Net Promoter Score (NPS)

This metric is used to measure customer loyalty to a firm. Companies among diverse industries have embraced NPS as a way to monitor their customer service operations while NPS also has been seen as a system that allows managers to use the scores to shape managerial actions.

One of the advantages of NPS is its simplicity: It is easy for managers and employees to understand the goal of having more promoters and fewer detractors. However, there are weaknesses: E.g., in the net promoter literature, a customer’s worth to Apple has been described as the customer’s spending, ignoring the costs associated with serving the customer. It is also easy to imagine how to increase the net promoter score (such as making customers happier) while destroying even to-line growth (by slashing prices). Another problem with NPS as a metric is the classification system: The boundaries between scores of 6 and 7 (detractors and passives) and 8 and 9 (passive and promoters) seem somewhat arbitrary and culturally specific.

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Unmuddling NPS:

The value of NPS depends on whether a manager sees it as a metric or as a system. The authors suggest that the NPS metric cannot change the marketing performance. However, they advise using this metric as a part of a system employed in evaluating the performance which might lead to a cultural shift within the organization.

 

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