Why You Need to Know Your NPS

The Net Promoter Score (NPS) attempts to quantify how successful a business is at producing customers who will reccomend its product or service.

You’re stuck. It’s your anniversary and you can’t figure out where to take your wife for dinner—she loves Italian food. You explain the predicament to your friend George; he has just the place for you. “Go to Bari’s! My wife and I eat there regularly and it is great,” he says.You might look at other options, but in the end, you take George’s suggestion because you trust his judgment.

In the case above, George is the type of customer every business wants—he not only uses the product and/or service, but he also recommends it to others, like you, who then use the product/service themselves.

The Net Promoter Score (NPS) attempts to quantify how successful businesses are at producing customers like George. Businesses want to know this information because the Net Promoter Score is based on the principle that high customer satisfaction leads to referrals and growth.

Here’s how it works.

There are three types of customers: promoters, passives and detractors.

The more customer promoters you have, the more likely you’ll be to grow your business and outpace the competition.

NPS data is derived from customer satisfaction surveys including a form of the question “How likely are you to recommend this product or service to friends, family or coworkers?” The question provides respondents with a scale of responses, for example, a rating of 0-10. Those who answer the “likelihood to recommend” question with a 9-10 are promoters, 7-8 are passives, and 0-6 are detractors (they actively tell people not to use the product/service). Detractors are subtracted from promoters to provide the estimate of how many more promoters than detractors the organization has. Obviously, a company wants net promoters.

NPS can be as low as −100% (everybody is a detractor) or as high as +100% (everybody is a promoter). An NPS that is positive (i.e., higher than zero) is considered to be good, and an NPS of +50% is excellent.

Measuring customer satisfaction in the form of an NPS score is not a new concept. Nearly a decade ago, Fred Reichheld, Bain & Company, and Satmetrix developed the program, and Reichheld introduced it in his 2003 Harvard Business Review article “One Number You Need to Grow”. Today companies including Philips, GE, Apple Retail,  American Express, BearingPoint and Intuit, to name only a few, have adopted a net promoter approach.

Nonetheless, the NPS principle is not without criticism. Some argue that a customer’s likelihood to recommend does not accurately describe actual customer loyalty behavior. For example, a customer may recommend shopping at Home Depot, while also being a recommender and shopper of Lowe’s. In fact, that customer may shop at Lowe’s more and also recommend Home Depot. Others criticize the NPS as a predictor of company growth, citing a lack of scientific evidence to support the “likelihood to recommend” question as a better predictor of business growth compared to other customer-loyalty questions.

In 2008, The Dwyer Group® adopted a customer survey strategy called Operation Synergy™, which is based on the NPS principle. It was a way for the company and its franchisees to become more focused on improving services for its customers. In addition to helping franchisees strategize their approach, The Dwyer Group has put NPS information to work in other ways to benefit franchisees.

First, the customer survey is also used as a marketing tool. For example, if a customer rates highly on likelihood to recommend for Mr. Rooter®, The Dwyer Group will use the opportunity to suggest one of its seven sister brands for other home services, such as Aire Serv® for HVAC needs. Secondly, The Dwyer Group uses its NPS is an asset in developing system accounts for franchisees (system accounts allow locally owned and operated The Dwyer Group brands to work with national companies at their local stores). A positive NPS signals to businesses that the franchise is consistent, trustworthy, and has loyal customers. This makes the franchise a good bet for providing excellent service when compared to other competitors who do not measure customer loyalty.

Ready to start measuring your Net Promoter Score and outpace the competition? You can learn more about The Dwyer Group’s Operation Synergy and integrated business systems for the plumbing, HVAC, restoration, landscaping, glass repair, appliance repair and electrical service industries by calling 1 (866) 696-1504.