An excerpt from the introduction, "From Score to System."
It always seemed to me that success in business and in life should result from your impact on the people you touch—whether you have enriched their lives or diminished them. Financial accounting, for all its sophistication and influence, completely ignores this fundamental idea. So several years ago, I created a new way of measuring how well an organization treats the people whose lives it affects—how well it generates relationships worthy of loyalty. I called the metric Net Promoter® score, or NPS. Thousands of innovative companies, including Apple, Allianz, American Express, Zappos.com, Intuit, Philips, GE, eBay, Rackspace, Facebook, LEGO, Southwest Airlines, and JetBlue Airways adopted NPS. Most used it at first to track the loyalty, engagement, and enthusiasm of their customers. They liked the fact that NPS was easy to understand. And they liked it because it focused everyone on one inspirational goal—treating customers so well that those customers become loyal promoters—and led to action in pursuit of that goal. They also appreciated the fact that it was an open-source method, which they could adapt for their own needs.
Over time, these companies developed and expanded the metric. They used it to help build employee engagement and commitment. They discovered new methods to extend its impact, not just to measure loyalty but to transform their organizations. They shared ideas with one another, and they built upon one another’s applications. In a remarkable explosion of creative intelligence, NPS soon morphed into something much more than a metric. Though the science is still young, it became a management system, an entire way of doing business. The initials themselves, NPS, came to mean Net Promoter system rather than just Net Promoter score.
And what a difference this system seems to have made. Listen to what some of these companies’ leaders have to say about it:
"NPS has galvanized our thinking and enabled the entire organization to focus on the customer. During the 1970s and ’80s, total quality management revolutionized the cost of quality in manufacturing. NPS is having a comparable impact in the current age."
— Gerard Kleisterlee, CEO, Philips
"NPS was a natural fit for Apple. It has become part of the DNA of our retail stores."
— Ron Johnson, SVP and founding executive, Apple Retail
"NPS completely changed our world. It has become an integral part of our process and culture. Now, you couldn’t take it away if you tried."
— Junien Labrousse, executive vice president and chief product and technology strategist, Logitech
"NPS provides the litmus test for how well we are living up to our core values—it is the first screen I look at when I boot up my computer each morning."
— Walt Bettinger, CEO, Charles Schwab
"NPS is the most powerful tool we have ever deployed. The reason is that it is so actionable."
— Dan Henson, then chief marketing officer, General Electric
"We use NPS every day to make sure we’re WOWing our customers and our employees."
— Tony Hsieh, CEO of Zappos.com, author of Delivering Happiness
In chapter 6 you’ll read nearly a dozen stories about how companies such as these have put the Net Promoter system to work and about the results they have achieved. NPS was a key part of Charles Schwab’s turnaround, a period in which the company’s stock tripled. It has been a central element of Apple’s famous retail stores, which are believed to have the highest sales per square foot of any retailer anywhere. It has enabled Ascension Health to give its patients better care, Progressive Insurance to gain market share and retain more of its policyholders, American Express to provide better service to cardholders while lowering its costs—and on and on. The Net Promoter system has proved to be a powerful engine of growth and profitability.
But I don’t want to stop with “system,” because there is another “S” that permeates the companies that have achieved the most impressive results with Net Promoter. These companies embody a Net Promoter spirit of leadership, a distinctive philosophy that energizes the system. Leaders who exhibit this spirit believe that the mission of any great organization is to enrich the lives it touches—to build relationships worthy of loyalty. A great organization must have a positive impact on its shareholders, of course, but also on its employees, its business partners, and especially its customers. Unless it earns the loyalty of all these stakeholders, its returns to shareholders will soon evaporate. Moreover, these leaders themselves recognize that their personal reputation, their legacy, will be defined by how well they achieve that mission.
