Recommended Reading: The Ultimate Question

Fred Reichheld, an ex-director at Bain & Company, has spent decades studying customer loyalty. “The Ultimate Question," his 2006 book, introduces the concept of the Net Promoter© Score (NPS) for gauging customer relationships in much the way companies use net profit to judge financial performance.

The NPS is a customer relationship metric derived from a supremely easy customer survey based on The Golden Rule: How likely is it that you would recommend this company to a friend or colleague? Respondents give a 0-10 rating which classifies them as “detractors,” “passives” or “promoters.” The final NPS is determined by subtracting the percentage of detractors from the percentage of promoters. What’s frightening is that the average company has an NPS of only 5 to 10 percent, meaning that there are nearly as many customers who are classified as detractors as there are promoters! Big surprise, many firms and industries have high negative NPS (think cable companies and airlines). Reichheld cites many company examples for improving NPS, with the most detailed being those of Enterprise Rent-a-Car, Intuit (financial software), Chick-fil-A (fast food), HomeBanc, Four Seasons, USAA (military insurance), Harley Davidson, and Superquinn (Irish grocery chain).

He also recommends that companies survey customers to calculate their NPS on at least a monthly basis, just as they evaluate their financials. Companies that are serious about improving customer relationships will establish procedures for follow-up to get to the root causes of detractor scores. If you wait too long, the core reasons a customer might have moved from promoter status to passive (or even detractor) will have been forgotten.

BTW, Bain research shows that for every negative comment made about a product or service, a prospective purchaser would have to find 5 positive comments to balance out that single negative!

Our client Attensity helps companies address their NPS issues through use of Attensity's "Voice of the Customer" (VoC) platform built on its text analytics software technology for transforming unstructured customer feedback into actionable first-person intelligence. Whirlpool and Travelocity are two of the companies using Attensity VoC.

Comments

[Amy Madsen]

Thanks for an interesting blog. Fred Reichheld, author of The Ultimate Questions, pens a Net Promoter blog. Here is a link for any interested parties:

http://netpromoter.typepad.com/fred_reichheld/