Drive customer loyalty with Net Promoter Score: calculating an NPS score is just the start of what such a program can accomplish. When used correctly with a feedback loop, it can help improve the bank's bottom line.

• Author: Garrity, Jim
• Position: Net Promoter Score

OVER THE PAST FEW YEARS many companies have embraced Net Promoter Score (NPS) as a key loyalty metric. But a NPS can do more than just tell you how likely your customers are to recommend your bank to others. With information obtained from the NPS calculation, marketers can figure out how to boost future loyalty--and thus improve bank profitability.

I'll explain how, But first, let's review the basics about NPS.

While people have been using "likelihood to recommend" as a key metric for years, the concept of "NPS" was introduced in 2003 by author and business consultant Fred Reichheld. Reichheld found through his research that asking a single question on a 0 to 10 rating scale: "How likely are you to recommend our company to a friend or colleague?" builds on a long-held truth that likelihood to advocate (recommend) is a strong indicator of loyalty and provides business users with a simple metric to benchmark against both internally and externally. (Net Promoter, NPS and Net Promoter Score are trademarks of Satmetrix Systems Inc., Bain & Co. Inc., and Fred Reichheld.)

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Just as net worth represents the difference between financial assets and liabilities, Net Promoter quantifies the difference between happy customers (Promoters) and unsatisfied customers (Detractors). By asking customers their likelihood to recommend your bank, you can sort your customers into three categories:

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* Promoters (9-10 rating) They are loyal and enthusiastic. They adore you and actively recommend you.

* Passives (7-8 rating) They are satisfied, but unenthusiastic. They are neutral.

* Detractors (0-6 rating) They are unhappy customers. Often they are frustrated and specifically do not recommend you to others.

People who criticize the NPS concept often point to the use of a "single question" as a problem; but calculating the NPS score is just the beginning of what a good NPS-based program can achieve. It's not enough to do the simple math, the real "magic" comes from the "why" behind the answers. This is where the real strategy happens and the roadmap to increased loyalty begins. I would argue the "open ends" are the most important part of building a NPS-style program. Since its mass-market launch in 2003, most companies who have adopted the concept of NPS have expanded beyond a single question and embraced the heavy use of open-ended comments and powerful reporting tools to make an advocacy-based measurement program useful for managers at corporate, regional and banking-center levels.

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