The Measuring Stick of Revenue & Loyalty: Net Promoter Score
In the early 2000s, Frederick Reichheld, a Bain & Company Fellow, was on a quest to determine if there were indicators beyond “customer satisfaction” surveys to indicate customer loyalty, engagement, and probable future sales. These customer loyalty insights were coined, Net Promoter Score® (NPS). NPS is a customer loyalty and satisfaction measurement taken from asking customers the ultimate question: “How likely is it that you would recommend Company X to a friend or colleague?” Today, many organizations consider it the gold standard to not only assess the customer experience, but to predict business growth by quantifying loyalty.
Why is NPS So Important?
Imagine the shock of spending most of your time ‘chasing your tail’ due to customers, suppliers and employees that aren’t as committed to your company and loyal to your brand as you thought? You can measure almost anything using the NPS metric. In addition to understanding the overall NPS for your organization, you can track scores for everything from individual products, services, stores, web pages, or employee retention. NPS can help your company understand your target market better and see how they respond to your product or service, social media campaigns, and customer service agents. The goal is to gain loyal customers who become brand evangelists instead of consumers.
How to Implement Net Promoter Score Metrics?
To calculate the NPS comes from the golden question: “On a scale of 0 to 10, how likely is it that you would recommend our organization to a friend or colleague?”
Based on the number a customer chooses, they’re classified into one of the following categories: “Detractors,” “Passives,” and “Promoters.”
Breakdown Scores
- 0 – 6: Detractors
- 7 – 8: Passives
- 9-10: Promoters
First, ask the question (how likely are you to recommend) and gather the data. This can be compiled via phone surveys, web surveys, in-person surveys, kiosks, cards at checkout or even QR codes.
From the data received you can categorize customers into the breakdowns: promoters, passives and detractors. Using the data from the previous two steps, do the following calculation:
Step 1 – NPS = % of Promoters – % of Detractors
Step 2 – NPS = 55% – 35%
Step 3 – NPS = 20%
Find benchmarks through your industry association, your survey provider or do your own survey of your competitors to see how you measure and compare to your competition. If someone is unhappy with your services or products it’s critical to respond quickly to make sure you show empathy and can resolve and capitalize on any complaints.
Dig deeper and determine why customers are in each bucket. This will probably require further segmentation by age, sex, demographics, and customer type. You will discover over time, there is a correlation between a positive NPS score and the lifetime value of a customer. Using the NPS metric to constantly guide both strategic and tactical decisions is a long-term tool to ensure profitable growth for your organization. If the customer’s score is low, then we as business owners must assess whether the problem lies in the experience or in expectations set during the sales process.
How Do You Measure?
How well is your business doing in the eyes of your customer? How do you know? What are you doing with that information? If you wish to speed up the process, there are several NPS tools and surveys to consider implementing within your organization. LINK
We are all familiar with the concept of what we regularly measure and focus on tends to improve. Now more than ever is the time to focus on your customer’s loyalty. Ask customers how you can help—and how you can provide an even better customer experience. What you do today, the empathy in the messages you send to your customers: that will be what they remember when we move into a post-coronavirus world.
