In the corporate world, NPS is a much used metric. NPS became famous more than 15 years ago as the one (at the time some suggested the only) number an organisation needed to assess customer satisfaction and loyalty. Frederick Reichheld of Bain & Company pioneered the NPS concept and wrote books published by Harvard on the subject.
NPS was developed by testing a variety of questions to see how well the answers correlated with customers’ actual behaviour. As it turned out, one question worked best for most mature, competitive industries:
What is the likelihood that you would recommend Company X to a friend or colleague?
This question has a scale from 0-10, and respondents are grouped as follows:
Promoters (score 9-10) are regarded as 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, and
Detractors (score 0-6) are unhappy customers who can damage the brand and impede growth through negative word-of-mouth.
Subtracting the percentage of Detractors from the percentage of Promoters gives the NPS score.
NPS is used by many corporates for a wide range of well-documented applications.
While early claims of strong correlation, even causation, between NPS and company growth and profits have been watered down, NPS remains a very popular and useful metric. The main reasons for this are simplicity of measurement, ease of use, adaptability for various applications and the growing body of experience in interpreting the data.
In this post we have not entered into the continuing debate whether there are links between customer loyalty (measured by NPS) and company growth, see this article and this one as examples.
How NPS is measured in the beatonbenchmarks annual study of professional services
In the beatonbenchmarks annual study, the question we use to gauge respondents’ likelihood to recommend a firm on a 0-10 scale is: “Would you recommend Firm X to a friend?“
We have collected this data for many years and reported it showing the full range of a firm’s ratings, not simply the single NPS number.
Like many other researchers, beaton believes a number of metrics to gauge clients’ satisfaction with overall performance, perceptions of value, propensity to recommend, probability of re-buy, and affinity with the firm. We report each of these and we combine them into ‘one number’ reported as ‘Overall Client Service’ (OCS).
Our data is readily converted to NPS and some clients do ask us to report NPS as well as in our standard charted way.
NPS can be measured at the level of the relationship between a firm and its clients (relationship NPS) or at the level of a project undertaken (transactional NPS). The former form is how we measure it in the beatonbenchmarks survey.
Our transactional NPS solution is called beatondebrief. It measures client satisfaction at a project / matter / engagement-level and is one in our suite of client feedback tools.
Are you measuring both relationship NPS and transactional NPS? Each yields different strategic insights.
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