There are a number of ways to gauge customer loyalty, but a method that is gaining increased traction is Net Promoter Score (NPS). NPS is a simple and easy way to measure loyalty and the likelihood of customer referrals. Companies that boast some of the strongest consumer relationships in the world, such as Zappos and Amazon, use this measurement of customer loyalty.
How Does It Work?
At its core, NPS consists of one easy question: “How likely is it that you would recommend this company or product to a friend or colleague?” This question gets straight to the heart of what a customer really thinks about their relationship with your brand. If they aren’t willing to recommend you to someone else then it’s likely they aren’t a loyal customer.
Adding to the metric’s ease, NPS is based on a simple 0 to 10 scale. A zero means that the respondent would not recommend the service to someone else, while a 10 indicates that he or she is extremely likely to recommend it.
Depending on an individual’s numeric answer to the question, that person will fall into one of three categories:
- DETRACTOR – A score of 6 or below
- PASSIVE – A score of 7 or 8
- PROMOTER – A score of 9 or 10
The actual NPS is calculated by subtracting the percentage of detractors from the percentage of promoters:
PERCENT (%) OF PROMOTERS – PERCENT (%) OF DETRACTORS = NPS
When interpreting NPS results, it’s important to realize that there is a disproportionate relationship between detractors and promoters. That is, there are only two numbers representing promoters while there are six for detractors. Therefore, it is much easier to have detractors than promoters, skewing the odds in a lower score’s favor. While passives are not directly included in the calculation of NPS, the more there are, the less promoters there will be, which also causes an NPS in the lower range.
A realistic breakdown of NPS may look like: 50% passives, 30% promoters and 20% detractors. This yields a final NPS of +10, which would be hailed as excellent by numerous companies.
30% – 20% = +10
Brutally Honest and Better For It
NPS provides an objective look at customer loyalty because those people who aren’t particularly satisfied, yet aren’t disappointed either, don’t bump up the final score.
ArmadaCare’s COO Jamie Spriggs explains, “Most clients continue to do business with you whether they are happy or not. People just tend to stick with a service regardless of how much they actually like it, and that will show as satisfaction in most scoring systems, but not NPS. This is what makes NPS so honest.”
Many companies aim for an NPS in the teens. However, the best organizations in terms of service excellence and brand loyalty—such as Amazon, Rackspace, TD Bank, Harley Davidson, Zappos, Charles Schwab and Dell—score as high as 40, 50 or greater.
In a recent survey, Ultimate Health received an NPS score of +58.4. We are proud to bring our customers a satisfactory experience that they would want to share with others.
We encourage companies to measure customer loyalty and satisfaction with NPS, too. While many member satisfaction surveys confirm companies are tactically performing well, NPS confirms that the company’s execution is aligned with its strategy.