#blyDEA No. 47 – Your Net Promoter Score is a Great Predictor of Future Revenue
#SageSummit 2012 is now only 47 working days away! Yippie!! In light of this, we’ve decided to create virtual forums a la Twitter to provide a space so everyone can share or ask questions about their ideas (or #blyDEAs as we like to call them). If you have a thought and are on Twitter, just use the hashtag #blyDEA and jump in the conversation! If you’re having a bit of trouble with Twitter or understanding its hashtags, check this out.
NPS, or Net Promoter Score is a measurement of buzz, positive or negative, that is out there about your organization. It is the public perception of your brand including how likely you are to receive referrals about your products. According to Bain and Company, NPS is the only relevant indicator of future revenue. Simply put, those with a higher NPS will earn revenue at a higher growth rate than competitors in the same industry.
So how is NPS calcuated?
NPS is kind of the result of one lone survey question: “would you refer our company to a friend or a colleague?” As far as NPS is concerned, this answer will always be on a scale of 0-10.
Those that respond with a 9-10 are considered your promoters and evangelists
Those that respond with a 7-8 are condiered neutrals
Those that respond with a 6-0 are considered detractors of your company and or brand
In order to calculate your NPS score you need to take the percentage of respondents that are your promoters and subtract them from the percentage of your detractors and this will give you your NPS.
Promoters % – Detractors % = NPS
For instance, if someone had 40% promoters, 45% neutrals and 15% detractors their NPS would be +25%.
Yes, you can actually have a negative NPS score, which is why here I’ve indicated that it is a +25%. Companies that have a negative NPS score are slowly going out of business, they just don’t know it yet.
The highest ever recorded Net Promoter Score is USAA insurance at a 85%. Clearly they are pushing profitability to new heights compared to their counterparts in the same industry.
In all cases, company’s can be ranked by NPS and it will correlate to growth and revenue achievement.
It kinda makes you think a little bit differently about delivering high value customer service that would make people want to refer you. For more information on NPS attend our free webinar – and learn how going social can greatly improve your NPS.