welcome to the net promoter score (nps) - asq...

Frank G. Adler – Managing Partner – Operational Excellence Consulting LLC

December 15, 2017 - 1

“A customer feedback program should be viewed

not as ‘market research’ but as an operational

management tool.”

Frederick F. Reichheld

December 15, 2017 - 2

Welcome to

The Net Promoter Score (NPS) ®

“Measuring & Improving Customer Loyalty”

ASQ Orange Empire Monthly Dinner Meeting

November 14, 2017

Frank G. Adler, Ph.D.

Principal & Managing Partner

Operational Excellence Consulting LLC

[email protected]

www.operational-excellence-consulting.com

mailto:[email protected]



http://www.operational-excellence-consulting.com/






December 15, 2017 - 3

Frank-G. Adler

Nokia Mobile Phones → 1994 – 2005

• Specialist, Global Operations & Supply Chain Development - Finland

• Manager, Operations & Quality Development - Fort Worth, TX

• Director, Lean Six Sigma & Quality Americas - Irving, TX

• General Manager, Mexico Operations - Reynosa, Mexico

• General Manager, US Operations - Fort Worth, TX

Magellan Navigation → 2005 – 2010

• Vice President, WW Quality & Customer Support - San Dimas, CA

Angelica Corporation → 2010 – 2011

• Corporate Director, West Coast - Operations, Logistics & Services

Operational Excellence Consulting (OEC) → 2012 – …

• M.S. Mathematics & Physics, Freie University of Berlin – Germany

• Ph.D. Operations Research & Industrial Economics, Helsinki University

of Technology – Finland

December 15, 2017 - 4

The Net Promoter Score – A Little Bit of History

Net Promoter Score is a customer loyalty metric developed by

(and a registered trademark of) Fred Reichheld, Bain &

Company, and Satmetrix Systems.

It was introduced by Reichheld in his 2003 Harvard Business

Review article "One Number You Need to Grow“.

Today, the Net Promoter Score has been widely adopted with

more than two thirds of Fortune 1000 companies using the

metric.

"Essentially, all models are wrong, but some are useful."

George Box


December 15, 2017 - 5

The Net Promoter Score – Used in many Industries …

…

December 15, 2017 - 6

A Definition of Customer Loyalty

First, a definition. Loyalty is the willingness of someone – a

customer, an employee, a friend – to make an investment or

personal sacrifice in order to strengthen a relationship.

For a customer, that can mean sticking with a supplier who

treats him well and gives him good value in the long term even if

the supplier does not offer the best price in a particular

transaction.


December 15, 2017 - 7

Some Benefits of a Loyal Customer

True loyalty clearly affects profitability. While regular

Customers aren’t always profitable, their choice to stick with a

product or service typically reduces a company’s Customer

acquisition costs.

Customers who are truly loyal tend to buy more over time, as

their incomes grow or they devote a larger share of their

wallets to a company they feel good about.

Loyal Customers talk up a company to their friends, family,

and colleagues.

The tendency of loyal Customers to bring in new Customers –

at no charge to the company – is particularly beneficial as a

company grows.

December 15, 2017 - 8

Customer Loyalty vs. Growth Rate

It is proven that in most industries, the percentage of Customers

who are enthusiastic enough to refer a friend or colleague –

perhaps the strongest sign of Customer loyalty – correlates

directly with differences in growth rate among competitors.

=


December 15, 2017 - 9

Customer Loyalty vs. Customer Satisfaction Rate

An even less reliable means of gauging customer loyalty is

through conventional customer satisfaction measures.

Research indicates that satisfaction lacks a consistently

demonstrable connection to actual customer behavior and

growth.

In some cases, there is an inverse relationship; at Kmart, for

example, a significant increase in the company’s American

Customer Satisfaction Index (ACSI) rating was accompanied

by a sharp decrease in sales as it slid into bankruptcy.

≠

December 15, 2017 - 10

The Net Promoter Score (NPS) – The Question & Scale

“On a scale of 0 to 10, how likely are you to recommend this

company’s product or service to a friend or a colleague?”


December 15, 2017 - 11

The Net Promoter Score (NPS) – The Categories

DETRACTORS

‘Detractors’ gave a score lower or equal to 6. They are not particularly thrilled by

the product or the service. They, with all likelihood, won’t purchase again from

the company, could potentially damage the company’s reputation through

negative word of mouth.

PASSIVES or NEUTRALS

‘Passives or Neutrals’ gave a score of 7 or 8. They are somewhat satisfied but

could easily switch to a competitor’s offering if given the opportunity. They

probably wouldn’t spread any negative word-of-mouth, but are not enthusiastic

enough about your products or services to actually promote them.

PROMOTERS

‘Promoters’ answered 9 or 10. They love the company’s products and services.

