There are many ways to gauge the vitality of your business. One popular means of measurement is the Net Promoter Score (NPS). This metric determines how likely your current customers are to recommend your business to someone else. Why is this so important? Most basically, it tells gives you an idea of how happy your customers are with the products or services you’re currently providing. On a deeper level, it gives you insight into your business’ potential for growth.

As shown in the infographic below from the referral marketing gurus at Ambassador, 65% of new business comes from referrals. Yowza. So it follows that if your NPS is low, your potential for growth in the near future is not terribly bright.

NPS is determined by asking your customers (in scale-of-1-to-10 format) the question “How likely are you are recommend us to a friend or colleague?”

You then divide the responders into groups based on their 1-to-10 rating: Promoters (9-10), Passives (7-8), and Detractors (6 or below). Subtract the percentage of Detractors from the Promoters, and there you have it. Some businesses express this as a percentage, some as a ‘score’.

So what kind of score should you be shooting for? That depends entirely upon your industry. For example, according to a 2012 Satmetrix study, USAA had the highest NPS in the banking industry at 83%, while Verizon had the highest NPS in the internet industry at just 18%.

To sum it all up, there are two ways things you need to do to make use of the metric. First, find out what the average benchmark is for your industry, and see how you measure up. Next, look at your own NPS and simply try to out-do yourself each year.

Oh, and here’s that nifty Ambassador infographic we promised:

2 Responses

  1. Reply
    Viktor
    Feb 05, 2013 - 10:01 AM

    How it can help start a business?

  2. Reply
    Taswir Haider
    Feb 12, 2013 - 02:01 AM

    Very informative post ! It’s very helpful for new starter of business.Thanks.

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