Net Promoter Score, Moments of Truth and Customer Loyalty

”A great company is where you want to end up and spend most of your life…most of life is a search for people and institutions worthy of your loyalty and commitment. People yearn for that.”

-Frederick F. Reichheld, author of The Loyalty Effect

Every company loves loyal customers and loyal employees. Fred Reichheld and Rob Markey of Bain & Company have done lot of research on customer loyalty. They came with a tool to measure loyalty of customers. They called tool as Net Promoter Score. It is a simple tool and unlike any other survey, score is calculated based on one single question.

”In the old world you can have medium loyalty and still make a buck, protected by a convenient location or the customer’s lack of information. In the Internet world, there will be no place to hide, no substitute for earning high loyalty.”

-Frederick F. Reichheld, author of The Loyalty Effect

In Net Promoter Score customers are asked a single question that predicts the likelihood of both repurchase and referral- “How likely is it that you would recommend this company to a friend or colleague?” .Customers rate their answers on a scale from 0 to 10 (10 being highest). Based on score, the customers are classified as detractors, passives and promoters.

customer-service-cartoon-1

If a customer gives score in range of 0-6, he is called detractors. Detractors are unhappy customers who can hurt your brand through negative word-of-mouth.

If customer gives score in range of 7-8, then he is called passive. Passives are satisfied but indifferent customers, who could be swayed by the competition.

If customer gives score in range of 9-10, then he is called promoter. Promoters are loyal customers who will keep buying from you and referring others.

“From what I have seen so far, very few companies are going to be able to hold their customers for three to four years.”

-Frederick F. Reichheld, author of The Loyalty Effect

Every organisation will love to have only promoters and no detractors. But each organisation has mix of them.

customer

A Bain study of affluent banking customers, for example, found that promoters are worth an average $9,500 more to a bank than detractors.

Based on scores given by customer, Net Promoter Score (NPS) is calculated as

NPS = (Number of Promoters – Number of Detractors)/ (Number of Respondents) X 100

For example: If out of 100 responses, 10 are detractors (0-6 range), 25 are passives (7-8 range) and 65 are promoters (9-10 range)

Then NPS= (65-10)/100*100= 55

Net-Promoter-Score-Formula

“If I were to track only one metric at the company that would be the Net Promoter Score (NPS).”

-Rohit Bansal, Co-Founder Snapdeal

Score should be more than zero i.e. promoters should be more than detractors. Now question is what ideal score? Answer is it depends on score of your competitors ex. Snapdeal has NPS of 65, in isolation score will not make sense, but if you compare it with others then we find that it is an excellent score.

marketing

NPS

Snapdeal.com                   +65

 Amazon.com                    +64

 Zappos.com                      +60

Google Shopping             +19

“There is a buyer NPS, a seller NPS and we also have something that’s called a team NPS. Like if you work here, would you recommend someone else to work here also? So we do a 360 degree thing.”

-Kunal Bahl, Co-Founder Snapdeal

Concept of NPS now has been extended to employee loyalty. While framework remains same, the question asked is different- “On a scale of zero to ten, how likely is it you would recommend this company as a place to work?”

'What do you mean 'you can't buy loyalty'?  I've sold mine numerous times.'

Another concept that is used to understand customer loyalty is called Moment of Truth- MOT. There are 4 categories of MOT.

Zero Moment of Truth or ZMOT is when customer recognizes a need to buy and goes online to gather information regarding a potential purchase.

First Moment of Truth or FMOT represents the “a-ha” moment when sees product on shelf. This is considered to be the decision point to buy a specific brand or product.

 

According to Proctor & Gamble shoppers make up their mind about a product in three to seven seconds, just the time it takes to note a product on a store shelf. This time lapse is called (by P&G) “first moment of truth” and it’s considered the most important marketing opportunity for a brand.

customers

Second Moment of Truth or SMOT happens after the customer has bought and started using organisation’s brand or product. The resulting experience supports organisation’s pre-purchase promises, helping to build a relationship with customer.

“The best brands consistently win two moments of truth…The first moment occurs at the store shelf, when a consumer decides whether to buy one brand or another. The second occurs at home, when she uses the brand – and is delighted, or isn’t.”

-A.G. Lafley, CEO, P&G

Third Moment of Truth or Ultimate Moment of Truth or UMOT happens after the customer has used the product. Customer becomes a true fan and gives your brand positive publicity via. word of mouth, ratings and reviews. At this point, the customer has become a walking endorsement for your business.

MOT

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