They are the repeat buyers, are the enthusiastic evangelist who recommends

the company products and services to other potential buyers.

December 15, 2017 - 12

The Net Promoter Score (NPS) – The Metrics

Example: 0 – 6 → 28 Responses 7 – 8 → 55 Responses 9 – 10 → 17 Responses

NPS = 17% - 28% = - 11%

Ʃ = 100

“On a scale of 0 to 10, how likely are you to recommend this

company’s product or service to a friend or a colleague?”


December 15, 2017 - 13

Customer Loyalty vs. Customer Satisfaction Rate

p = ?

R = ? 2

December 15, 2017 - 14

The Net Promoter Score – The Objective

A Customer feedback program should be viewed not as

“market research” but as an operating management tool.

“We need more promoters and fewer detractors in order to

grow”.

The goal is clear-cut, actionable, and motivating.


December 15, 2017 - 15

The Net Promoter Score – 2016 NPS Benchmarking Study

Each year Satmetrix, the co-developer of Net Promoter®, benchmarks

leading brands according to their Net Promoter Score® (NPS).

The research behind the Net Promoter methodology shows that

companies with scores higher than their competitive set grow faster

and are more successful. How does your company compare?

44,000 247 23 100

US respondents via

opt-in email survey

Brands Industry

Sectors

Or more

responses

per brand

Research conducted January & February 2016

December 15, 2017 - 16

The Net Promoter Score – 2016 NPS Benchmarking Study

0 10 20 30 40 50 60

Internet Services

Cable / Satellite TV Services

Health Insurance

Airlines

Banking

Shipping Services

Online Shopping

Hotels

Grocery / Supermarkets

Department / Speciality Stores


December 15, 2017 - 17

The Net Promoter Score – “Growth by Word of Mouth.”

Research shows that, in most industries, there is a strong

correlation between a company’s growth rate and the

percentage of its Customers who are “Promoters” – that is,

those who say they are extremely likely to recommend the

company’s products or services to a friend or colleagues.

… by the way, size does not matter here.

December 15, 2017 - 18

Net Promoter Score – Growth Rate vs. NPS


December 15, 2017 - 19

Net Promoter Score – Growth Rate vs. NPS

December 15, 2017 - 20

NPS Estimator – Margin of Error (MoE)

Your boss walks in with a chart of the last 12 months of the

organization’s Net Promoter Score survey results and he’s not

happy!

The score went down last month and he want’s to know why.

Looks like you’ll have to hunt around to find a reason for the

change; or will you?

𝐶𝐼 = ± 𝑧 ∗ 𝑀𝑜𝐸

𝑧 = 1.96 for the 95% Confidence Interval


December 15, 2017 - 21


First you need to know more than just the score, you need the

actual number of Promoters, Detractors and Neutrals in your

sample:

→ #P is the number of Promoters

→ #N is the number of Neutrals (or Passives)

→ #D is the number of Detractors

December 15, 2017 - 22


Let us assume:

#P = 915, #N = 543, #D = 282 → #T = #P + #N + #D = 1740

-1 0 +1

Mean Value = ( (+1) * 915 + (0) * 543 + (-1) * 282 ) / 1740 = 0.364

𝑵𝑷𝑺 𝟏𝟎𝟎 =#𝑃

#𝑇 -

#𝐷

#𝑇

=915

1740 −

282

1740

= 𝟎. 𝟑𝟔𝟒

https://www.genroe.com/services/net-promoter-score








December 15, 2017 - 23


So, first you can calculate the number of total responses:

𝑉𝑎𝑟 𝑁𝑃𝑆 =#𝑃 × +𝟏 − 𝑁𝑃𝑆 2 + #𝑁 × 𝟎 − 𝑁𝑃𝑆 2 + #𝐷 × −𝟏 − 𝑁𝑃𝑆 2

#𝑇

#𝑇 = #𝑃 + #𝑁 + #𝐷

𝑁𝑃𝑆 =#𝑃

#𝑇 -

#𝐷

#𝑇

Second, you need to calculate the Net Promoter Score (NPS) or

better NPS / 100.

Now you can calculate the Variance of the Sample NPS using

the discrete random variable approach.

December 15, 2017 - 24


Finally, you can calculate the Standard Error (SE) or Margin of

Error (MoE) for your sample with the sample size #T.

