Benchmarking is talked about in many industries and for many it is seen as necessary but expensive. Last week I came across an open source concept for benchmarking which has a lot of opportunities for organizations of all sizes. The ultimate question a single measure for business growth?
In 2006 author Fried Reichheld published a book – The Ultimate Question (The Ultimate Question 2.0 (Revised and Expanded Edition): How Net Promoter Companies Thrive in a Customer-Driven World) How likely is it that you would recommend [your company] to a friend or colleague?
The book was updated in 2011, however it’s an interesting single question upon which to measure and benchmark the performance and growth of a business.
The author points out that no single measure can really do justice to any business, however, if you are going to ask one question of your customers, then this is a great one to ask.
From idea into product
The author in association with the company Satmetrix, who is the official sponsor of netpromoter.com, a site dedicated to sharing benchmarking data, have produced some certification training and benchmarking reports. Sure these are not free, but the idea and methodology is open source, and as such there is no cost barrier to using such a measure.
What does it measure?
In many ways this is the ultimate benchmarking score, it looks at the question
“How likely is it that you would recommend [your company] to a friend or colleague?“
– that is it… one question… nothing else! The author called this the Net Promotor Score – or NPS
It uses a simple 10 point scale to answer the question often presented in this way:
The colour of the numeric scale was introduced to help guide customers.
Promoters are customers with a score of 9-10 who are said to be loyal enthusiasts who will keep buying and refer others, fueling growth
Passives are customers with a score of 7-8 who are said to be satisfied but unenthusiastic customers who are vulnerable to competitive offerings
Detractors are customers with a score of 0-6 who are said to be unhappy customers who can damage your brand and impede growth through negative word-of-mouth
What is NPS?
NPS (Net Promoter Score): reflection of loyalty on range from 0 – 10. It reportedly indicated “the intent to personally make referrals of the brand”
The author and users on the forum of netpromoter say that there is Global statistical evidence that NPS correlates with revenue growth.
Business goal here isn’t merely to delight customers, it’s to turn them into Promoters — customers who buy more, and who actively refer friends and colleagues. That’s the behavior that contributes to growth. In the current environment of social media culture for both b2b and b2c, this approach can only continue.
A 4 step growth process
The approach recommended is a simple 4 step approach:
Know – know your score, or know where you are in OD orientation terms
Grow – grow your business by understanding which of your customers are in what category – Promoters, Passives, and Detractors. Support your people to help move Passives to Promoters, and consider the value of keeping Detractors, as often they cost your business rather than help to grow it. This means you can have a measured plan for customer service and support
Expand – Expand your horizons, once the mix of Detractors is reducing, it is time to expand your thinking and look at ways to improve the number of Promoters you have. Keep learning, and keep adapting.
Compare – When you have started improving internally, then look to compare against your competitors and other sectors. Of course this may be cost prohibitive for some firms, however if organizations in Chambers of Commerce, or other collectives also use the same measure, this can be done locally for no cost.
The beauty of an open source approach like this, is that there is no barrier to entry, that free survey tools can collect the data if you cannot justify a commercial solution
How is Net Promoter Score (NPS) calculated?
Net Promoter Score (NPS) is the percentage of respondents who rated
9 or 10 (Promoters)
% of people that rated 0-6 (Detractors)
Promoters-Detractors = NPS Score
On the NetPromoters site, the show some tables of performance, here is an example which you may use as a benchmarking comparison.
Source – http://www.netpromoter.com/why-net-promoter/compare/
The ultimate question a single measure for business growth?
How likely is it that you would recommend [your company] to a friend or colleague?
The BIR uses similar components in its customer survey