I came across an HBR review on the “The one number you need to grow” by Frederick F. Reichheld while at Strategic Management classes during my MBA.
The paper mostly focuses on how companies spend thousands of bucks in conducting customer satisfaction survey while most of it can be analyzed through a simple question –
“How likely is it that you would recommend our company/product/service to a friend or colleague?”
The scoring for this answer is most often based on a 0 to 10 scale.
Those who respond with a score of 9-10 are called Promoters, and are considered likely to show positive behaviors like repeat purchase and positive referrals. Those who respond with a score of 0-6 are labeled Detractors, and they are believed to exhibit the negative behaviors like driving away from the brand, negative referrals. Responses of 7 and 8 are labeled Passives, and their behavior falls in the middle of Promoters and Detractors.
This method is often referred to as calculating the Net Promoter Score and Reichheld indicates that this is the number companies need to grow.
The NPS Calculation formula
(Number of Promoters — Number of Detractors) / (Number of Respondents) x 100
In the recent days however there has been criticism of NPS calculation emphasizing on how it could possibly have classification bias.
NPS is also understood as a tool that provides the status of high or low customer loyalty and satisfaction not its causes. So a good follow up questions are preferred in the survey. For instance, a customer who responds with a 9 or a 10 is categorized under promoter, but it is uncertain that he/she has actually promoted the product. So, questions like “Have you recommended the product/service in the last year to your friends/family?” could be a good one to know the fact.
I further researched on what type of survey methods are conducted in different organizations. I surfed and found out different telecom giants like AT&T, Airtel use NPS competitive benchmarking technique. The concept of competitive benchmarking made a lot more sense to me. It emphasizes on taking samples of all target customers for a particular value proposition they offer. It is about getting feedback not only from a company’s own customers but also from their competitors’ customers. This type of survey is believed to give a picture of not just one’s own product or service but the entire value proposition of the business they are in. This way they could get a clear picture of the line of competitors they have. This concept is often like a third party survey about a general service. The best thing I realized of competitive benchmarking was that biases are minimal.
In Nepal upto my knowledge, Ncell- one of the leading telecoms in country uses NPS as the customer satisfaction and loyalty management tool.
Customer service is usually lead by a department but like it is believed it is everyone’s job. Achieving customer satisfaction and loyalty without employee’s engagement and motivation is quite impossible. So the concept of eNPS (Employee Net Promoter Score) is emerging. If the employee working in a company rates the company he/she is working as a bad place to work, it is basically a bad eNPS. It is based on two major questions as per my research,
On a scale of zero to ten,
“How likely is it for you to recommend this company as a place to work?”
“How likely are you to recommend this company’s products or services to a friend or colleague?”
Market survey and research, albeit detailed and informative, does not produce instantaneous result. In order to quickly capture some customer feedbacks to understand perception, I believe companies should be able to leverage the social media, which is streaming with huge mass. For instance, Sentiment analysis in twitter is one fascinating technique of social media feedback analysis. It is a technique of mining people’s social networking responses to understand their perception about a particular brand by processing natural language.
While working at Three60, I shared my learning about the NPS management tool with my colleague Ayush Subedi and coordinated with him to develop an android application- something of a NPS calculator. This is a version 1 development of the application, which is done to make research handy and develop better insights.
PS: Technology has never failed to impress me ☺ I focus on research and development because I believe “ The future of marketing is the combination of data and intuition”
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Looks great. Captures introduction, pros, and cons NPS in a succinct yet informative manner. Please continue blogging.
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