Net Promoter Score: The Number You Need to Grow

August 11, 2016 John Gorup

What if there were one metric that could predict the growth of your company? Of course, it would sound too good to be true. But the Net Promoter Score (NPS) might just be that metric. That was the conclusion best-selling author Frederick F. Reichheld came to with his research on customer satisfaction and loyalty. Writing for the Harvard Business Review back in 2003, Reichheld notes: “It turned out that a single survey question can, in fact, serve as a useful predictor of growth. But that question isn’t about customer satisfaction or even loyalty — at least in so many words. Rather, it’s about customers’ willingness to recommend a product or service to someone else.”

The “willingness to recommend question” is simple: “On a scale of 0 to 10, how likely are you to recommend this company’s product or service to a friend or a colleague?” The scores are used to calculate a company’s NPS.

NPSConsistency and reputation

The reason why this question is so powerful is because it taps into 2 social psychology concepts: consistency and reputation. Consistency, as described by Robert Cialdini in Influence: The Psychology of Persuasion, means that people tend to act consistently with what they publicly declare. So a fan of your company — by filling out a survey and giving a 10 on the NPS question — is more likely to do business with your company than a fan who was not surveyed at all.

The NPS question is also asking the respondent to put their reputation on the line. Recommending a product or service, especially in the B2B world, may affect a career. Since reputations are fragile things, the willingness to recommend carries more weight than anonymous testimonies. Imagine getting a recommendation for a surgeon who removed a friend’s appendix versus a comment on a doctor-rating website; you get the idea.

Where to begin with NPS

The loyalty a strong NPS represents means lower customer turnover, which in turn lowers acquisition costs. Loyalty also translates into top-line growth through free word-of-mouth advertising — the most cost-effective source of marketing there is. So with all this research in favor of measuring NPS, where should a company begin? Here are 3 things to get started:

  • Build a cross-functional team around surveying and acting on NPS. As Reichheld points out, NPS should not be looked at as market research, but rather as a management tool. An organizational structure to react and adjust strategies based on NPS will help a company grow.
  • Don’t only look at how the Customer Experience affects NPS; look at the Worker Experience as well. We call this connection between the Customer Experience and Worker Experience the Virtuous Cycle.
  • Consider a Voice of the Customer (VoC) solution. A VoC solution like Medallia can help you understand customer sentiment and act on issues before you lose a customer. Medallia provides great reading on NPS to help get you started.

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