The term Net Promoter Score and the formula for the customer loyalty index were proposed in the early 2000s by business consultant Fred Reichheld. Gradually NPS has become one of the most important indicators of the customer focus of companies around the world.
Interestingly, the calculation of NPS is based on the answers to just one simple question: “How likely would you be to recommend our company/store/service to your friends or colleagues?”
How to measure NPS
First, customers are asked to rate the likelihood that they would recommend the company’s services to their friends, acquaintances, relatives or colleagues on a ten-point scale. Zero points means the client strongly refuses to give recommendations, 10 points – a willingness to do so.
The scores are collected through email newsletters, on the website, in social networks and mobile applications, at the cash register or in the sales area of the store, by phone after the customer calls or by a special phone call. The main thing here is to work with “live” client bases that have recently interacted with the company.
Some companies even pay money to participate in surveys in order to stimulate consumers for feedback.
In order to get a reliable picture of customer relations, such surveys should be conducted regularly with the frequency appropriate to the particular type of business. For example, an online store may survey customers after each order, and mobile app developers may survey after an interface update. Some companies combine surveys with new product launches.
Depending on the responses received, customers are divided into three categories. Those who score 9 or 10 are classified as brand advocates, or promoters; those who score 0 to 6 are classified as detractors, or critics; those who score 7 or 8 fall into the group of neutral customers – neutrals.
The index of consumer loyalty is obtained by subtracting the share of critics from the share of promoters as a percentage.
The context of consumer interaction with the company is constantly changing. It is influenced by many factors: from the situation on the world market to the mood of the client at the time of the survey. The NPS indicator changes as well. Therefore, it is important to measure the customer loyalty index regularly, constantly monitoring its dynamics. Conclusions about the change of the index in comparison with the previous period give an opportunity to adjust tactics of relations with clients.