𝐶𝐼 = ± 𝑧 ∗ 𝑀𝑜𝐸

𝑧 = 1.96 for the 95% Confidence Interval

𝑆𝐸 = 𝑀𝑜𝐸 = 𝑉𝑎𝑟(𝑁𝑃𝑆)2

#𝑃 + #𝑁 + #𝐷 2


December 15, 2017 - 25

NPS Estimator – Margin of Error (MoE) Example

Let us assume:

#P = 915, #N = 543, #D = 282 → #T = #P + #N + #D = 1740

Therefore

NPS / 100 = #P / #T – #D / #T = 915 / 1740 – 282 / 1740 = 0.364

NPS = 36.4 ± 1.96*1.8 → NPS = [32.9, 39.9]

with a 95% Confidence

Therefore

VAR(NPS/100) = 0.556 and SE = 0.018

December 15, 2017 - 26

NPS Estimator – Tracking with Margin of Error (MoE)


December 15, 2017 - 27

Rows: Period Columns: NPS Responses

Detractors Neutrals Promoters All

Sample 1 282 543 915 1740

290.1 480.1 969.8

0.226 8.254 3.101

Sample 2 642 986 2174 3802

633.9 1048.9 2119.2

0.104 3.777 1.419

All 924 1529 3089 5542

NPS Comparison – Chi-Square Test Analysis

A p-value below 0.05 indicates that

there is a significant difference

between the NPS of Sample 1 and

Sample 2. Chi-Square Test

Chi-Square DF P-Value

Pearson 16.881 2 0.000

Likelihood Ratio 16.670 2 0.000

December 15, 2017 - 28

Net Promoter Program – TOP 10 Best Practices

“1. The Net Promoter Score is not just a metrics.”

The Net Promoter is not a ‘market research’ but an

operational management tool. Sales & Marketing may not be

the right home for your Net Promoter Program.

The Net Promoter is mostly focused on helping you to

understand and improve the day-to-day operations.

Collect your Net Promoter Score data as “real-time” as

possible.

It is not about gaming the system to move the number. It’s

about improving the Customer experience.

Treat your Net Promoter Program like any major change

initiative.


December 15, 2017 - 29


“2. Brand you Net Promoter Score (NPS) Program.”

Give your Net Promoter Program a tagline.

Ensure that your program is internally recognized.

Communicate the value of the Net Promoter Program to all

members of the organization.

December 15, 2017 - 30


“3. Launch your NPS Program properly. Make it visible.”

Insert the NPS on the “Executive” dashboard.

The NPS should be visible but so should the actions that are

taken to change the business. → Data Democracy

The score is just one element of the closed loop process.

Today Customer satisfaction is expected. Employees need to

be able (willing & capable) to “surprise & delight” your

Customers.

Show the good, the bad, and the ugly. Not just the ugly.

Re-launch your Net Promoter Program periodically (e.g.

annually) to re-energize it and keep it moving.


December 15, 2017 - 31


“4. Survey design consistency is vital.”

For most organizations you will need to add questions to

understand what drives the score. No more than 10

questions. Test for correlation.

You want the survey as short as possible to drive up the

response rate and lower the impact on your customers.

Ensure that the survey is consistent from one customer to the

next and one wave or transaction to the next. Resist the urge

to re-order questions, add new ones, change the wording,

etc.

Understand how to improve: You know what drives the score

but you also need to know how to move the score.

December 15, 2017 - 32


“5. Be humble and accept that you need to change.”

The Net Promoter is mostly focused on helping you to

understand and improve the day-to-day operations.

Consider the humility to recognize flaws and fix problems

quickly.

Eliminate the distance between the Customer wants and what

the company is doing.

Too often we are quick to reject feedback from Customers as

wrong.

“How do we improve?”, not “How do we prove the Customer

wrong?”


December 15, 2017 - 33


“6. Create a NPS Improvement Team.”

To make a Net Promoter Program work you have to have a

cross functional team tasked with driving change.

Employees know 100% of the Customer concerns because

Customers tell them every day.

You can’t satisfy your Customers with disengaged employees

→ Internal Detractors – Passives – Promoters → eNPS .

Implementing your Net Promoter Program correctly will drive

employee engagement.

“0” is a special number. These Customers are generally still

engaged with your brand. Act on it !

December 15, 2017 - 34

Net Promoter Program – Service Recovery Process

Make sure that service recovery is one of the very first processes

that you implement as you roll out your Net Promoter Program.

It is invaluable for two reasons:

1. You win back customers and they are more loyal than ever.

2. You demonstrate to everyone that the program is driving

actions and change.

For too many companies, after you fill in the feedback form that’s

the end of the process. You never hear anything about the survey

again.

Telling customers that you have heard them and are actively

considering their input sets you apart from your competitors.


December 15, 2017 - 35

Net Promoter Program – The “Single” Feedback Loop

December 15, 2017 - 36

Net Promoter Program – The “Double” Feedback Loop


December 15, 2017 - 37


“7. Instrument the Customer Journey.”

Get a deep understanding of how Customers perceive each

and every interaction with them in your Customer journey.

