The Net Promoter Score and the value of Promoters

by on 2 April, 2009 - 12:06

by: Matt Rhodes

Whether you use the Net Promoter Score or not yourself, you will undoubtedly have come across this ‘single number everybody needs to know’. On one level it is a calculation that takes into account how strongly people would be likely to promote your brand and returns a single score, expressed as a percentage. On another level, it is an entire approach to business and interacting with your customers that leads to the calculation of this score.

The score itself is what most people are interested in - the difference, expressed in a percentage, between those people who are very likely to recommend your brand and those people  and the beauty of it is that it can reflect the different levels of engagement and loyalty that customers feel to different types of brand. A luxury hotel chain, for example, should be expecting a Net Promoter Score of about +70%, an airline shouldn’t expect one higher than +10%, and a cable TV company needs to prepare for a score below -5% (yes, scores can be negative).

At the Marketing 2.0 conference we were lucky to hear from both Richard Owen of Satmetrix (the people behind the NPS) and Conny Kelcher from LEGO (a fervent user of the NPS). Both were able to highlight exactly what the benefit of Promoters is, in hard cash.

Conny’s example looked purely at revenue generated by the individual themselves, and clearly showed that Promoters spend more than Detractors and so it makes good business sense to improve your NPS. Looking at expenditure on LEGO, over the same time period customer spend was as follows:

• Promoters spent 208 Euros
• Fence Sitters spent 165 Euros
• Detractors spent 136 Euros

So, for LEGO, a Promoter will spend 53% more on their product than a Detractor.

Richard, quoting a study of network providers in the US, looked at this in more detail. He considered not just direct spend that the individual makes on the product, but the total contribution they make to the brand - including from recommending others (or indeed otherwise). When looked at like this, the average lifetime value for the network providers was as follows:

• Each Promoter brings an additional $693 in revenue
• Each Detractor is responsible for $1,495 in lost revenue

So the difference between a Promoter and a Detractor was almost $2,200. For Richard this showed that sometimes it can make business sense to buy your Detractors out of their contract with you. Overall it shows that Promoters are a category worth keeping and worth growing.

Read all of our posts based on the Marketing 2.0 Conference here.

Some more reading

• NPS is Growing Up (adaptivepath.com)
• Net Promoter Score: an operational tool to measure customer satisfaction (startuplessonslearned.blogspot.com)

Original Post: http://blog.freshnetworks.com/2009/04/the-net-promoter-score-and-the-value-of-promoters/