Management consultant Frederick Reichheld was looking for an alternative to the long questionnaires in market research. He wanted to be able to measure satisfaction and brand loyalty in an easy and fast way, without compromising on the quality of the research. That is why he created the Net Promoter Score (NPS) in 2003.¹ This measurement tool would make it possible to measure loyalty on the basis of just one question: 'How likely is it that you would recommend this brand to family and friends?'. Easy? Check. Quickly? Check. This means that sixteen years later, the NPS is still a widely used tool in many different types of research. But what exactly does the NPS say? And does this score make an extensive questionnaire superfluous?

Definition NPS

The NPS is a management tool that can be used to measure loyalty. The score is based on the probability that people will recommend a product, brand or organization to acquaintances, friends and family.

What does the NPS?

People who would recommend a product to others can be seen as ambassadors of the brand. A product that is recommended will come to the attention of potential consumers in a positive way. Since the NPS is thus based on the principle of word-of-mouth advertising, it is not surprising that in some studies a link is found between the NPS and sales figures.² However, this effect is only found in existing trends. There is little or no evidence that the NPS can be used as a predictor of growth, as Frederick Reichheld claimed.³

Yet the NPS does have something to say about the extent to which consumers are enthusiastic about a brand or product. It can therefore be seen as an indicator of satisfaction and brand loyalty. Although it is not advisable in an investigation to only relying on the NPS, it can be a valuable part of a more extensive questionnaire.

By now, the NPS is no longer only used in market research. The NPS is actually applied in every context in which supply and demand play a role. Whether you're talking about the recommendation for a new restaurant, a holiday destination or - in the case of Staff Research - an employer.

How is the NPS calculated?

Let's stick to the above employee survey. When you talk about recommending an employer, you are also referred to as the employer NPS (eNPS). The question that is needed to calculate the NPS is: "How likely is it that you would recommend this organization as an employer to friends or family?". The respondent answers this question with a number from 1 (very unlikely) to 10 (very likely). You might expect the NPS to be the average grade given for this question. In reality, however, it is a little more complicated. First of all, the respondents are divided into three groups:

Detractors

Respondents with a score from 0 to 6 are marked with the English word Detractors. There is no really good Dutch translation of this word, but it comes closest to 'Opponents'. Within this category, it is unlikely that these people will recommend their employer to friends and family. Now you might think: a 6 is enough, right? However, research has shown that people who are skinny enough are not yet enthusiastic enough to actually make recommendations.

Passives

For a score of 7 or 8, respondents are categorized as follows Passives. These are people who are moderately enthusiastic about their employer and therefore have an average probability of making a recommendation. These people are not dissatisfied with their employer, but will not easily try to convince their friends and family to join the organization.

Promoters

Respondents with a score of 9 or 10 are Promoters. These persons are ambassadors of the organization, and recommending their employer to friends and family is very likely. These are the people who are most satisfied with their employer and who are most loyal to the organisation.

The NPS is in fact the difference between the number of promoters and the number of detractors. It is therefore calculated by subtracting the percentage of detractors from the number of promoters. The simplicity of this method means that the NPS is used in many different situations. Little knowledge of research methods is needed.

What is a good NPS?

When there are more promoters than detractors, the NPS is a positive number. When it The NPS is negative, as the majority of the respondents fall under the category of detractors. The most important thing is that the NPS is above 0. In the ideal world where every employee would be a promoter, is the NPS 100. impossible. However, the higher the better.

Makes the NPS an extensive questionnaire is unnecessary?

As you may have felt coming, the answer is no. It is true that the NPS is a measure of loyalty, and that this can lead to word-of-mouth advertising. However, it is difficult - whether or not impossible - to measure loyalty on the basis of a single question.⁴ By asking one question, it is suggested that loyalty has only one dimension. Other aspects of loyalty are omitted. For example, is the employee proud to work for the organisation? And would he or she also prefer the organization to competing companies?

In the case of market research - which has made the NPS great - asking just one question to establish loyalty is less problematic. After all, the choice of a product is much less complex than the choice of an employer. In Staff Research it would be wiser to opt for a combination of the NPS with questions about Satisfaction and involvement. Not only because the choice is more complex, but also because an employee survey is often intended for development. It is therefore not only valuable to know the organisation's NPS, but even more so to find out where the areas for improvement lie. And the NPS simply cannot provide that information.

Satisfaction and loyalty are complex constructs that cannot be captured in one question. So don't consider the NPS as an all-embracing tool for employee satisfaction or loyalty. Think of it as a thermometer. It tells you if something is wrong, but it doesn't give any information about exactly what's going on.

Sources

1. Reichheld, F. F. (2003). The one number you need to grow. Harvard business review, 81(12), 46-55.
2. Shaw, R. (2008). Net promoter. Journal of Database Marketing & Customer Strategy Management, 15(3), 138-140.
3. Keiningham, T. L., Cooil, B., Andreassen, T. W., & Aksoy, L. (2007). A longitudinal examination of net promoter and firm revenue growth. Journal of Marketing, 71(3), 39-51.
4. Keiningham, T. L., Aksoy, L., Cooil, B., & Andreassen, T. W. (2008). Linking customer loyalty to growth. With Sloan management review, 49(4), 51.

22 July 2019