Net Promoter Score – CRE
The Net Promoter Score is a valuable tool that allows any business to gauge customer loyalty and satisfaction. Commercial real estate is no exception when it comes to the importance of this score. Essentially, the Net Promoter Score is when a customer answers the question “how likely will you recommend our company to a friend?” on a scale from 0-10. In a recent blog post, Rod Santomassimo from the Massimo Group discusses the relevance of the Net Promoter Score in commercial real estate. If you want to learn about this vital tool in commercial real estate, read the excerpt below and then click the green button to view the full article.
CRE Broker’s Answer to “the Ultimate Question”
During our annual National Commercial Real Estate Brokerage Survey earlier this year, we asked “The Ultimate Question”, which is also the title of Fred Reichheld’s Wall Street Journal bestselling book. This book, a required reading for any owner or manager, dissects the loyalty of your people and your customers.
The “Ultimate Question” is How likely is it you will recommend us to a friend? With zero (0) being Not at All Likely and ten (10) being Extremely likely; and the accompanying result in a “Net Promoter Score”. This score is calculated by subtracting the number of “detractors” – those who answered the ultimate question with a rating of 0 to 6, from the “promoters” – those who answered the ultimate question with a rating of 9 or 10. Anyone who answered the question with a 7 or 8 rating is termed “passive”
In his book, Reichheld demonstrates the “fundamental concept of Net Promoter, explaining its connection to a company’s growth and sustained success and presents the closed-loop feedback process and demonstrates its power to energize employees and delight customers.”
As the consulting conglomerate Bain and Company explains, “The average firm sputters along at an NPS efficiency of only 5 percent to 10 percent. In other words, promoters barely outnumber detractors. Many firms—and some entire industries—have negative Net Promoter Scores, which means that they are creating more detractors than promoters day in and day out. These abysmal Net Promoter Scores explain why so many companies can’t deliver profitable, sustainable growth, no matter how aggressively they spend to acquire new business. Companies with the most efficient growth engines—companies such as Amazon, Rackspace, TD Bank, Harley-Davidson, Charles Schwab, Zappos, Costco, Vanguard, and Dell—operate at NPS efficiency ratings of 50 percent to 80 percent. So even they have room for improvement.”
So what about commercial real estate brokerage?
Do individual commercial real estate firms have different NPS ratings? Based on our survey, absolutely. However, for purposes of this blog, I will focus on the industry as a whole, and from the brokers’ perspective. This is an important distinction. This following reflects the opinions of the brokers themselves regarding the company they work with.