This week marks the start of the Net Promoter Score Annual Conference in NYC, so the timing seemed ideal to share some information and discuss NetPromoter Score (”NPS”®).

Prior to joining 7DS, I'd heard about NPS, but didn't have an in-depth understanding of its operating model. Upon hearing more about it, I was intrigued and immediately started my own NPS Research Project. What I discovered, in a nut shell, is that it's an extremely powerful, yet simplistic system.

Unfortunately, many industries aren't tapping into NPS, including the real estate world. There's an immense amount of information out there, so that's not the issue. It's currently being used by hundreds of companies worldwide, including GE, Apple and Verizon Wireless, so it's not due to a lack of proven success or credibility. So, based on a few recent conversations, I think the challenge is people just aren't sure what NPS is, how it directly correlates to an increase clients satisfaction, why it makes sense for RE professionals, etc.  

So, let's start with the basics.... 

What is NetPromoter Score®? 

NPS was first developed by Fred Reichheld, the founder of Bain & Company’s loyalty practice group and author of The Ultimate Question, the book in which he discuses NPS and its direct connection to growth and long-term profitability. The core question used in NPS is “Would you recommend me to a friend?". It's a surprisingly straightforward, yet deceptively authoritative, tool for measuring customer loyalty to a brand, a company, a product, or a service. 

NPS is clear-cut. It doesn't involve lengthy questionnaires that most individuals won't take the time to read, let alone answer. It asks one single question (although several additional questions are welcome): “How likely are you to recommend XYZ to a friend or colleague?” where XYZ is a company, product, or service. The responses are collected on a 0-10 scale where 0 is “Extremely Unlikely” and 10 is “Extremely Likely”. Someone giving a score of 9-10 is considered a Promoter, score of 7-8 is considered Neutral (or Fence Sitter), and score of 0-6 is considered a Detractor. The score is computed simply by subtracting the percentage of Detractors from the percentage of Promoters. The graphic above provides a clear illustration.

Here's a quick example:

• You survey 1,000 past clients with one question, “How likely are you to recommend our agents to your friends?” 
• 250 answer 9 or 10 (Promoters); 600 answer 7 or 8 (Neutral); and 150 answer from 0-6 (Detractors) 
• Your NPS is 25% – 15% = 10%. This is not, by the way, a good score. You will likely want to find out why your NPS is so low and start looking at ways to improve your customer service experience.

Category characteristics:

• Promoters (Give you a 9-10) These are the loyal enthusiasts who will keep buying from you and working with you. They'll passionately refer you to others and fuel your growth.
• Passives (Give you a 7-8) These folks are satisfied but unenthusiastic customers. Their score isn't calculated as they are unlikely to tout your product or service to others. 
• Detractors (Give you a score of 0-6) This is the group of unhappy customers who can damage your brand and impede your growth in a viral manner...quickly. 

Why Would NPS Be an Asset to Me and My Business?  

The whole point of NPS is to gauge customer loyalty by matching the survey responses to the specific client and then to their unique behavior and experience with your product or service, i.e. repeat purchase and referral patterns over time. A little bit more about The Metric That Links to Growth.  

In real estate, customer loyalty and viral marketing are essential components of the business. Given the utter simplicity of NPS, it's an ideal solution for most real estate companies, since a good number of agents, teams and brokerages lack the kind of marketing departments, discipline, and budgets to conduct truly scientific customer loyalty studies.

In the next post, I'll share a few case studies and more information about how real estate professionals could directly benefit from using NPS.

In the meantime, these two books are excellent reads for anyone interested in learning more about the process and psychology involved with Net Promoter Score: The Ultimate Question: Driving Good Profits and True Growth (where it all began) and Answering the Ultimate Question: How Net Promoter Can Transform Your Business (the methodology behind answering the question).

[NOTE: NetPromoter Score® and NPS® are both registered trademarks of Satmetrix, Bain & Co., and Fred Reichheld.]