When measuring customer satisfaction with a service, Boston-based consulting firm Bain and Company identified three major groups of people based on the scores they give to one particular question: are they, the customers, going to recommend the particular service they are using to friends and family?
Using a normal scale of 1 to 10 as the answer, a customer can fall into one of the following three designations:
- Promoters – These are people scoring the service either a 9 or 10. They are active promoters of the product and believe in the service they’re using.
- Passives – Anyone scoring the service a 7 or 8. These people are indifferent to the service or are neutral about promoting it to others.
- Detractors – Includes dissatisfied customers and people who are extremely critical of the service. May suggest and recommend against the company and its products.
To get what is known as the net promoter score, a number that shows the actual range of satisfaction that customers fall into, the number of detractors is subtracted from the number of promoters. Because it’s a difference, if the promoters and detractors happen to be equal, the net promoter score is simply zero and the product can be seen as lacking any kind of customer-initiated promotion.
Net Promoter Score as a Competitive Benchmark
NPS lends itself quite nicely to measuring a company’s performance against the competition. By knowing where the customer satisfaction rating of a business stands against its peers, it can understand what other customers do or do not see in its own offerings.
This is not just a “magic” number either: there is hard proof that companies that take extreme care of their NPS ratings experience better compounded annual growth against those who don’t.
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