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The 5 Ss that capture the true essence of NPS®
CloudCherry | Featured | June 2, 2016
In the past decade or so, anyone who is a member of the business community with the objective of increasing the scope of their business will have realized the importance of building a customer-centric foundation and considered tracking customer experience in this pursuit. A headcount is redundant because everybody has acknowledged the importance of customer experience in today’s dog-eat-dog world where success lies in the hands of those who treat their customers better than they expect to be treated.
In what came as a timely intervention, the Net Promoter ScoreSM is considered as one of the simplest yet most effective ways to measure your brand’s customer loyalty quotient. In this post, we will discover the five Ss that dictate the phenomenon called NPS®.
When the concept was presented for the world to marvel at, NPS was simply a Score – a 11-point scale on which your customers will rank their experience with your brand while answering the golden question:
“How likely is it that you would recommend our company/product/service to a friend or colleague?”
The answer can range anywhere between 0 and 10. But here’s the catch. It doesn’t end there. Depending on what the answer is, the customer is then adjudged as a Detractor (between 0 & 6), Passive (7 & 8) or Promoter (9 & 10).
The Net Promoter Score is, therefore, calculated by deducting the percentage of customers who are Detractors from the percentage of customers who are Promoters. The score does not include Passives in the calculation.
NPS = (% of Promoters) – (% of Detractors)
Even though the metric was ambitiously sold as “The One Number You Need to Grow”, it suffered its share of limitations which eventually became the crux of criticisms. One of the chief limitations of NPS is that even though it tells you exactly whether you can or cannot expect loyalty from a certain customer, it in no way reflects directly on any growth in revenue.
The measurement is also openly acknowledged as not being as universally applicable as it is projected to be. NPS falls flat when it comes to some markets and industry like B2Bs or even monopolies where calculating NPS will have absolutely no impact. NPS also can never singularly lead a brand to success. It will be most effective when it works in tandem with other metrics like transactional analysis, tracking customers’ behavioral trend, etc. Also, the NPS question itself is close-ended in nature, which makes it difficult to gain insights.
Being aware that a certain customer is a detractor is worth very little when you don’t know what exactly it was that instigated him to become a detractor in the first place. Therefore, unless followed up with a “why” question, the NPS doesn’t really help close the feedback loop and help create a brand with an enviable number of promoters!
In 2003, Fred Reichheld, a partner at Bain & Company, put together his years of experience in Customer Loyalty and came up with a new metric to deduce how well an organization is doing in terms of building customer relationships worthy of loyalty and he called it Net Promoter ScoreSM (NPS®) – which is a registered trademark of Reichheld, Bain & Company and Satmetrix.
Reichheld proposed this metric at a time when the world had already woken up to the myriad advantages of prioritizing the customer’s satisfaction above anything and everything. There were a lot of ways to track customer behavior but none was as simple. NPS, despite the limitations, still gave a lot of insights into customer behavior and how customer satisfaction can impact profitability.
Thousands of companies across the world started testing out this new metric for its efficacy and with time, just like everything else, the metric has also evolved into becoming something more than just a “score”. It is now a whole “System” which communicates more than just the “One Number” which it initially was made out to be. It is still as simple, but envelopes a lot more than what it initially did.
The sensation of NPS hasn’t fizzed out in over ten years. The feedback received from the thousands of companies which tracked the metric was taken into consideration alongside the criticisms that were presented and with time it has evolved into a System which tracks customer Loyalty and its impact on organizational growth is huge.
It has been already established that one simply cannot hope to reap immediate and tremendous results when it comes to customer loyalty. The system of NPS is now actually quite widely practiced where CxOs have started pushing for a pan-organization culture of customer centricity.
This not only makes sure that every employee strives to satisfy and delight customers in their own right, but also encourages a steady delivery of exceptional customer experience – something which is crucial in determining the customer loyalty quotient of any brand. After all, why will customers repurchase from your brand unless they have something outstanding awaiting them? So, the Net Promoter Score is no longer just about the score or the calculation, but its scope starts well before the customer even walks into your store to give his feedback!
This part we may as well skip. But we choose not to, because no matter how much has been said and done about NPS, it shan’t suffice. Several organizations have fixed their loopholes thanks to this one metric which communicates customer perception of a brand most effectively.
Industry giants like Apple, Philips, Siemens, Intuit, GE, etc are all NPS trackers. The success of NPS rests solely on the fact that despite being flawed in its universality, it still is the only number that most business owners aim to own. A positive shift in the needle indicates that their customer experience efforts are heading in the right direction and even though it may be a slow process, it is worth a lot.
We have already discussed how customer retention is way more cost-effective as opposed to customer acquisition. In order to make this a reality, you have GOT to start listening to what your customers are whispering, talking or shouting out loud about your brand – be it positively or negatively.
We assume, of course, that you already have your Net Promoter System in place and we hope that you have a deeper understanding of its scope after reading this post. But if you haven’t already discovered the miraculous metric called NPS, well… CloudCherry has your back!