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Measure Customer Loyalty and NPS to Succeed with your Business
Net Promoter Score Customer Loyalty

Why Net Promoter Score is important for your business's success

by Katie Dodd Syk

One of the best ways to grow a business is to make your customers happy. Promoting what you have to offer, figuring out what needs improvement, and maintaining high standards is usually a winning combination to bring in more business. But doing this successfully can be quite challenging. One simple way to gage your business’s overall success is by measuring how loyal your customers are. The net promoter score (NPS) of a business does just that. 

What is Net Promoter Score?

A concept first developed by Frederick F. Reichheld in a 2003 article published in the Harvard Business Review, the net promoter score asks customers a simple question:

How likely is it that you would recommend our company to someone you know?

The answer, according to Reichheld, is incredibly indicative of a company’s overall growth and success. Or, we should say, the answers of your customers — as many as possible. 

Customers answer along on an 11-point scale, ranging from 0 for least likely to recommend the company to 10 for most likely. The NPS concept places customers into three categories based on their response: 

  • Promoters - With a response of 9 or 10, these customers are likely to create value for the brand by either making more purchases, recommending your brand to others, or becoming a lifelong customer.
  • Passives - These are the customers whose response is a 7 or an 8. They’re somewhat satisfied, but relatively unenthusiastic and probably won’t promote your brand.
  • Detractors - Those customers who respond with a 6 or under are not particularly happy with their experience of your brand, they probably won’t purchase again, and they may negatively impact your brand by sharing their discontent with those in their network.

How to calculate Net Promoter Score

Actually calculating the net promoter score is also easy to do, determined by the following equation:

% Promoters - % Detractors = Net Promoter Score

Scores can range anywhere from -100 to 100.

In addition to asking customers about the likelihood they’ll recommend your company, the NPS satisfaction survey should also include an optional blank space for participants to elaborate on their selection if they wish. This information will help give direction to the changes you make toward improving your products or services.

Benefits of using NPS to measure Customer Loyalty

There are a number of customer service survey options available to help businesses of all types and sizes. So why should you be using net promoter score? There are many benefits that make NPS a unique, straightforward metric to help your business:

  • NPS is simple. It’s amazing how a number so easy to understand and calculate can provide so much valuable information about customer satisfaction (as well as a business’ success in general). Unlike sales or profit, customer loyalty is generally not an easy parameter to measure — NPS makes it not only possible, but also simple.

  • NPS provides an overall picture of how a customer views your brand rather than just one specific experience they’ve had with it. This means that NPS is both relevant for all employees and easily digestible as just one number. Everyone is on the same page.

  • NPS makes it easy to benchmark your brand compared to your competitors and/or industry. It can be difficult to get an idea of how you’re doing compared to other similar businesses. When you look at NPS, you’ll have a big-picture insight and can dive into the details from there.

  • NPS provides insights into the chance of repeat customers, which allows you to forecast the potential growth, revenue, and health of your brand.

  • NPS can be indicative of employee satisfaction, too. Employees generally do a better job when they feel happy and fulfilled, resulting in happier customers. So if the number is low, there may be changes that need to be made relating to both your customers and your own employees.

  • Follow-up questions provide a direction for change. The blank space you include with the survey is critical. Although not everyone will fill it in, the answers you do get can be invaluable in understanding what needs to change to get that NPS ticking up!

  • NPS is both easy and inexpensive to implement. We can help you get it all set up right here!

  • NPS is an effective way to track change over time. Is your score going up? That’s great, keep making those improvements. Is your score going down? Time to re-assess the actions you’re taking or do some investigating to figure out why. 

  • NPS can help reduce customer churn. It’s much more difficult to get new customers than it is to keep existing ones. The negative feedback you receive through NPS will provide insights on keeping your customers happy and not looking elsewhere for the same product or service.

And lastly, it’s easy for customers to complete the survey. Everyone is busy and time is a luxury these days, so creating a way to give feedback quickly is of the utmost importance. A fast survey means you’ll have higher participation, giving you more of this coveted information to help your business.

Ready to grow your business with NPS? Start your 14-day free trial today.

NPS Email and SMS campaign examples

I know my NPS, what now?

So you’ve completed your first NPS survey, received a good number of responses, and determined your company’s NPS. Bravo! But you’re not done. Let’s talk about what happens next.

You’ll need to have a follow-up plan, regardless of what the results show. Before we go any further, a quick note on the scores:

Net Promoter Score by industry

Looking across net promoter scores by industry in 2019, 2018, or any other year, you may be surprised by how low the scores are. Some of the highest ranking companies in the world achieve a 70 out of 100.

Research shows that up to 75% of people are likely to share a negative experience with their network compared with just 42% of people who are likely to share a positive review. So low scores aren’t unusual — but that doesn’t mean you don’t need to keep working to move it up. 

Use NPS and Feedback to improve your business

If your score is lower than expected, you’ll have your work cut out for you. Consider specific feedback seriously and work to make improvements on the complaints. Perhaps they relate to certain features or updates of your products; look into making appropriate changes.

Studies show that one in three customers will leave your business after just one adverse experience and 91% will leave after two or three so time is of the essence in retaining your customers!

If you’ve got a high score, you’re done, right? Not exactly. There are always improvements that can — and should — be made in order to maintain that high score. Keep an eye on specific feedback detailing what it was that customers like about your business and their experience with it.

If they mention something specific, perhaps use that component of your business as a model for others.

For instance, let’s say a customer raves about a guide they found especially useful on your website. If that’s the only one of its kind you’ve got, consider making more. If there are others, use this favourite as a template for them. 

Another example could be a support interaction that delighted your customer. Get your customer support representatives on the same page — share this review and what made that interaction great so the whole team can follow suit! Never stop thinking about what you can do to make positive changes. 

Benchmark your Net Promoter Score with similar companies

You know that your NPS may be lower than expected, but how can you gage if it can be considered to be a good score?

Technically speaking, a score of 0 would be completely average, meaning there are just as many promoters as detractors for your company.

But it makes much more sense to compare your NPS with your competitors as well as the average net promoter score for your industry to get an idea of where you stand. You’ll want to stay ahead of the industry curve and your net promoter score will help you assess if you’re doing it right. 

Reach out to unhappy and happy Customers

Keep in mind: according to a survey conducted by CEO of thinkJar Esteban Kolsky, just 1 in 26 unhappy customers complain; the rest don’t say anything. So it’s important to reach out to customers who’ve had a negative experience to learn more about why or to correct the problem, if possible.

On that note, you’ll want to reach out to happy customers as well: thank them for taking the time to share their feedback and ensure there is nothing else you can do for them at this time.  

Loyal customers are crucial for your business' success

Customer satisfaction survey questions don’t need to be long-winded and complicated; a net promoter score provides incredibly valuable information by getting your customers to answer just one question.

The success of a company goes hand in hand with customer loyalty, so if you’re going to measure something, the net promoter score of your company is the one you want.

Feel free to reach out to us if you’d like more information or want to get started!  

SOURCES

7 benefits of NPS: why use it over other customer satisfaction tools? - Campaignmonitor.com

Is Net Promoter Score Still Useful? - Businessnewsdaily.com

What Is a Good Net Promoter Score? - Blog.hubspot.com

5 Interesting Ways Real Companies Use Net Promoter Score Results - Blog.hubspot.com

Katie Dodd Syk
Writer