13 April 2012

In NPS I trust...?

NPS, or Net Promoter Score, is used nowadays as an indicator of customer loyalty.

By asking one simple question on a 0 to 10 rating scale...
How likely is it that you would recommend [Company X] to your network?
Customers are then being categorized as follows:

Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

Its formula is simple.
NPS = percentage of promoters - percentage of detractors

But is NPS reliable?
There are only 3 types of customers in the entire marketplace?

How about feedback from potential user?
Potential user could be someone loyal to the brand...
But for some reasons s/he never buys.
S/he will still promote the brand.
But since potential user is not included in the firm's database...
S/he is never included in the formula.

So how reliable is NPS indeed?

Should firm allocate limited resources to measure loyalty...
Where it will be eventually reflected in profitability?
Or should firm focus on innovating methods to wow each individual user instead?

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