02 Jun The Economics of Loyalty

Posted at 17:14h in Hotelier Articles by

Have you ever heard of the Net Promoter Score? Now commonly known as NPS, I first read about this loyalty measurement in the Harvard Business Review in 2003. Since then, the concept has grown into a book, a system and the ‘inventor’ Dr Fred Reichheld founded Bain Consulting’s Loyalty division.

Here’s a summary of what the NPS is, and how it can be used in your Resort or Hotel.

Ask the question: ‘What’s the likelihood you would refer <insert your Hotel name here> to a friend or colleague, on a scale of 0 through 10?” (with 0 being not likely at all, and 10 being extremely likely)

net-promoter-score
1. Zero’s through Six’s are Detractors or Negatives

2. Seven’s and Eight’s are Neutral

3. Nine’s and Ten’s are Positives

So, for example, if you surveyed 100 guests, and you ended up with the following data;

  • 5 Detractors  (guests which rated your hotel 0 – 6)
  • 30 Neutrals     (guests which rated your hotel 7 or 8)
  • 65 Positives     (guests which rated your hotel 9 or 10)

Your guest NPS would be (-5+65)=60%

Reichheld says the real value comes from asking the detractors ‘why’ they are hesitant to recommend your product/service to a friend or what you could change to make them a ‘ten’. Then you have the opportunity to create more evangelists – nine’s and ten’s. Makes sense.

We found this an easy survey to create, using a free service like Survey Monkey (which has NPS templates built in).

The analysis shows various NPS scores depending on what industry is analysed. Most compelling, is that profitability of a business, is directly correlated a higher NPS than its industry peers.

How does your NPS compare to other industries or the NPS leaders? Here some the NPS leaders from 2013.

The top 10 NPS leaders are dominated by USAA and Apple (we could only find US data)

  1. USAA – Insurance = 80%
  2. USAA – Banking = 78%
  3. Costco = 78%
  4. Apple – Laptop = 76%
  5. Dillards = 75%
  6. Nordstrom = 75%
  7. Apple – iphone = 70%
  8. Amazon = 69%
  9. Southwest Airlines = 66%
  10. Apple – ipad = 65%

A simple exit survey, for your guests to complete is all it takes. If you’re already evaluating your NPS, great. If not, let us know and we’ll help you get started today.

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