As a leader, you should know about the power of loyalty. Great leaders transform their companies into industry frontrunners, largely by building an intensely loyal relationship with their customers and employees. Loyalty is the willingness of someone—a customer, an employee, a friend—to make an investment or personal sacrifice to strengthen a relationship.
Loyal customers are one who not only give you repeat business but also recommend the company to their friends and talk up a company to their colleagues, friends, and family. Such an endorsement is one of the best indicators of loyalty because of the customer’s sacrifice in making the recommendation. When customers act as references, they do more than indicate that they’ve received good value from a company; they put their reputations on the line. And they will risk their reputations only if they feel deep loyalty.
So what would be a useful metric for gauging customer loyalty?
Net Promoter Score (NPS) is a customer loyalty score, starting from -100 to 100, calculated by asking customers one question: “how likely are you to recommend this product/company to a friend or colleague? – On a scale from 0 to 10”
Why is Net Promoter Score important?
NPS can be used as an interpreter of business growth. When your company’s NPS is high (or, at least, higher than the industry average), you know that you have a strong relationship with customers who are likely to act as evangelists for the brand, spread positivity through word of mouth, and generate a positive growth cycle.
The Net Promoter Score Calculation
Calculate your NPS using the answer to the above key question, using a 0-10 scale:
Respondents are grouped on the basis of their response in following three categories as follows:
Subtracting the percentage of Detractors from the percentage of Promoters produces the Net Promoter Score, which can vary from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter).
NPS = % of PROMOTERS minus % of DETRACTORS
What is a good Net Promoter Score?
Given that NPS can vary from -100 to +100, any score above 0 reads as ‘good’ because it specifies that a business has more promoters than detractors.
Top-notch companies generally have an NPS of 70 and above. In 2019, Net Promoter Scores of various two-wheeler companies in India as found in Numr Research’s survey is as between 47 and 74 Honda has the highest NPS, 74.27
What is a bad Net Promoter Score?
Any score below 0 specifies that a business has more detractors than promoters. A negative NPS is a sign that a business has some serious work to do to mend the situation, shrink the number of unhappy customers, and create more promoters. it’s hard to interpret NPS without comparable scores from key industry players.
Using Net Promoter Score to Survey and Measure Employees (eNPS)
While most net promoter score surveys are aimed to collect customer feedback, they can also extend to measure employee sentiment, or what is normally referred to as employee net promoter score (eNPS). eNPS measures how likely your staff members are to endorse your company as a place to work.
The strength of NPS is the simplicity of the survey. By asking only one question from your customers or employees, you make it easy for them to respond. The question is also based on their expected behaviour, which is far easier to answer than other complex questions.
The flip side is that the NPS or eNPS lacks the variety and depth of information that a more detailed questionnaire would provide. Knowing that you have a low NPS or eNPS does not help you any further regarding the specific actions that you must take. For that you need further study and analysis.
As a part of our efforts towards continual improvement, GEM has started recently started measuring its eNPS score. We hope to create a better workplace by listening to the voice of our employees and addressing various issues that tend to lower the NPS.