The NPS is a simple measurement system that produces a standardized indicator to measure satisfaction and monitor the loyalty of a company's customers. Its first reference appeared in 2003, in the article entitled "The One Number You Need to Grow", written by Fred Reichheld and published in the well known "Harvard Business Review" magazine. The Net Promoter Score or NPS is obtained through a simple survey containing a key question, which may vary in its formulation and style, but always maintains the same essence:
How likely are you to recommend [the organization/product/service] to a friend, colleague or family member?
As a measurement system, NPS has a simple, straightforward and easy to understand objective: to detect the probability that a person would recommend a company, a service or a product to another person. Today, thousands of companies around the world use this system to measure how they are perceived by their customers and how loyal they are to their products and services.
HOW TO CALCULATE THE NPS?
Respondents must give their answer on a numerical scale ranging from 0 (not at all likely) to 10 (extremely likely) and, depending on their answers, they will be classified into three categories:
To calculate the NPS, the number of promoters and detractors must be converted into percentages, and then the percentage of detractors must be subtracted from the percentage of promoters. Thus, the NPS formula would be expressed as follows:
NPS = Promoters (%) - Detractors (%)
For example, let's say that 10% of the respondents turned out to be detractors, 15% passive and 75% promoters, the result of the NPS index will be 75 - 10 = 65%. It is worth mentioning that the result of this indicator is not really a percentage, but an index expressed on a scale from -100 to +100.
In addition to obtaining a general NPS of the company, the NPS tool can be used to evaluate any area of the business, such as brand loyalty, product quality, corporate site, technical support, customer service, events, and even the company's own employees. It can also be used to evaluate marketing strategies or to measure the shopping experience
Once this indicator has been obtained, it is possible to compare it with industry benchmarks and, consequently, determine its position vis-à-vis the competition (Benchmark). This makes it easier to understand the target market, the loyalty of consumers to the company's products or services, the effectiveness of campaigns on social networks, the quality of customer service agents' attention, etc.
HOW THE INDEX IS INTERPRETED NPS?
The result obtained by applying the formula PROMOTERS-DETRACTORS and expressing it like a percentage generates a value ranging from -100 (All are detractors) to +100 (All are promoters). Thus, if a company has more detractors than promoters, the Net Promoter Score will be negative, and it will be positive if the results are the other way around, more promoters than detractors.
Since the interpretation of the NPS (Net Promoter Score) is simple to understand and apply, this indicator has gained great popularity among companies of all sizes, but has been standardized as a standard measurement factor in the Balance Score Card of Fortune companies.
For the creation and implementation of the NPS in the organization, several aspects must be taken into account:
DEMOGRAPHIC DATA COLLECTION
In addition to including the question of whether or not you would recommend the product or service, the questionnaire should include socio-demographic variables and segmentation of the product or service, variables such as age, sex, income level and type of customer allow us to cross-reference data to obtain the NPS in more specific groups and thus be able to define strategies to achieve greater loyalty in groups where there are more detractors or passive.
WHY YES, OR WHY NOT I WOULD RECOMMEND?
Right after asking: "On a scale of 0 to 10, to what extent would you recommend or not recommend the product or service", you can include open-ended questions to find out why you have selected that value. So, if there are detractors, we could understand the cause of dissatisfaction, or if there are passives, we could understand why they are not as enthusiastic as promoters. Thus, such open-ended questions in NPS questionnaires provide a type of information that can be helpful in guiding adjustments in business strategy.
CODING THE ANSWERS WITH THE SAME MEANING
The open-ended responses should be categorized by thematic axes to facilitate their analysis. For example, some of the common axes we will have from detractors are:
ANALYZING THE NPS CROSS-SECTIONALLY OVER TIME
It should be noted that the Net Promoter Score is a long-term index. A detractor customer, in normal situations, does not become a promoter from one moment to the next. It is a slow process, during which the customer's trust must be won. In this sense, we speak of the NPS trend: when a customer maintains a certain "upward trend" towards brand loyalty, we can speak of a promoter customer. NPS should therefore be measured regularly, either on a quarterly, half-yearly or annual basis. So that we can see the evolution of the index and infer whether the changes made in the marketing strategy are reflected in the gain of customer loyalty.
ADVANTAGES OF APPLYING NPS
According to a recent Forrester Consulting study, 77% of customers say that the most important thing a company can do to serve them well is to value their time. Companies dedicated to ensuring exceptional experiences that live up to those service expectations will receive loyalty and high recommendations. Measuring satisfaction and loyalty is vital to accelerating business growth. As such, NPS has become the standard for measuring loyalty, improving retention and revenue.
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