Net Promoter Score

Definition

The Net Promoter Score (NPS) is a customer loyalty metric that measures the willingness of customers to recommend a company's products or services to others. It is a widely used tool in customer relationship management (CRM) and marketing strategy development.

5 Must Know Facts For Your Next Test

1. NPS is calculated by asking customers a single question: 'How likely are you to recommend this company/product/service to a friend or colleague?' on a scale of 0 to 10.
2. Customers who respond with a 9 or 10 are considered 'Promoters,' those who respond with a 7 or 8 are 'Passives,' and those who respond with a 0 to 6 are 'Detractors.'
3. NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters, resulting in a score ranging from -100 to 100.
4. A high NPS indicates a company has a high level of customer loyalty and is more likely to experience growth, while a low NPS suggests the need for improvement in customer experience.
5. NPS is a valuable metric for evaluating the success of a company's marketing plan and can be used to track progress over time and benchmark against industry competitors.

Review Questions

• Explain how Net Promoter Score (NPS) relates to Customer Relationship Management (CRM) and its importance in this context.
  • In the context of CRM, the Net Promoter Score is a crucial metric for understanding and managing customer relationships. By measuring the willingness of customers to recommend a company's products or services, NPS provides valuable insights into customer loyalty and satisfaction. This information can then be used to improve customer experiences, enhance marketing strategies, and strengthen long-term relationships with customers, which are all key objectives of effective CRM.
• Describe how a company can use Net Promoter Score to develop a strategic plan and track progress using marketing plan metrics.
  • When developing a strategic plan, a company can use the Net Promoter Score as a key performance indicator to set goals and measure the success of its marketing initiatives. By tracking NPS over time, the company can identify areas for improvement, make data-driven decisions, and adjust its marketing plan accordingly. For example, a company may set a target NPS score and use it as a metric to evaluate the effectiveness of its customer experience initiatives, brand-building efforts, and other marketing activities. This allows the company to continuously refine its strategic plan and ensure it is meeting the evolving needs and expectations of its customers.
• Analyze how Net Promoter Score can be used as a form of brand development, brand loyalty, and brand metric, and discuss its importance in managing the sales force and distribution channels.
  • The Net Promoter Score is a valuable brand metric that can provide insights into the strength and loyalty of a company's brand. A high NPS indicates that customers are enthusiastic about the brand and are willing to recommend it to others, which can contribute to brand development and foster brand loyalty. This information can also be used to guide the management of the sales force, as sales representatives can focus on nurturing relationships with promoters and addressing the concerns of detractors. Additionally, NPS can be used to evaluate the effectiveness of distribution channels, as a high NPS may suggest that the company's products or services are being effectively delivered to customers through its distribution network. By leveraging NPS data, companies can make informed decisions to enhance their brand, sales force, and distribution strategies, ultimately driving long-term business growth.

Related terms

Customer Loyalty:

The degree to which customers are willing to continue doing business with a company and recommend its products or services to others.

Customer Satisfaction:

The measure of how well a company's products or services meet or exceed customer expectations.

Customer Retention:

The ability of a company to keep its existing customers and prevent them from switching to a competitor.