Net promoter score

If you have not heard about Net Promoter Score (NPS) – do yourself a favor and learn about it. Some links are here, here, and here.

In a nut shell it is about building more promoters of your business than detractors. More customers speaking good about your business the better. It takes a whole lot of effort knowing what customers want and what you need to do meet their need to move the needle on NPS. It requires cultural shift within a company as organizations embrace the concept. Good thing is NPS is great for business hence a feasible sell when starting a new journey. Done right companies grow brand; build trust and establish ever lasting customer relationships.

Consider some of the examples from business perspective:

Loyalty Effect: Depending on the industry, little increase in retaining existing customers (say 5%) can improve a company’s bottom line profitability between 25% and 85%. It is a high margin business.

Cost of Sale: Typically, acquiring new customers is a costlier and some would say low margin business than selling more to existing customers. Some study suggests it often costs 5 to 10 times more than selling to an existing one.

Word of mouth: Customer who are promoters is nearly 6 times more likely to be loyal; buy more again; and recommend your products to others than one who are fence sitters.

It goes other way too: Each unhappy customer and detractors will share their grievance with at least 9 other people. Actually few vocal one will go long way sharing their complain and spoiling customer relationship. So engage detractors proactively.

Studies and analysis across companies now suggest that word of mouth is usually the leading driver in generating leads and business opportunities than other mechanisms. Whatever you believe though knowing what your customer think is important (and good business)…actually much more important in the connected world. Social networks now wield significant influence on us as customers when we consider buying product or services.

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About aloktyagi

After travelling the world and living in several places, Alok lives with his wife Alka and two daughters Ayushi and Mansi in Denver, Colorado. At work Alok is known to build software products and run engineering organizations - a life long passion.
This entry was posted in Agile, Kaizen, Organization Development and tagged , . Bookmark the permalink.

2 Responses to Net promoter score

  1. Erik Kaas says:

    Spread the gospel!

  2. Neil Hartley says:

    Great post Alok – I would add that implementing NPS needs to be augmented by a process to understand “why” people are promoters or detractors. You may be interested in the following blog post that discussed alternative approaches to getting to the “why”. http://customerintimacyblog.wordpress.com/2009/11/30/nps-correlation-analysis-or-comment-analysis/
    Regards, Neil

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