May 21, 2013 12 Comments
We just published a Temkin Group report, The Economics of Net Promoter, which examines the link between NPS and loyalty across 19 industries. Here’s the executive summary:
Net Promoter Score (NPS) is a popular metric, but how does it relate to loyalty? We analyzed responses from thousands of consumers and examined the connection between NPS and three areas of loyalty: likelihood to repurchase, likelihood to forgive, and the actual number of times they recommend a company. Compared to detractors, promoters are almost six times as likely to forgive, are more than five times as likely to repurchase, and are more than twice as likely as detractors to actually recommend a company. Examining the data, we also found that consumers who gave a score between 0 and 4 have particularly low levels of loyalty. The analysis examines 19 industries: airlines, appliance makers, auto dealers, banks, car rental agencies, computer makers, credit card issuers, fast food chains, grocery chains, health plans, hotel chains, insurance carriers, Internet service providers, investment firms, parcel delivery services, retailers, software firms, TV service providers, and wireless carriers. Promoters who are likely to repurchase range from 87% for grocery chains to 73% for TV service providers, those who are likely to forgive range from 72% for rental car agencies to 59% for TV service providers, and those who actually recommended a company range from 80% for retailers to 47% for parcel delivery services.
Here’s the first figure from the report. It has a total of 43 figures that include specific graphics for each of the 19 industries in the study.
Here’s an excerpt from the first section that examines the data cross all industries:
To understand how NPS relates to customer loyalty, we examined NPS scores for companies across 19 industries based on feedback from 10,000 U.S. consumers. The analysis covers more than 95,000 pieces of feedback from consumers about those companies. Examining three areas of loyalty across industries, looking at promoters versus detractors, we found that:
- Promoters are almost six times as likely to forgive. We asked consumers about their likelihood to forgive a company if it delivered a bad experience and found that 64% of promoters are likely to forgive compared with 11% of detractors.
- Promoters are more than five times as likely to repurchase. We asked consumers about their likelihood to make additional purchases from a company and found that 81% of promoters are likely to repurchase compared with 16% of detractors.
- Promoters are more than twice as likely as detractors to actually recommend. In a separate study of 5,000 U.S. consumers, we asked consumers how many times they actually recommended each company. It turns out that 64% of promoters have recommended the company compared with 24% of detractors.
We also examined the level of loyalty across each response on the NPS scale between 0 and 10. This analysis shows that:
- Super detractors are much less loyal. Forgiveness and repurchase loyalty stay at a consistent low level between 0 and 4 on the scale. Actual recommendations begin to increase after 5.
- Midpoint attracts low recommenders. When we examine the actual quantity of recommendations across the NPS scale it turns out that there’s significant drop in recommendations at the midpoint of the scale, when 5 is selected.
- Text anchors attract responses. We analyzed the volume of responses across the 11 point scale. Consumers appear to select the three responses with text anchors at a disproportionately high rate: “0,” “5,” and “10.”
The Excel file provides all of the data from the 43 figures.
The bottom line: Promoters are more loyal than detractors.
P.S. Net Promoter Score, Net Promoter, and NPS are registered trademarks of Bain & Company, Satmetrix Systems, and Fred Reichheld.