CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
That's what it's all about isn't it? To get people to talk about and recommend you to others? So how are you doing? All this work you've been doing with social media and building community, is it working? That is, are you developing the kinds of relationships with people that influences them to want to tell others about you?
No, I'm not talking about having thousands of "likes" on Facebook or thousands of "followers" on Twitter, those don't help you gauge the effectiveness of your campaigns above and beyond your ability to attract people, I'm talking about your ability to influence positive word-of-mouth. And yes, there is a difference between attracting people and influencing them to talk about and refer others to you. Where do you stand on that? I know that you can probably name a few customers, or a few people that are connected with you on Facebook, that would probably recommend you, but what about the overall feelings of your community towards you... would they recommend you to their friends and family?
I know that's a tough question to answer and one even harder to quantify but what if there was an easy to understand metric that you could use to gauge the effectiveness of your relationship marketing campaigns?
Enter the Net Promoter Score
The Net Promoter Score is a customer loyalty metric developed by Fred Reicheld, which was introduced in 2003 in his Harvard Business Review Article, The One Number You Need To Grow. From NetPromoter.com
NPS is based on the fundamental perspective that every company's customers can be divided into three categories: Promoters, Passives, and Detractors. By asking one simple question — How likely is it that you would recommend [Company X] to a friend or colleague? — you can track these groups and get a clear measure of your company's performance through its customers' eyes. Customers respond on a 0-to-10 point rating scale and are categorized as follows:
To calculate your company's Net Promoter Score (NPS), take the percentage of customers who are Promoters and subtract the percentage who are Detractors.
- Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
- Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
While there is no one metric that you can use, that will tell you everything there is to know about how influential you are over your online community, the Net Promoter Score gives you a great generalization of how things are going.
Getting The Score
With the onset of Facebook questions it's easier than ever to poll your Facebook Page. Just ask the question, "How likely is it that you would recommend [Company X] to a friend or colleague?" From there just enter the available answers from 0 to 10 and viola! To figure out what your Net Promoter Score is, just take the percentage of people that answered 9 to 10 (Promoters) and subtract the percentage of people that answered 0 to 6 (Detractors).
Example: 60% Promoters - 25% Detractors = +35% NPS
The Net Promoter Score ranges from -100% to +100% and of course the higher the better. In simple terms the number represents a business's efficiency at creating promoters and detractors. Best case, a business is converting 100% of its customers into promoters, worst case 100% into detractors, where do you stand?
Companies with the most efficient growth engines operate at NPS efficiency ratings of 50 to 80%. But the average firm sputters along at an NPS efficiency of only 5 to 10%. In other words, Promoters barely outnumber Detractors. Many firms — and some entire industries — have negative Net Promoter Scores, which means that they are creating more Detractors than Promoters day in and day out. These low scores explain why so many companies can't deliver profitable, sustainable growth, no matter how aggressively they spend to acquire new business.
While the Net Promoter Score wasn't initially used to gauge your influence over your online community, and your ability to generate word-of-mouth, it's a great metric to use and a fairly easy one to figure. Keep in mind that if you run this one-sentence-survey too often you will wind up skewing your numbers, instead, run it once a quarter to gauge your promoter growth.
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