Net Promoter Score

•Net Promoter is a management tool that can be used to gauge the loyalty of a firm’s customer relationships. It serves as an alternative to traditional customer satisfaction research.

•Net Promoter Score is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow.“ NPS can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter). An NPS that is positive (i.e., higher than zero) is felt to be good, and an NPS of +50 is excellent. Companies are encouraged to follow this question with an open-ended request for elaboration, soliciting the reasons for a customer’s rating of that company or product. These reasons can then be provided to front-line employees and management teams for follow-up action. Local office branch managers at Charles Schwab Corporation, for example, call back customers to engage them in a discussion about the feedback they provided through the NPS survey process, solve problems, and learn more so they can coach account representatives.

•Proponents of the Net Promoter approach claim the score can be used to motivate an organization to become more focused on improving products and services for customers. They further claim that a company’s Net Promoter Score correlates with revenue growth. Discussed at length in The Ultimate Question: Driving Good Profits and True Growth by Fred Reichheld, and Answering the Ultimate Question by Richard Owen and Laura Brooks, the Net Promoter approach has been adopted by several companies, including EON, Philips, GE, Apple Retail, American Express BearingPoint, and Intuit. It has also emerged as a way to measure loyalty for online applications, as well as social game products.