Net Promoter Score

By: EconomyWatch   Date: 30 June 2010

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The Net Promoter concept and the Net Promoter Score methodology were developed by consultant Fred Reichheld.

NPS is based on the fundamental idea that every company's customers can be divided into those who suppor the company and promote it to their friends (Promoters), those who are neutral about the company and don't take action either way (Passives), and those who actively dislike the brand and tell their friends why (Detractors).

By asking one simple question — How likely is it that you would you recommend [company/ brand/ product] to a friend or colleague? — you can see how many customers you have in each of these three groups. Furthermore, since the score is so simple to test and track, you can monitor your performance over time, against your competitors and against marketplace benchmarks.

Supporters of this methodology say because it is simpler to understand and implement, it is more likely to be adopted and used across organisations.

Critics say that it lacks a strong academic basis and has not been found to corelate with success when NPS data is compared with revenue, margin, growth or share price data.

Designed to simplify the measure of customer satisfaction, so it can be compared over time/ vs competitors & industries.

The Net Promoter Score ="Promoters" - "Detractors" .

1 Survey Question: “How likely is it that you would recommend our company to a friend or colleague?”

Answers on a scale of 0 - 10 .

Customers are put in 3 groups: Promoters (9-10 rating), Passives (7-8 rating), and Detractors (0-6 rating).

A score of 75% or above is considered quite high.

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