Technology

Net Promoter Score: What is It, and Why it is Used?

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Apple, GE, eBay, American Express…… And the list goes on. It is about the companies that use Net Promoter Score (NPS) as their key customer satisfaction index.

I have been extremely interested in this term since the time it was introduced, in 2003. Slowly, a majority of Fortune 5000 companies adopted this scale, and it has turned out to be Valyrian Sword for these companies.

So, What’s NPS?

According to many articles on the internet, this question is quite famous:

“How likely would you rate a business on a scale of 0 to 10, to recommend it to a friend or a client.”

But in a nutshell, would you recommend a business/product/platform/service to someone else? Rate accordingly!

This image will clarify many things, and consider the emoticons on the bars as customer’s face.

As we can see, the first emoticon is quite sad, let’s call him John. Maybe, John ordered an Adidas and received a Bata from your platform. Maybe John spent a lot of money in buying your product, but his expectations didn’t fulfill. John will score you 6 or less than that, and he will be called, a Detractor.

Second is Smith. Smith bought a product from you and he received it. Smith is happy with your services. Smith won’t tell his friends that your platform sucks! But, Smith can be easily diverted to another platform by a simple discount. Smith will rate you 7 or 8, and he will be called, a Passive.

Meet David with hearts in his eyes. David is entirely dedicated to your product. In an another word, David is “Loyal” to your product or platform. David will never leave you unless something terribly wrong happens. David will tell his friends that your product is awesome! David will definitely rate your business 9 or 10, and he will be called a Promoter.

All customers are asked the predefined question and all responses are recorded. Then, a simple formula is applied:

NPS = %age of Promoters – %age of Detractors

Sure, NPS is an effective tool to get customer feedback, but it has much more to offer than that. Here are some benefits of adopting NPS:

  1. A lower NPS is a sign that customers are not entirely happy with your product. Philips is a very good example of it. Philips improved its NPS by opening stores and service centers on weekends. A 6 or lower NPS is a sign to improve your product and customer experience.
  2. NPS is not only used where customers are concerned, it’s about your employees as well. This can be a great tool for performance evaluation. Suppose, you have multiple products and teams falling under each product. You can give targets of lifting up NPS to each team. And with the results, you can promote your employees.
  3. A constant lower NPS may also question your leadership method. A continuous low NPS can be a poke that you may want to change the way you lead.

But, like Chameleon has two independent eyes, one eye is not on Pros. There are many companies that believe NPS is not worthy enough to be applied. Here are the reasons against NPS:

  1. An NPS score doesn’t give your reasons why customers are not satisfied. You have to find various reasons for your low NPS. There are many possibilities. But one benefit in this process is, you will find all possible loopholes in your product or process.
  2. The companies generally play between Detractors and Promoters, but there are a large number of customers who are Passives. These customers can be converted into Promoters. Although, the lesser focus is paid to the Passives.

Although there are some cons in the favor of NPS, it has proved its worth in many huge firms. At given point of time, customer satisfaction is the apex. So, NPS should be given a shot.

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About the author

Ashok Pandit

Ashok Pandit

Working as Digital Marketing Manager at CallHippo, Ashok Pandit loves to share his knowledge about VoIP, Virtual Phone Systems & Cloud Technology. Ashok has reviewed software in categories including Small business, startups, and cloud telephony.