Net Promoter Score, or NPS, is a tool that is widely used by companies around the world to measure loyalty among clients. According to the Fortune website (The simple metric that’s taking over big business, May 2020): “At least two-thirds of the Fortune 1,000 use the Net Promoter Score, including most or all of the financial service companies, airlines, telecom companies, retailers, and others”.
NPS is the composite of scores given by customers in answer to a simple question: On a scale of zero to 10, how likely are you to recommend us to your friends? A respondent who gives a 9 or 10 on the scale is a promoter; 7 or 8 is passive; 6 or lower is a detractor. Subtract the percentage who are detractors from the percentage who are promoters, and that’s the Net Promoter Score, which can range from 100 to minus-100.
“NPS might not have the shareability of a Facebook post,” says Neill, but in terms of value to the business, understanding how happy a client is to recommend us to a friend (as a company to trust with their retirement savings) carries a lot of weight.
“Likewise, an improvement in NPS is not likely to create a buzz like a great review on Google will, but it is so compelling because it directly measures clients’ responses in a way that you can compare over time. It allows us to measure our clients’ loyalty to 10X, which talks to trust,” says Neill.
She adds that the company’s focus on NPS does not mean 10X pays no heed to social media reviews. “Any feedback is important, but social media reviews are tricky because of issues like sample size and difficulty comparing across platforms.”
NPS scores vary across different industries, but a positive NPS (i.e., one that is higher than zero) is generally deemed good, an NPS of +50 is deemed excellent, and anything over 70 is exceptional.
Neill says that in a world where everyone is an expert, and a Tweet can be more impactful than a column in a respected newspaper, “it can be very instructive and useful to focus on metrics that can be quantified and compared over time”.
10X Investments runs an NPS survey every quarter with clients who joined 10X within the quarter. The company has just completed the survey for the 2nd quarter of 2020.
“I don’t need to tell anyone what a tough quarter this has been. I am satisfied to have recorded a score of 55, an improvement on the 54 in the corresponding quarter last year, although it is still short of our internal target of 60,” says Neill.
An NPS of 55 compares favourably with the global benchmark of 40 for the category “all finance” (from Survey Monkey, based on 148,504 companies that run the NPS survey though the Nasdaq-listed company ), but Neill adds that using NPS does not mean just chasing a number.
Most companies that use NPS add a second question to their survey: Why did you give the score you gave?
As much as the genius of NPS is in its simplicity, even the biggest fans of the tool will tell you that this feedback section is where a lot of the real value comes in.
“The most important thing we have learned above all is what customers tell us, not the number,” says Julio Estevez-Breton, who oversees the research at USAA, the financial services firm that continually posts some of the highest Net Promoter Scores in America.
Verizon, the American telecoms company that gets some of the best scores in a low-ranking industry, has found the same. “It’s not about chasing the number,” says Deborah Campbell, who oversees Verizon’s use of NPS. “It’s about understanding what our customers want and need from us.”
10X’s Neill agrees. “It can feel like your client is whispering in your ear, giving you real feedback that you can act on.”
NET PROMOTER SCORE: BACKSTORY
Net Promoter Score, or NPS, was introduced in a 2003 article, "The One Number You Need to Grow", in the Harvard Business Review by Bain consultant Fred Reichheld, who went on to write the bestselling business book The Loyalty Effect.
In 2003, a simple metric was very unusual. At the time, customer surveys were massive, unwieldy questionnaires that required tenacity and forbearance to complete. Extracting insights from the survey data, and packaging and presenting them to clients was no mean feat either.
Reichheld’s simple metric, which he spent two years testing, was revolutionary because of its simplicity. Being just one number, no analysis or comparison or weighting is required, there are no graphs, keys or scales. It’s one question with one answer.
“We picked likelihood to recommend because it best predicted future behaviour of customers,” Bain has said. “We picked it on a technical basis. Fortunately, it also makes people want to take action. If someone hears that someone won’t recommend them, they want to fix that.”
Breaking further new ground, Bain shared the concept with the rest of the word. Rob Markey, a colleague of Reichheld and current head of Bain’s NPS practice, recalls urging his partners in the project to let NPS be used as widely as possible so that they could learn faster about it.
“We wanted more companies to use it and share their results. Those that were really serious would benefit from our consolidating the experience of all these companies,” he said.