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Net Promoter Score (NPS) and Why it Matters to your Business

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The Net Promoter Score (NPS) is a loyalty metric based on the principal that every company’s customers can be divided into three categories:

Promoters: Loyal enthusiasts. They provide repeat business to a company and urge their friends to do the same.

Passives: Satisfied but unenthusiastic. These customers could easily be swayed by the competition.

Detractors: Unhappy customers. Have a bad or nonexistent relationship with the company.

An easy way to measure success and track your business’ growth is to calculate the percentage of your customers who are Promoters (P) and subtract the percentage who are Detractors (D). This simple equation is how you calculate your Net Promoter Score:

P — D = NPS

While the concept itself is easy to grasp, NPS represents a fundamental change in the way companies manage customer relationships and organize for growth. Rather than relying solely on customer satisfaction surveys, businesses now use NPS to measure customer relationships as rigorously as they now measure profits.

Furthermore, NPS empowers CEOs to hold employees accountable for treating customers fairly. It cements the link between the quality of a company’s relationships and its prospects for growth. 

So How Do Businesses Measure Up?

The average business manages an extremely modest NPS efficiency of between 5 and 10%. On the whole, promoters marginally outnumber detractors.

Many businesses (and actually some entire industries) are performing so poorly that they have negative Net Promoter Scores – with Detractors consistently outnumbering Promoters. Such businesses will never achieve sustainable growth or long-term profitability, unless they implement major changes which turn their NPS around.

Wildly successful companies, within growth industries, such as Amazon and Dell consistently achieve NPS efficiency ratings between 50 and 80%, giving you something to aim for.

Where to Start?

You need to ask your customers the right questions, in the correct manner in order to receive reliable data, in a timely manner that enables you to act accordingly, implementing changes where necessary. Once you know how your business is performing then you have empowered yourself to improve it.

Why not contact Success Academy today to see how we can help your business succeed with the power of NPS.

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