The System
The Net Promoter Score℠
The Net Promoter Score℠
Create a reliable metric to link improvements in customer loyalty to business outcomes.
More than a decade ago, Bain & Company set out to develop a simple, practical measure of what customers think and feel about the companies they patronize. We wanted a number that reliably linked these attitudes to what customers actually did and to the growth of the company. We wanted, in short, to provide a basis for linking improvements in customer loyalty to business outcomes.
Your Net Promoter Score is simply the percentage of promoters minus the percentage of detractors. It’s a number you can compile and track regularly, not only for a whole company but also for each business, product, store, customer-service team, customer segment, geographic unit or functional group. It helps everyone focus on the critical mission of customer loyalty. It is, quite simply, your customer balance sheet.
The Net Promoter System is much more than just the score. Net Promoter System practitioners ask customers the reasons for their ratings using an unstructured, open-ended question. This provides employees the opportunity to hear comments from customers every day—in their own words. These leaders build that feedback into their operating systems, using it both to address customer concerns and to fuel the innovations that generate more promoters. They use this process to learn more about how they can improve their processes, people, products and pricing for the long term.
Accurate Net Promoter Scores depend on a constant flow of data. Many leading companies survey a sample of their customers every week. Frequent surveys enable you to monitor the scores for unexplained variation. They also allow you to test new approaches and tactics to see if these changes improve outcomes.
Customer Value
Customer Value
Promoters—the loyal, enthusiastic customers who love doing business with you—are worth far more to your company than passive customers or detractors. You can quantify that difference and then use the result to assess and choose among investments in improving the customer experience. The first step is to calculate the lifetime value of your average customer. Using that average as a baseline, tally up the difference in lifetime value for promoters, passives and detractors. This kind of rigorous economic analysis isn’t easy, but it can help any company gauge the likely return on investments aimed at creating more promoters and fewer detractors.
Factors to consider when calculating customer lifetime value
- Retention rate. Promoters generally defect at lower rates than other customers, which means that they have longer, more profitable relationships with a company.
- Annual spending and share of wallet. Promoters increase their purchases more rapidly than detractors. They are also more interested in new offerings and brand extensions.
- Pricing. While many promoters expect your “best deal,” some stay with you for reasons other than price. It’s important to know which loyal customers are price sensitive and what impact that has on your financial performance.
- Cost efficiencies. Promoters typically require less in sales, marketing and advertising costs than other customers. Their average order size is typically larger, leading to lower transaction costs per unit of revenue. They generally have fewer complaints and account for fewer credit losses. Their positive attitudes boost employee morale and productivity.
- Word of mouth. Promoters generate 80% to 90% of referrals. Conversely, detractors account for most negative word of mouth.