Net Promoter Score

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Net Promoter

Net Promoter or Net Promoter Score (NPS) is a tool used to compute the loyalty of a firm's customers and business relationships. This score can be used to know how customers feel about the firm or to check the business relationships of the firm with its distributors or retailers. It serves as a replacement to traditional customer satisfaction research and can be correlated with the revenue numbers of an organization. NPS is widely accepted by almost all business units across industries such as FMCG, consumer goods, electronics, etc., in India.

NPS is majorly relevant to the companies which want to track promoters and detractors of their brands. The analysis gives a complete outline of the organization performance through its customers’ eyes. Although the concept is trademarked by Bain & Company and initially designed for the western countries’ requirements, the analysis shows the sustained value creators – through which companies can achieve long-term growth. TechSci has modified the concept to make it relevant for Indian brands.

How Scoring Works?

TechSci scores responses to the question related to multiple services on a simple 0-10 scale. This scale is easy for customers to understand. Also, the responses tend to cluster in following three groups, each one characterized by different attitudes, behaviors and, therefore, economic value.

Promoters (9 or 10)

Promoters are either loyal to the product and have been using the product for a significant time or new users completely satisfied with the services. In any form, they are more likely as compared to others to remain customers and to increase their purchases over time. The Promoters drive the business by Word of Mouth. Thus, they account for over 80% of referrals in most businesses.

Passives (7 or 8)

The passives are ONLY ‘satisfied’ with the product. They are likely to switch and are not very enthusiastic to promote the brands which lead to low rebuying and referral rates i.e. 50% lesser than those promoters. Technically, this category is ignored while calculating NPS, but TechSci performs a separate analysis to list down possible research efforts to make them a rather happy customer.

Detractors (0 to 6)

Detractors are completely unhappy customers and hence account for over 80% of negative word-of-mouth. The companies are advised to keep this percentage low, especially for impulse products. They have high rates of churn and defection. With the introduction of social media, the existence of discouraged customers can be precarious.



Methodology

The NPS is calculated by asking 4-5 subjective questions pertaining to the objective of the organization. For example: Service quality of an automotive car company or happiness index of employees.

Step 1 : The most important part of the study is to diagnose the problem and list down all the parameters important for the function. Let’s pick the same example of Service Quality mapping. In this case, important parameters are time of service, cost of the service, interaction with the employees and communication for service related queries.

Step 2: Create a 4-5 objective question questionnaire (max 1 subjective question). The questionnaire can be created by asking the customers how happy or satisfied they are with the service and make them scale the answer. The process will let a customer think about the service he has consumed and can take a rational decision for likelihood.

The duration of the questionnaire should not be more than 30 seconds. Beyond this time, the customer usually becomes impatient and gives random responses which further increase the variation level.

Step 3: Identifying the users – The Users can be identified on the basis of the target group an organization would like to choose.

  • Client usually shares the data of all the possible users
  • Agency creates its own user database (in case of an FMCG or consumer durable product)

Post data collection for all responses, the results are compiled to arrive at the brand’s NPS score. This score is calculated by subtracting the percentage of Detractors from the percentage of Promoters.


NPS = % promoters - % Detractors

A single number that can range from -100 (for all Detractors) to +100 (for all Promoters) will be shown on the screen, which is the final NPS for the brand. This numerical score gives the client a benchmark that provides a macro picture of how they are doing. Over time, it corrects the business course of action.

To make it relevant to an Indian context. In few cases where % age passives are more than % age detractors, an average score of NPS is calculated and compared with the respective top brand.

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