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Net Promoter Score - The simple secret to sustainable growth

Building, sustaining, and growing a customer base is imperative in order for any business to thrive. To this end, research has shown that there is a single metric that is more important than all the rest: that the number of customers who would recommend your company to people in their networks exceeds the number of customers who would not.

Building, sustaining, and growing a customer base is imperative in order for any business to thrive. To this end, research has shown that there is a single metric that is more important than all the rest: that the number of customers who would recommend your company to people in their networks exceeds the number of customers who would not.

In other words, above average customer satisfaction is not enough to drive growth: customers need to be satisfied enough to be willing to put their own reputations on the line to endorse a brand or company to members of their networks. That is the point at which they go from being satisfied customers to promoters, when they become drivers of growth who are tangibly more valuable to the company than passively satisfied customers.

Net Promoter Score

Frederick F. Reichheld introduced this connection in a seminal article in the Harvard Business Review, using the term Net Promoter Score (hereafter referred to as NPS) to represent the difference between the percentage of customers who are promoters and the percentage who are detractors. He showed that the companies with the highest NPS experienced the largest share of industry growth, concluding that this figure is “the one number you need to grow.”

The first step to applying this insight is identifying the most satisfied customers using a simple survey that asks customers to rate the likelihood that they would recommend a certain product, service, or company to a friend or colleague on a rising scale of one to ten. Promoters are those who give a rating of 9 or 10, while detractors are those whose ratings come in at 6 or below.

The resulting NPS can, then, serve as a powerful operational management tool. Comparing NPS scores between different segments, markets, etc. is a way to discern the root causes of problems, as well as identify best practices. By providing an easily interpreted measurement of a company’s potential to grow based on customer satisfaction, the NPS gives employees direction as they work toward effecting further growth.
Thus, a single-question survey is, in many ways, more valuable than a lengthy and complicated survey unlikely to entice responses or give clear direction.

Asking for referrals

However, in order for companies to realize the value of satisfied customers who qualify as promoters, the promoters must actually make recommendations to others in their networks. Researchers Magnus Söderlund and Jan Mattsson found that just asking customers to partake in word of mouth transmission positively impacted word of mouth behavior and intentions. They also found that asking customers to engage in this manner did not negatively affect customers’ overall evaluation. Basically, simply asking customers to spread the word is a harmless way to prompt them to become promoters. 
Promoters are desirable for companies because they have higher customer lifetime values and because they, ideally, bring in additional business, at no charge to the company, as people from their networks follow their recommendations.

Capturing customers’ true opinions about a certain product, service, or company and encouraging word of mouth marketing helps ensure that promoters actually promote—that the most satisfied customers become both marketers and drivers of sustainable growth.

Further reading:

Frederick F. Reichheld. The One Number You Need to Grow. Harvard Business Review 2003. 

Magnus Söderlund, Jan Mattsson. Merely asking the customer to recommend has an impact on word-of-mouth activity.: Journal of Retailing and Consumer Services 2015.

June 14, 2016, Renée Ericsson

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