In case your Customers interact with you several times to

complete a task, it is best to …

start with a map of their journey through the process

in this map identify the moments-of-truth that are important to the

customer – can cause drop out or ensure success

at each Moment of Truth (MoT) determine the key drivers of

satisfaction, where the data to trigger a feedback request will

come from and the best channel to present that request

Sample customers at each Moment of Truth (MoT)

December 15, 2017 - 38

Net Promoter Program – Customer Experience Management

RELATIONSHIP NPS SURVEY – NPS & Up to 10 Questions

Measures Loyalty

Research Purchase Delivery Pay Bill Usage Get Help

JOURNEY STAGES

Employee

Input Employee

Input

Website

Marketing

Sales &

Legal

Warehouse &

Shipping

Finance &

Collections

Product

Engineering

Customer

Support

FUNCTIONAL ACCOUNTABILITY

Google

Analytics

Time to

Close

Fulfillment

Lead Time Aging

Usage

Statistics

1st Call

Resolution

LEADING OPERATIONAL DATA & METRICS

DETAILED MOMENT OF TRUTH TRANSACTIONAL SURVEYS

Measures Interactions


December 15, 2017 - 39


Research Purchase Delivery Pay Bill Usage Get Help

JOURNEY STAGES

Website

Marketing

Sales &

Legal

Warehouse &

Shipping

Finance &

Collections

Product

Engineering

Customer

Support

FUNCTIONAL ACCOUNTABILITY

Marketing

Leader

Sales

Leader

Department

Leaders

Department

Leaders

Product

Leaders

Service

Leaders

Executive Leadership & Steering Team

Cross-Functional NPS Improvement Team

Account Management

Em

plo

yee A

lig

nm

en

t b

y R

ole

December 15, 2017 - 40


What if every C-level executive followed up with a detractor

once a month?

Would your product leaders benefit from speaking to a

sampling of detractors, passives, and promoters who all

mention “product” in their comments?

Have you considered a Passive-to-Promoter initiative? Who

would be best to follow up with Passives to understand what it

takes to garner greater loyalty?

Are sales and marketing leaders following up

with Promoters for customer advocacy groups,

referrals, …?

…


December 15, 2017 - 41


“8. Read and share all qualitative responses.”

There can be a tendency to not read all the text responses

from Customers.

4% of responses ask you to take action for the Customer,

including providing a quote for more business – not

something you want to miss.

Share the Customer verbatim comments with the entire

organization – the good, the bad, the ugly.

Transparency of this data across the organization is key.

…

December 15, 2017 - 42


“9. Understand sample size and margin of error.”

What changes of your Net Promoter Scores are significant

and what are not (sample-to-sample, customer segment-to-

segment, product-to-product, site-to-site, …)?

You generally need larger samples to get the same statistical

significance for the NPS than for simple Customer satisfaction.

Test 1: Margin of Error

Test 2: Chi-Squared Test


December 15, 2017 - 43


“10. Don’t bother benchmarking your score externally.”

… unless you are going to do it right, i.e. understand the

drivers of the score.

The only valid comparison of your Net Promoter Score is to

your past trend. Cross-company comparisons are in most

cases sheer folly.

If you’re ahead of your competition are you going to stop

driving change? No. If you’re behind them are you going to

stop driving change? No.

→ Information that drives no change in what you will do is

worthless.

December 15, 2017 - 44

Net Promoter Program – Recognition & Rewards

Recognition and rewards come in many forms, and while

compensation is the most obvious way to reward employees, it’s

a blunt instrument. Why?

15% – 20% of Pay is Incentive Compensation

5 – 6 Annual Objectives or Initiatives

→ 2% – 3% Impact for each Initiative !!!

If you want to reinforce desired behaviors, small,

regular, immediate rewards are often far more

effective.


December 15, 2017 - 45

Net Promoter Program – Recognition & Rewards

Let’s take a look, then, at the variety of reward and recognition

techniques available.

Real-Time Feedback → The central technique of the Net Promoter

System is to provide customer feedback as soon as possible to each of

the employees who were involved in the transaction.

Informal and Formal Storytelling → Promoter stories can also be

reinforced and shared in supervisor-led conversations or team huddles.

Peer Recognition → For many employees, the most meaningful

recognition often comes from colleagues and teammates.

Award Competitions → Some organizations have competitions to

ensure recognition is embedded in the culture and celebrated.

Executive Recognition → Executives often have more influence than

they fully understand, and the symbolic messages they send through

the positive reinforcement can have a huge impact on employees.

December 15, 2017 - 46

Frank-G. Adler, Ph.D.

Principal & Managing Partner

Operational Excellence Consulting, LLC

Phone: + 1 (888) 372 - 8705

Email: [email protected]

Website: www.operational-excellence-consulting.com

OPERATIONAL EXCELLENCE

C O N S U L T I N G

“Perfection is not attainable, but if we chase perfection we can catch excellence.”

Vince Lombardi






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