Welcome back to Part Two!
Every profession has its jargon, its “TLAs” that give insiders a shorthand. (What’s a TLA? A “three-letter acronym!”) At their best these save a few syllables here and there when the cognoscenti gather, but they can be a barrier to understanding with the civilians that experts hope to influence.
When your business explores getting more from your customer relationships, you will hear two TLAs in particular—CLV and NPS. Just to make things interesting, note that CLV and CLTV (a FLA!) are the same thing.
Let me demystify these critical measures for you as you consider how to build more customer ❤️ in your work.
Last week, we explored CLV or customer lifetime value. Today, we will be taking on NPS!
TLA: NPS
What it stands for: Net Promoter Score
What it means: NPS is the measure of your customers’ willingness to refer and recommend your organization to a friend or colleague.
How it works: Even if you are unfamiliar with the TLA, you will recognize NPS because you have seen it many times in customer surveys from your favorite online and IRL (another TLA, means “in real life”) sellers.
NPS starts with the simple question, “How likely is it that you would recommend this company to a friend or colleague?” Answers fit a scale of zero to ten, ranging from “not at all likely” to “extremely likely.”
- Scores of 9 and 10 are great. Those who answer in that range are “promoters.”
- Scores of 7 and 8 are neutral.
- Scores of 6 or lower are signs of trouble, identifying the customer as a “detractor.” Detractors area threat to move to a different seller or, worse, to actively discourage working with you.
Companies review NPS scores for individual customers or clients, in the aggregate across their entire operation, and for subsets of their customer population such as specific geographies, lines of business, or even individual sellers.
A company’s overall NPS score is the percentage of promoters (customers that ❤️ you), minus the percentage of detractors, plus 100. A few examples—
| Total # of Customers | # of Promoters (Scores 9-10) | % Promoters | # of Detractors (Scores 0-6) | % Detractors | Promoter % Minus Detractor % | Add 100 to get NPS Score |
| 174 | 95 | 55% | 22 | 13% | 55 – 13 = 42 | 142 |
| 628 | 493 | 79% | 97 | 15% | 79 – 15 = 64 | 164 |
| 307 | 109 | 36% | 117 | 38% | 35 – 38 = (-2) | 98 |
A web search can often turn up scores for particular industries, from CPG (another TLA!) to professional services, including averages, median scores, and cut-offs for top and bottom quartiles and quintiles.
While anything over 100 is positive, good scores are typically in the 130’s or above, and top organizations hit the 170’s or more. In professional services, for example, average is in the low 140’s; median (half the scores higher, half lower) is 150; and the top quintile begins at 173.
There are many strategies to increase NPS, which in turn positively impacts CLV, quantity of referrals, your ability to secure references to help you sell.
Do you know these critical numbers for your organization? Are you working throughout your organization to improve them? Happy customers are your #1 source of free advertising. Set up a short call with the 3C team to brainstorm ideas and explore all the ways we can help.