I’ve always been a sucker for surveys. When I was 12 or 13, I’d take all those frivolous questionnaires in teen magazines, everything from “Are you a loyal friend?” to “What are your favorite beauty products?” I liked feeling as if my opinion truly mattered.
These days, the surveys I’ve noticed are all to do with customer satisfaction. Everyone, from fast-food restaurants to big-box chains, wants your opinion on their performance. But there’s one big thing that each one of these surveys has in common: They all ask the question “From a scale of 0 to 10, with 10 being extremely likely and 0 not at all likely, how likely is it you would recommend us to a friend?”
This is no coincidence. Back in 2006, Fred Reichheld, a business strategist known for his work on customer and employee loyalty, wrote an entire book, The Ultimate Question: Driving Good Profits and True Growth, around this one question and its significance.
How people respond to this question determines what he calls the Net Promotor Score. Here’s how it works.
All customers can be divided into three categories: promoters, passives and detractors. Those who answer with a nine or 10 (most likely to recommend you) are “promoters,” loyal clients who will return again and again, and enthusiastically refer your services to friends and family. “Passives” are those who answer with a seven or eight, and, while satisfied with their experience, have no qualms about switching to a competitor, given the right incentives. “Detractors” are unhappy customers who answer between zero and six and are likely to share their dissatisfaction with others. Your company’s net promoter score, or NPS, is determined by taking the percentage of customers who are promoters and subtracting the percentage of detractors. These scores can range anywhere from -100, where everyone is a detractor, to +100, where everyone is a promoter.
So why should you care about your Net Promoter Score? Because according to Reichheld, a firm’s NPS can be used as an indicator of its future growth. Companies with a track record of sustainable growth, such as Amazon, Costco and Harley-Davidson, have net promoter scores between 50 and 80. In addition, he says, firms with the highest scores in their fields are likely to grow, on average, twice as fast as their competitors.
This simple concept has spawned an entire system that businesses can use to leverage their customers’ loyalty, or lack thereof, into opportunities for higher profit and growth. I urge all of you pool business owners to check it out and see how it might help grow your companies.
I guess that makes me a “promoter.”