Thursday, February 15, 2018

29. NET PROMOTER SCORE® (NPS®)


OBJECTIVE

Identify customers’ likelihood of making recommendations.


DESCRIPTION

Usually the value of customers is calculated using only the variables amount spent and frequency of purchases. However, customers can create value in several other ways, one of which is by recommending the service to other potential buyers. The so-called “word-of-mouth” phenomenon is nowadays empowered by social networks, metasearch websites, or portals that provide customer feedback on products.

Positive recommendations can not only increase sales but also allow companies to save money on advertising. The Net Promoter Score® is an indicator that estimates the probability of recommendation of a group of customers based on the recommendation intention of single customers. It was developed and registered as a trademark by Fred Reichheld, Bain & Company, and Satmetrix.

The data are collected through surveys, and the respondents are asked to score from 0 to 10 the likelihood of recommending the product or service. Those who respond 9 or 10 are the real promoters, while those who respond 6 or lower are the detractors. The respondents whose score is from 7 to 8 are considered passive, since, even if they say that they would recommend the product or service, in reality they do not recommend it. The NPS® is the percentage of promoters minus the percentage of detractors.



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