is followed by an open-ended question asking the respondents to elaborate on the reasons behind the score. These follow-up exercises are often done by the companies over the phone, where the staffs of the company reach out to the customers and ask them to explain the reason behind the score. Reichheld argued, the survey question followed by a why should provide all the information that is needed to identify the scopes of improvements. However, it is often difficult to analyze the descriptive answers without human bias. The companies generally add some more questions to the original survey question to address the issue. The additional questions can be framed to understand the customers perception of various products, services, and business line. This helps the companies to estimate the importance of these other parts of the business in the overall score. It also helps them to identify the issues and scope of improvement. Companies use software for measuring the Net Promoter Score. The software provides a detailed metric, report and its analysis.
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Academic Research on Net Promoter Score (NPS)
- Questions about the ultimate question: conceptual considerations in evaluating Reichheld'snet promoter score(NPS), Grisaffe, D. B. (2007). Journal of Consumer Satisfaction, Dissatisfaction and Complaining Behavior,20, 36. According to this research paper, an analyst named Frederick Reichheld in the year 2003 according to a Harvard Business Review paper, he introduced the concept known as the Net Promoter Score (NPS). This claim was straightforward and easy to understand. According to his paper, he presented a scenario for his premise. This paper, however, adds to the study of the Net Promoter Score (NPS) by studying Reichhelds original work and then propound a rethinking as regards the conceptual grounds and how it will later develop into potential threats which will be present in various parts of the Net Promoter Score formulation.
- Measuring donor loyalty: key reasons whyNet Promoter Score(NPS) is not the way, Schulman, K., & Sargeant, A. (2013). International Journal of Nonprofit and Voluntary Sector Marketing,18(1), 1-6. This paper discusses the aspects in which the Net Promoter Score have been found weak. This weakness is found as a measure of donating loyalty for fundraisers working in non-profit or non-governmental organizations. This paper, however, suggests that this measure is primarily inappropriate and flawed for use in this text and also explained six most important critiques of the Net Promoter Score (NPS) approach and proffered a solution to the ways of measuring future value and loyalty.
- How theNet Promoter Score(NPS) Can Drive Growth, Reichheld, F. (2014). JWI 518: Marketing in The Global Environment Spring 2014, 73-100. This paper studies the ways the Net Promoter Score (NPS) can be used to drive the Growth of an economy.
- Measuringnet promoter score(NPS) of after-sales service and sales: Iran's perspective, Nazemi, M., & Neghabi, V. (2014).Asian Journal of Research in Business Economics and Management,4(6), 391-405. In this paper, a measurement of the Net Promoter Score (NPS) of the after sales and sale services was discussed. However, the data adopted in this paper was from an Iran perspective. Meaning, firms in Iran as well as their market structure was used as an example to explain this phenomenon.
- Solving the mystery of consistent negative/lowNet Promoter Score(NPS) in cross-cultural marketing research, Seth, S., Scott, D., Svihel, C., & Murphy-Shigematsu, S. (2016). Asia Marketing Journal,17(4), 43-61. According to the research carried out in this paper, some empirical reasons and theoretical evidence for the problem of negative score that is being exhibited in Korea and Japan as well as the unstable Net Promoter Score (NPS) that can be experienced was discussed in this paper. One of the firsts step taken is a psychological analysis of the Net Promoter Score result which helped to explain the validity of the negative Net Promoter Score often found in Japan and Korea. However, as a result in the NPS system, people become labelled as detractors when in a real sense they should be tagged Ambivalent Customers. According to the solution proffered in this paper, the customer's psyche evaluation seems to be the key factor that determines for both types of behaviour item that is, an item with more than one stimuli and item with just stimuli.
- Net Promoter Score: Using NPS to Measure IT Customer Support Satisfaction, Lee, S. (2018, September). InProceedings of the 2018 ACM on SIGUCCS Annual Conference(pp. 63-64). International World Wide Web Conferences Steering Committee. In this paper, customer satisfaction is measured as an important factor to note in proving the value of IT in higher education. It is therefore important to consider the use of measurable data as the criteria for metrics that can also be used to track and measure the customers satisfaction over time. This paper, however, studied the data acquired from the University of Illinois AITS Service Desk which uses the Net Promoter Score as its main metric for quantifying customers satisfaction as far as IT services and the customer support are provided. According to this paper, an overview of the Net Promoter Score was provided and the customer survey which was designed to implement this action was also evaluated.
- The perspective ofNet Promoter Score(NPS) in Grameenphone Ltd., Rahman, M. (2016). According to this paper, customers are said to be the asset of the company which enables the company to have the capacity to serve more people. According to this paper, Grameenphone Ltd was used as a case study and the role of business procedure as well as the effectiveness and view of the Net Promoter Score was study. This paper however defined the Net Promoter Score as the measure of the loyalty that exists between a company, employer or any business entity. The provider, however, can be an employer, a company or any entity. This paper defines the provide an entity that is responsible for asking the question as regards the Net Promoter Score survey while the consumer is defined as the customer, respondent or employee to a Net Promoter Score.
- Factors Influencing theNet Promoter Score(NPS): A Case of Funnel, Gadkari, D. (2018). Factors Influencing the Net Promoter Score (NPS): A Case of Funnel. According to this paper, some factors that influence the Net Promoter Score was studied and a case study of the Funnel has also evaluated ion this research paper.
- Customer Satisfaction in the Retail Banking System-A Critical Comparison between the Two International Indexes:Net Promoter Score(NPS) and American Customer, Melnic, E. L. (2016). Journal of Emerging Trends in Marketing and Management,1(1), 215-223. This paper assumes that for a customer-centred bank, customers satisfaction is very crucial and can be either used as a marketing tool or seen as a goal. This research paper explains the two basic international technique that can be used for measuring and tracking the customers overall satisfaction on willingness or likelihood to recommend the bank to other aspiring customers or repurchasing intentions as well as specific characteristics or advantages that may be related to customers satisfaction. Those two methods are the American Customer Service Index (ACSI) and the Net Promoter Score (NPS). However, there are various challenged faced by the banks in determining the customers satisfaction and how to predict them or how to deliver services to them. These problems were discussed and solutions were proffered in this paper.
- Retail Banking SystemA Critical Comparison between the Two International Indexes: American Customer Service Index (ACSI) andNet Promoter Score(NPS), Melnic, E. L. According to this study, the retail banking system was taken as a case study and a crucial comparison between these two international technique indexes (The American Customer Services Index and the Net Promoter Score) that can be used to measure the customers satisfaction was studied.