Customers deliver the final verdict on the profitability and success of any company. They decide, and their vote carries the weight of their wallets. For leaders, then, the big questions are: “Is my company referable? When it comes to customers, how do they feel about the organization? Are they loyal to us?” The Net Promoter System purports to inform business owners and leaders with this one very simple metric: How likely is it that you would recommend Company X to a friend or colleague?
The Advent of the Net Promoter Score
In 2003, Enterprise’s then-CEO Andy Taylor, told a group of assembled leaders about his company’s new approach to customer satisfaction surveys. Throwing out lengthy forms, they asked just two questions. One dealt with the quality of their experience, and the other with how likely they would be to rent from Enterprise again. The company ignored all but the most enthusiastic responses. Why? Because those were the people who were most likely to refer the company to a friend, family member, or colleague…
Business strategist Frederick F. Reichheld was so struck by the idea and its simplicity that he researched it for two years and came up with the “One Number You Need to Grow.” Out of this grew the Net Promoter Score (NPS). He wrote in the Harvard Business Review, “…evangelistic customer loyalty is clearly one of the most important drivers of growth. While it doesn’t guarantee growth, in general profitable growth can’t be achieved without it.”
How Does NPS Work?
After an experience with a salesperson, customer service rep, project manager, or other customer-facing employee, customers are asked how likely, on a scale of 1 to 10, they are to recommend this particular company to others. A rundown of the scores:
9-10: Promoters. Loyal and enthusiastic about the company, Promoters will just keep lining up at the cash register with their wallets and their mouths open as they tell their friends and family members about this great business.
7-8: Passives. How do they feel about the company? Eh, it’s all right. They’re happy enough with their experience but not pouring over with enthusiasm like those Promoters. They’ll also go elsewhere if the price– or the service, products, convenience, etc. – is right.
0-6. Detractors. Watch out. Detractors will badmouth you on Facebook. These unhappy customers can damage the brand and certainly influence others through negative word-of-mouth.
To arrive at a score, companies ignore the neutrals. Which might be why they’re so neutral in the first place! They then subtract the detractors from the promoters. Say there are 100 customers. 50 are Passives. Throw them away. Of the 50 remaining, 20 are Detractors. The NPS is 30. A 50+ is considered “excellent,” so this company has some work to do.
Just for fun: in 2013, the companies with the highest scores were:
- USAA (insurance): 80
- USAA (banking): 78
- Costco: 78
- Apple (laptop): 76
- Dillards: 75
- Nordstrom: 75
- Apple (iPhone): 70
- Amazon: 69
- Southwest Airlines: 66
- Apple (iPad): 65
It’s also possible to get a negative score, as Motel 6 (-10) is painfully aware.
Value of Customer Surveys
While NPS does have its share of detractors and significant blind spots, leaders do need to be aware of whether or not customers consider their companies to be referable. Customers are the revenue-generation side of the business, and organizations need to pay close attention to creating and maintaining a great customer interface.
Anyone in a position which interfaces with customers – project managers, sales, operations people, even the owner or leader – has an impact on how those customers feel about the company. Ultimately, though, the buck stops at the top, and owners/leaders are responsible for the success of their teams and the experiences they create.
In “Customer Feedback Crucial to Success,” Ken Bernhardt writes that a score, no matter from what system a company uses, is only a number. “…the most important thing is what is done with the information. Failure to share the information throughout the organization and not acting on the feedback from customers happens way too often.”
It’s critical for leaders to understand how customers feel about their company – and to disseminate that information and act on it.