How likely are you to recommend a company/product/service to your friend? Companies who utilized Net Promoter Score to its efficiency will be able to understand consumer sentiments. That said Net Promoter Score (NPS) helps to build companies loyalty and growth, which is correlated to revenue.
The methodology of NPS is very simple; it utilizes a ten-point scale to form its analysis. NPS is divided it into three segments: Promoters, Passive and Detractors. Fred Reichheld, Bain & Company and Satmetrix developed the concept.
I recently conducted case study on “Yelp” by surveying 60 random respondents on how they utilize the services that Yelp has to offer. However, in order to keep this survey effective and relevant, the participants were asked three simple questions and of those three, one was based on the ten-point scale. The questions were a) how likely is it that you would recommend “Yelp” to a friend or colleague, b) what is the primary reason for the score you gave and c) what is the most improvement that would make you rate this closer to ten.
To further understand the methodology behind the calculation of the NPS, participants were asked to select their answers based on a ten-point scale. I then calculated the score based on how the respondents selected their answers based on the concept below:
- · Promoters = 9 -10
- · Passives = 7- 8
- · Detractors = 0-6
To complete the findings of Yelps Net Promoter Score, I then calculated the results using the following formula:
% Promoters – % Detractors = NPS
Conversely, the result of the study showed not to be in Yelps favor. The result indicated that Yelp had a NPS score of -32. A negative score like this indicates that Yelp has more detractors than promoters. Not only did Yelp had a negative score, the detractors answers were shocking and more in sync with one another, one participant said, “I use Yelp specifically for services that I need urgently but where quality plays a factor (such as dry cleaning, alterations, shoe repairs) – but I would never turn to it for services where personal taste has more weight – such as restaurants, or beauty services. For those, I still prefer to rely on ‘real’ word of mouth from friends and colleagues.” Another stated, “It’s a good site to review a place but due to number of news reports showing businesses that pay for reviews. So not all reviews are directly from the customer.” However, it failed to acquire a positive score, according to Qualtic.com, research suggests that higher scores indicate more loyal customers, which leads to increased revenue and higher profits.
I must agree, that measuring customer loyalty is a more effective way in analyzing the likelihood that consumers will buy again, talk up the company and resist market pressure to go to the competition in my opinion. But then again, with every methodology there will always be those who oppose the model. A research conducted by Keiningham, Cooil, Andreassen and Aksoy proves just that, the research disputes the Net Promoter metric as the best predictor of company growth.
However, for this purpose, the focus is measuring the value of the relationship after costs that will give the provider insights on how to attract and retain the most profitable consumers and how to most effectively invest in and develop those relationships.
In conclusion, the study concluded that several participant indicated that the lack of brand awareness, credibility in the reviews and not being user-friendly are significant issues that will prevent them from promoting Yelp to friends, additionally they prefer to simple “Google it.” That being said, having a negative Net Promoter score will force companies to reassess make the necessary changes that will result in improvements.
NB: NPS calculation was done on http://www.npscalculator.com/