"The One Number You Need to Grow"

Frederick Reichheld

Harvard Business Review

December 2002, pp. 46-54

After reviewing the pitfalls of customer retention scores and customer satisfaction surveys, the author describes a research study conducted to determine what customer survey questions most effectively predict customer behavior and company growth.

The approach started with roughly 20 questions on the Loyalty Acid Test, which was designed by the author about 4 years ago. The test was administered to thousands of customers in six industries: financial services, cable and telephony, personal computers, e-commerce, auto insurance, and internet service providers. Information was subsequently gathered on survey-participant purchases and referrals. Purchases and referrals are postulated to be two behaviors that can drive company growth.

The question (from among the aforementioned 20) that was far and away the most effective across industries for predicting purchases and referrals was:

"How likely is it that you would recommend [company X] to a friend or colleague?"

The above question used a 10-point response scale, with 10 meaning "extremely likely", 5 meaning "neutral" and zero meaning "not at all likely." Customers with score of 9 or 10 were labeled as "Promoters." Those with a score of 7 or 8 were labeled "Passively Satisfied." Those who scored zero through 6 were labeled "Detractors." A "net promoters" score was computed by assessing the percentage of Promoters minus the percentage of Detractors. It was found that the "net promoters" score clearly predicted a company's growth rate over a 3-year period.

Two other questions that were effective predictors in certain industries were:

• "How strongly do you agree that [company X] deserves your loyalty?"
• "How likely is it that you will continue to purchase products/services from [company X]?"

Additional questions that had some limited usefulness in a particular industry, but little general applicability, were:

• "How strongly do you agree that [company X] sets the standard for excellence in its industry?"
• "How strongly do you agree that [company X] makes it easy for you to do business with it?"
• "If you were selecting a similar provider for the first time, how likely is it that you would choose [company X]?"
• "How strongly do you agree that [company X] creates innovative solutions that make your life easier?"
• "How satisfied are you with [company X's] overall performance?"

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