How do promoter shares work

Net Promoter Score (NPS)

NPS: Brief explanation

 
The Net Promoter Score (NPS for short) is a key figure that is intended to provide information on the success and customer satisfaction of a company. A simple, standardized customer survey is used to obtain an evaluation and feedback from customers or users, from which a cross-company comparable measured value can be calculated.

Detailed explanation:

 
The system around the Net Promoter Score was developed by Fred Reichheld, author and business strategist at Bain & Company, and Satmetrix Systems. With the help of the NPS, companies should be able to easily receive feedback and data on the satisfaction of their customers and derive further indicators for their work from this data. Since the survey and the answer options are standardized, the score enables a comparison with other companies. The Net Promoter Score is mainly used as a method in online marketing.

To determine the Net Promoter Score, companies ask their customers about their willingness to recommend the provider. The respondents can express their satisfaction with a value from 0 (very unlikely) to 10 (very likely). To collect the survey responses, only a single question is asked, which, if necessary, can be supplemented by an open answer field in which customers can give written feedback. Based on the answers, a key figure - the so-called Net Promoter Score - is calculated, which is intended to give the company an indication of customer loyalty and satisfaction.

How the Net Promoter Survey works

 
To determine the Net Promoter Score, a simple survey - for example by email - is sent to (a representative group of) customers or user (s). The survey includes the question: "What is the probability that you would recommend this company to friends or colleagues?" The respondent can choose between values ​​from 0 to 10 on a number scale. The higher the number a customer picks, the more likely they are to recommend the company.

After the user has rated the company using the scale, they can provide additional feedback. An open text field is available for this purpose, in which he can enter in writing what he particularly likes or particularly likes about the interviewing company.
 

Example of a Net Promoter Score survey that Textbroker uses to determine how satisfied customers are.


 
The information and, if applicable, the feedback from the customer are transmitted to the company, which can then evaluate the survey results (with the help of a tool) and calculate the Net Promoter Score. The participants are usually not anonymized, so they can be clearly assigned to their answers.

How the Net Promoter Score is calculated

 
In order to calculate the number of points that the company achieved in the Net Promoter Score (NPS) from the responses of the participants, the number scale is divided into three levels:
 

  • Respondents who 9 or 10 points forgive, count among the Promoterswho view a company very positively and would recommend it to others.
  • Respondents who 7 or 8 points awarded are classified as neutral towards the company. They are considered to be so-called Passive or Indifferentwho would not recommend the provider to others, but would not damage its reputation with negative reviews. Accordingly, they are neglected in the calculation of the Net Promoter Score.
  • Respondents who 0 to 6 points forgiven, are so-called Detractors or Detractors. You are critical of the company and express this criticism. For example, they can warn other users or potential customers not to use a company's service or products or publish bad reviews.

 

Distribution of promoters, passives and detractors to calculate the net promoter score.


 
To calculate the score, the percentage of detractors is subtracted from the percentage of promoters. The difference results in the Net Promoter Score, which can therefore range between -100 and 100.
 
Example:

A survey shows that 65 percent of the participants promoter are, so 9 or 10 points are awarded. 20 percent award 7 or 8 points and are thus considered Passive not included in the calculation. 15 percent of respondents are rated with 0 to 6 points Detractors classified.

The detractors will now be deducted from the promoters:

65-15=50

The Net Promoter Score for this company is 50.

Aim and advantages of the Net Promoter Score

 
Determining a key figure such as the Net Promoter Score can be useful to get a first impression of customer satisfaction. Such a survey easily focuses on the customer's point of view and thus gives important feedback. A company is encouraged to consider other points of view, encounters unknown problems and can better assess its own strengths and weaknesses.

The number of participants is comparatively high with a process as simple and quick to implement as the Net Promoter Score. Many positive and negative opinions can be perceived quickly and without great effort and customers with positive and negative attitudes can be identified. Once they have been recognized, critics can then, if necessary, be changed and promoters can be used as positive instruments. With important influencers in particular, it can be worthwhile to contact them and enter into a dialogue.

In addition, the Net Promoter Score should make companies comparable with one another through the standardized question and answer scheme. This enables companies to draw important conclusions about where they stand in the market. Studies also try to map the competition between companies in individual industries in this way.

Criticisms

 
In addition to the advantages of the system around the Net Promoter Score, weak points are also mentioned again and again. The scoring system is often viewed as arbitrary and not easily transferable to other cultures. In some cultures there could therefore be a stronger tendency towards the middle, so that the 10 points are awarded less often. The tendency towards recommendations can also vary widely from branch to branch.

Studies indicate that the simple distinction between promoter and detractor is overly simplified and that only limited indications of actual customer behavior and customer loyalty can be derived from the Net Promoter Score.

Another serious point of criticism is that the survey is hardly meaningful without the additional question about the reasons for the user. Only when the participant answers the additional question about why and thus reveals qualitatively usable information can conclusions be drawn from his answer. However, these qualitative data make it difficult to make data comparable in a standardized way.
 

Net Promoter Score Tools

 
With the emergence of the Net Promoter Score, more and more companies have specialized in offering tools that can be used to conduct Net Promoter surveys. The best-known providers include:
 

Conclusion:

 
With the help of the Net Promoter Score, also known as NPS, companies can get an indication of customer loyalty and satisfaction. The score or the key figure is determined by a user survey shortened to a single question, in which the respondents rate the company on a scale from 1 to 10. With the help of additional feedback, the causes of satisfaction or dissatisfaction should also be determined.

The meaning and use of the Net Promoter Score are controversial, there are points that speak for its use, but there are also some points of criticism. Nonetheless, the Net Promoter System is a frequently used method for which many companies have developed tools that they offer for a fee.


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