Bain Company

bain Company

bain & company invented the Net Promoter System, and this system continues to be the leader in how companies earn customer loyalty and inspire employees. What is the Net Promoter Score? How is it calculated? What do promoter, passive, and detracting customer mean? Identify an industry, and compare three competitors in that industry by their NPS score. What does this tell you?

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The Net Promoter Score (NPS) is a metric developed by Bain & Company to measure customer loyalty and predict business growth. It is calculated by asking customers, "On a scale of 0 to 10, how likely are you to recommend our company/product/service to others?" Based on their responses, customers are classified into three categories: Promoters (9-10), Passives (7-8), and Detractors (0-6). Promoters are loyal customers who enthusiastically recommend the company, Passives are satisfied but unlikely to promote actively, and Detractors are dissatisfied customers who may spread negative word-of-mouth.

The NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. The score ranges from -100 to +100, with higher scores indicating stronger customer loyalty and better potential for growth (Reichheld, 2003). A high NPS signifies that a company has many more Promoters than Detractors, which correlates with increased revenues and customer retention.

In the airline industry, for example, Delta Airlines, American Airlines, and United Airlines are major competitors. According to recent surveys, Delta's NPS is around 65, American's is approximately 50, and United's is roughly 45 (CustomerGauge, 2023). These scores suggest Delta has a higher level of customer loyalty, which may lead to increased market share and customer advocacy. The differences indicate that Delta's focus on customer service and experience effectively foster Promoters, whereas United and American need to enhance their service quality to boost loyalty.

Overall, NPS offers valuable insights into customer perceptions and helps companies identify areas for improvement. By benchmarking against competitors, firms can refine strategies to elevate customer loyalty and sustain growth in highly competitive markets.

References

Reichheld, F. F. (2003). The One Number You Need to Grow. Harvard Business Review, 81(12), 46-54.

CustomerGauge. (2023). Net Promoter Score Benchmark Report. Retrieved from https://customergauge.com/blog/nps-benchmark-report