Nps Marketing Management Final

2.3 The Concept of NPS

NPS is a new tool being an alternative to traditional customer satisfaction analysis. It is a customer loyalty metric based on a simple question: “How likely is it that you recommend… ?” and giving the customer the choice to choose a number between 0 (low) and 10 (high).

People rating between 9 and 10 are seen as promoters. This is the stage you need to bring customers that they promote a company or product in an exciting way that attracts new customers. Ratings between 7 and 8 can be ignored, but People rating from 0 to 6 are seen as detractors which are then in the focus of further analysis.

NPS became popular as it turned out that customer satisfaction is often not a good indication for customer loyalty as many satisfied customers have changed providers for various reasons.

NPS itself is a real simple tool which might also be a reason for its success. But unless customer satisfaction it helps a company to predict growth just by the simple message: improve the NPS and it is very likely that you improve revenue.

The Amazon example shows that this might take some time, but it seems to be worth instead of spending into new customer acquisition.

But how does NPS support a company to improve customer loyalty?

There are two ways NPS can be used:

- Top down NPS is a powerful tool within a company to measure an organization or an unit and compare it with competitors. The result might help senior management to identify a need for organizational or personal changes, e.g. within a company as a KPI to manager incentives

- Bottom up NPS is the one used to identify customer loyalty as it is measured right after customer interaction. It helps to identify the driving factors of customer loyalty and gives customers a chance for feedback, e.g. to customer feedback form at the point of sale.

Both together can be used to improve processes and service delivery which is likely to end in less costs and better sales = profit.

The feedback of detractors needs to be treated seriously, as this might also end up in bad promotion to people that could have been turned into customers by promoters.

So an agent needs to evaluate and re-act on detractors’ feedback to identify and trigger actions to improve NPS in the future.

NPS is a proven tool in the US and UK. In these countries the companies can really make a correlation between NPS and revenue, but in other cultures the correlation is weaker. In other cultures the answers given to such questions differs from the ones in US and UK. But even in non-Anglo-American cultures the score can be used as a trend for the likelihood of future revenue changes.

2.4 Area