Anyone using Net Promoter Scorecard (NPS) to Measure Customer Loyalty?

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Marc

Hunkered Down for the Duration with a Mask on...
Staff member
Admin
#2
As general information for readers such as me who have never heard of this before:
mycustomer.com said:
It is a quest akin to the search for the holy grail – the hunt for a ‘magic number’ in business that is inextricably linked to financial results and actions. Yet unlike the quest for the grail (and I’m discounting the fictional successes of Dan Brown’s protagonists and King Arthur here), the search for a magic number appeared to have reached a successful conclusion. In 2003, a Harvard Business Review article – ‘The one number you need to grow’ – introduced the world to Net Promoter. Based around the idea that word of mouth is the key metric, rather than the likes of customer satisfaction or customer retention, Net Promoter claimed to provide a score that would accurately predict a company’s ability to grow.

This metric, the Net Promoter Score (NPS), was even easily derived: survey consumers on the likelihood (out of 10) that they would recommend the company, and subtract the proportion of respondents who rate the company at 6 or less – ‘detractors’ – from the proportion who rate the company at 9 or 10 – ‘promoters’ – and the result is your NPS. Developed by influential loyalty business model expert Frederick Reichheld, who changed the landscape of loyalty in the 1990s, the research data seemed to leave NPS’ clear superiority over other measures in no doubt. Hailed by Reichheld as the “single most reliable indicator” of company growth, NPS was embraced wholeheartedly by the management community. The quest, it appeared, was over.

But there are those that have their doubts. In fact, there is increasing debate over whether Net Promoter is the success it has been portrayed as. Some are questioning whether it is the superior ‘magic number’ after all, or just another useful metric. And, more importantly, some are suggesting that no magic number exists at all. Just what is going on?
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N

Net_Promoter

#4
Hi Qualityalways. Yes - plenty of people are using Net Promoter. We have examples of success stories on the official Net Promoter website (netpromoter.com). Many of these write-ups are of speakers who presented on their company successes with Net Promoter at the Net Promoter Conferences. These companies include T-Mobile, Experian, Schwab, Intuit, HSBC, Philips, and more. We have numerous resources at the official website including a discussion forum, blogs, newsletter, job board, and more.
 
P

Pat Garvey

#5
I understand that people use the Net Promoter as a guide to increase profitability. And HBS states this, but has any firm that uses the net promoter strategy ever linked Loyalty to Profits, and if so do you know how they did it.

I have been doing research on this at Niagara University and it seems that everyone states that raising the Net Promoter Value (Loyalty) should increase profits, but not one person has shown a quantitative example on how they have proved that it does. Ultimately, I want to show how a one percent increase in loyalty causes a certain percent increase in profit. I have developed my own model for calculating this, which works, but proves that a customer's loyalty, for the most part, does not have a significant impact on its revenues. For example, using monthly data, an increase in loyalty should show an increase in revenue for that month, but often times this is not the case.

Does anyone have any suggestions or referals to quantitative examples for my project?
 
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