Phrases such as personal reputation, Net Promoter spirit, and enriching lives might lead you to infer that NPS is soft and nebulous. On the contrary, Net Promoter is where mission meets mathematics. A mission without a measurement, without an accurate gauge of success or failure, is just so much hot air. Only by systematically measuring its effect on people and their relationships can an organization gauge whether it is really achieving its mission and enriching lives. That’s NPS’s reason for being. It provides a practical measurement process that can accurately assess a company’s progress. It provides a management system that can help a company capture the spirit and drive toward greatness.
This book tells the story of NPS, where it began, how it evolved, and where it is headed. It shows you how you can use the system to improve your business—and your life.
In the Beginning
NPS first saw the light of day in Harvard Business Review, in late 2003. That article—“The One Number You Need to Grow”—eventually led to a book titled The Ultimate Question, which appeared in 2006. Both article and book described a simple, practical way to categorize customers based on their answer to a single question, typically phrased something like this:
On a zero-to-ten scale, how likely is it that you would recommend us (or this product/service/brand) to a friend or colleague?
I also instructed companies to ask at least one follow-up question:
What is the primary reason for your score?
The simplicity of the zero-to-ten scale allows companies to take a quick measurement of customers’ feelings and attitudes. The open-ended follow-up question enables them to hear the reasons for these attitudes in the customers’ own words. It avoids the distortions imposed by the preconceived response categories of traditional customer-satisfaction questionnaires.
When my colleagues and I studied the use of these questions, we found that customers typically fall into three well-defined groups. Each group of customers exhibits a distinct pattern of behavior as well as a distinct set of attitudes. And each calls for a different set of actions from the company.
- Promoters. People who respond with a nine or a ten are signaling that their lives have been enriched by their relationship with the company. They behave like loyal customers, typically making repeat purchases and giving the company a larger share of their spending. They talk up the company to their friends and colleagues, just as their answer to the question implies. They take the time to respond to surveys, and they offer constructive feedback and suggestions. We called this group promoters, because in their energy and enthusiasm that’s exactly how they act. Any company should want to maintain the promoters’ enthusiasm, to learn economical ways to create even more customers who feel and act that way, and to provide recognition and rewards to the teams or individual employees who do so.
- Passives. People who give the company a seven or an eight got what they paid for, nothing more. They are passively satisfied customers, not loyal ones, and they exhibit a markedly different set of attitudes and behaviors. They make few referrals—and when they do make one, it’s likely to be qualified and unenthusiastic. If a competitor’s discount or glitzy ad catches their eye, they are likely to defect. We called this group passives, because they bring little energy to the company and cannot be counted on as long-term assets. A company’s goal for this category is to improve its services, products, or processes, where possible, to the point where it can delight these customers and turn some of them into promoters.
- Detractors. And then there are the people who give a rating of six or below. Their score indicates that their lives have been diminished by their dealings with the company. They are not a happy crew. They are dissatisfied, disaffected, even dismayed by how they are treated. They badmouth the company to their friends and colleagues. If they can’t easily switch providers—for instance, if they have long-term contracts or if there aren’t any competitors with similar offerings—they make nuisances of themselves, registering complaint after complaint and driving up costs. Their surly behavior destroys employee motivation and pride. Companies confronted with detractors have to probe for the root cause of their disappointment, then apologize and determine ways to solve the problem. If there is no economically rational solution to the detractors’ discontent, then the company must learn not to acquire this type of customer in the first place.
If one central goal of a company is to enrich the lives of its customers, these three categories are a measure of how well it’s doing. Promoters represent successes. Customers don’t give a nine or ten score unless the company delivers something very special—unless it truly has a positive effect on their lives. Passives are just satisfied. They can’t be considered successes unless the company’s goal is to achieve mediocre results. Detractors, of course, represent serious failures. Something has gone badly wrong, and an interaction that should have had a positive effect instead has had a negative one.
But categorization was just the first step. We then wanted one simple number that could be tracked week in and week out to gauge a company’s progress and focus its improvement efforts. We wanted a metric that was simple, powerful, and easy to understand, a bottom-line number akin to net profit or net worth. So we decided to take the percentage of customers who are promoters and subtract the percentage who are detractors. The result is Net Promoter score.