Saturday, August 27, 2011

How Net Promoter Score (NPS) Measures Customer Happiness

Companies want to know if their customers like their products and services. Net Promoter Score (NPS) tracks how likely is it that they will recommend the company’s product/service to a friend or colleague, using a 0-10 point scale, and tracking the ratio of “promoters”, “passives” and “detractors”.
  • Promoters are loyal enthusiasts who will keep buying and refer others, fueling growth. They score 9-10.
  • Passives are satisfied but unenthusiastic customers who are vulnerable to competitive offerings. They score 7-8.
  • Detractors are unhappy customers who can damage your brand and impede growth through negative word-of-mouth (WOM). They score 1-6.
Apple (AAPL) has some of the highest NPS scores of any sector by careful listening to what customers have to say and responding to it.

Apple made its retail stores to places where people can gather and learn, not just buy. Apple learned that customers want an ongoing relationship with Apple and not a one-off purchase transaction. Apple opens on average between three to five stores a month worldwide, using the NPS to check how effectively each store is meeting expectations.

Apple uses the NPS in its daily management of its more than 300 stores. Apple’s central NPS team analyzes customer feedback from all the stores to understand the systemic reasons for promoter’s enthusiasm or lack thereof.

Apple store employees who create promoters are recognized by store management. Each day, the “daily download” takes place, when employees review the NPS feedback and discuss how to adjust their work accordingly. Detractors are phoned by Apple store managers within 24 hours resulting in additional sales of $25m yearly.

Other companies that use the NPS are: Intuit (INTU), Philips (PHG), Southwest Airlines (LUV) and Allianz, They all use NPS to monitor customer satisfaction.

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