In the early 1980s, reach by Fred Reichheld and his colleagues at Bain & Company confirmed that businesses cannot prosper without customer loyalty. They set a goal to find the one question – the Ultimate Question – that showed the strongest correlation with repeat purchase and referrals.
It was: “HOW LIKELY IS IT THAT YOU WOULD RECOMMEND COMPANY X TO A FRIEND OR COLLEAGUE?”
Reflecting upon his findings, Reichheld and his Bain colleagues realized that this question made perfect sense as two conditions must be satisfied before a consumer makes a personal referral:
- Your customers must believe that you offer superior value in terms of price, features, quality, functionality, ease of use, and other practical factors.
- Your customers must believe that you know and understand them, value them, listen to them, and share their principles.
Today, this simple question is used by many of the most admired companies in the world through a metric that produces the Net Promoter® Score (NPS).
The Net Promoter® Score divides your customers into three categories:
9 - 10
Loyal enthusiasts who keep buying from you and urge their friends to do the same
7 - 8
Satisfied but unenthusiastic customers who can be easily wooed by the competition
0 - 6
Unhappy customers trapped in a bad relationship
The formula for the Net Promoter® Score is the percentage of customers who are Promoters (P) subtracted from the percentage who are Detractors (D).
P-D = NPS
How do legendary companies like Costco, Starbucks, Netflix, Southwest, and Amazon stack up? They operate at an NPS between 60 and 80 percent. But the average firm sputters along at an NPS of only 5 to 10 percent. To learn more about NPS, go to www.netpromoter.com and https://customer.guru/net-promoter-score/benchmarks.