Are your customers sticking around out of loyalty, or just of ignorance and inertia? Are they trapped in long-term contracts they would love to get out of, but have no choice?
Business leaders know to grow business you need profitable customers and happy customers. It is easy to measure profitability, but the only measurement of customers’ happiness were vague statistics of satisfaction derived from surveys that nobody trusted and nobody was accountable for.
How can managers really know how many of their customers love the company and how many hate it? Why is it important to know? What practical gauge can distinguish good profits from bad?
Simplicity itself: how likely is it that you would recommend this company, or this product or service, to a friend or colleague? The metric that it produces is the Net Promoter® Score.
Net Promoter Score (NPS®) is based on the fundamental observation that every organization’s customers cluster into three groups, each with its own distinct patterns of behaviour.
Promoters are loyal enthusiast who keep buying from a company and urge their friends to do the same. Passives are satisfied but unenthusiastic customers who can be easily wooed by competition. And detractors are unhappy customers trapped in a bad relationship.
The NPS is simply calculated by subtracting the percentage of detractors from the percentage of promoters. This number does not only shows the current state of customer loyalty but more importantly, it can be used to predict the future growth and profitability of the company.
Recent research shows an average NPS increase by about 9% across three years resulted in a whopping 23% increase in revenue across a one year lagged, three years. A slight improvement in NPS would result in a substantial increase in financial numbers.
Companies that pioneered the use of this system, both small and large organizations, found this an excellent approach towards being a customer centric organization. These companies are able to quantify the future value of a detractor and a promoter and how the benefit of converting detractor to promoter stacks up against the cost!
Like many companies around the world, companies in Malaysia are looking for reliable leading indicators in order to build profitable growth. NPS is a key enabler for a company to build a customer centric culture and improve on areas matters most to customers which in turn result in profitable growth.
“This is the best customer-relationship metric I’ve seen- I cant understand why any of you wouldn’t’ want to try it!”
JEFF IMMELT, CEO,
General Electric (2005)
Contact us to know more about Netpromoter and for a no-obligation presentation on NPS. firstname.lastname@example.org