In the December 2003 issue of the Harvard Business Review, Customer Loyalty Consultant Fred Reichheld presented a new way to measure customer satisfaction. He claimed that his new metric would reveal powerful data about customer repurchase rates. In fact, he even said that it was "the one number you need to grow." He later called it the ultimate question.

What is this groundbreaking number? Net promoter score (NPS). The net promoter question asks customers, “How likely is it that you would recommend our company to a friend or colleague?”

Responses range from zero to ten, and according to Reichheld's system:

• Detractors (a score of 0 to 6) are customers who would complain about your company to friends and colleagues. These customers are not likely to re-purchase.
• Passives (a score of 7 or 8) are customers who have little to no impact on your company: they're probably not coming back, but they're also probably not going to bad-mouth you.
• Promoters (a score of 9 or 10) are customers who have high re-purchase rates and an equally high number of referrals.

The actual net promoter score of a company is the percent of promoters minus the percent of detractors. If you get a positive score, more people like your company than dislike it. If you get a negative score, you're getting more trash talk than recommendations.

The Harvard Business Review article became the foundation of Reichheld's book, The Ultimate Question: Driving Good Profits and True Growth. The book’s success led to the rise of Reichheld's company Satmetrix.

The widespread use of net promoter scores has encouraged companies to focus on the commendable goal of creating more "promoters" and fewer "detractors." Clearly, with the growing popularity of social media, keeping track of promoters and detractors has become a necessary business practice.

But is Reichheld's question really the ultimate question? Net promoter scores have captured the imagination of businesses everywhere because the question is simple to understand and easy to ask. However, researchers not affiliated with Reichheld's company have found serious problems with NPS; namely:

• Net promoter scores don't relate to profitably.
• Net promoter scores do not accurately gauge customer loyalty.

For companies that strive to inspire, manage and predict customer loyalty, these are grave problems indeed.

Resources:
•  Reichheld, Frederick F. “The One Number You Need to Grow.” Harvard Business Review, 81 (December 2003), 46-54.