The Net Promoter Score (NPS) is a measurement tool used to assess the loyalty of the customers towards a company, a product, a service or a brand. NPS is used by organizations to have a better understanding of the overall customer experience and their likelihood to stay loyal to the company.
For a management student, using NPS in your marketing essay to measure the loyalty of the target customers will definitely add more value to your work, leading to more merit. In several instances you will have to design your own market research methodology to conduct thorough assessment of the target customers, in order to design the most suitable business plan.
The NPS is considered to be one of the most reliable customer experience metrics, which was first introduced in the year 2003 by Brain & Company, and it now used by organizations all across the world. The NPS is represented by a number which may range from -100 to +100. The higher the score, the more positive the customer experience is for the chosen company and its products and services. It is measured by using a single question:
“How likely you are to recommend [brand/company X, product Y, or service Z] to a friend or colleague?”
This one simple question can help provide a clear understanding of how the customers perceive the given brand, product or service. The responses of the customers are measured in an ordinal scale which ranges from 0 to 10, where 0 being least likely and 10 beingextremely likely. Based on their chosen score, the respondents or the customers are segregated into the three different categories, such as promoters, passives, detractors.
Promoters: The promoters are customers who has responded with a score of 9 or 10. These individuals are highly enthusiastic customers and are considered to be most loyal.
Passives: The passives are the ones who has responded with a score of 7 or 8. These customers are satisfied with the experience offered by the company, but not enough to be called as promoters. Compared to promoters they are less likely to make repeated purchase or engage in positive word of mouth.
Detractors: The detractors are the ones who has responded with a score ranging from 0 to 6. These customers are quite dissatisfied with their experience, and are not likely to make any future purchases and may also discourage others to avoid the brand and its products and services.
Now that we have seen how to interpret the NPS, let us now look at how to calculate it, so that you can apply it in your own college paper. In order to calculate the NPS, we need to subtract the percentage of detractors from the that of promoters. For instance, if 15% of the respondents are detractors, 10% are passives and rest 75% are promoters. Then, the NPS is calculated as 75-15 = 60. Please note that the NPS is not calculated in percentage, but as an absolute value, which ranges in between -100 and +100. The higher NPS output value is always favorable.
The application of the NPS can be used in two different ways, offering two distinct measurements of customer experience: Transactional NPS and Relational NPS.
The relational NPS is measured on a regular interval, mostly quarterly or half-yearly. In this case, a regular routine survey is conducted to get a clear understanding of how the customers feel about the company, the brand and its products and services as a whole. This data can be used to assess the brand health of the company, from one quarter to another, thereby allowing the firm to witness the gradual changes or stability in the customer experience and their perception. Moreover, it also helps the company to have a benchmark for its success. Thus, relational NPS can be effectively used as a market analysis tool, which particularly focuses on the target customers.
On the other hand, the transactional NPS is measured on a more situation specific instances. Typically, a transactional NPS survey is conducted after the customers has used a particular product or service, or has been exposed to the brand in any way. It provides a more granular level feedback to the company about specific topics, rather than on the overall customer experience. This category of NPS is most suitable when a company wants to know about the immediate acceptance of a product that has been recently launched in the market.
The NPS can be used to measure almost every aspect of customer perception towards an organization. You can use the score to measure, how the customers think about the products, store layout, webpage design, shopping experience and interaction with the staff members, among other parameters. Moreover, using the NPS gives a company the ability to compare its performance against industry benchmarks. This as a result can easily allow the firm to make the necessary changes into their own business operation. The core objective of using the Net Promoter Score is to have a better understanding of the target customers and their perception and reaction towards the brand and the offered value, which determines their loyalty. A higher score means that the customers are likely to come back and make another purchase and will spread positive word of mouth among their peer groups. From organizational perspective, the NPS is can be quite beneficial as a tool that can help an organization to constantly measure the customer experience and loyalty, allowing the firm to take necessary actions to meet its objectives. As a management student, you can also use the NPS as a marketing research tool for your dissertation finding & analysis. Using and interpreting the net promoter score is much easier compared to other tools, and it also offers reliable results.
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