Your Only Guide to understanding Net Promoter Score
Updated: Jan 28
Net Promoter Score (NPS) is directly routed to customer retention. Any industry may it be E-Commerce, Insurance, Financial services or Mobility, heavily relies on customer loyalty. As quoted by Shep Hyken, “Satisfaction is a rating, Loyalty is a brand” truly speaks of how giants like Amazon, BMW, Apple and others have had a huge success in the market share by attaining customer loyalty.
One such metric that measures the customer loyalty of a company is the Net Promotor Score (NPS). NPS is measured by asking their customers a very simple question on how likely they are willing to recommend your product/service to others on a scale of 0-10.
So why is Net Promoter Score so important? According to the Nielsen Report in 2015, 83% of online respondents said that they trust the recommendations of friends and family. Secondly, London School of Economics derived a correlation between NPS and the revenue. As per the study, with an increase in Net Promoter Score by 7, the revenues were expected to increase by 1%. Thus, it is evident that NPS has a huge impact in driving the businesses across various industries.
In this article, I will briefly summarize on how NPS is calculated and recommend 5 strategies that will help you achieve a higher NPS score and thereby win more customers.
What is a Net Promoter Score? How is Net Promoter Score calculated?
The 1st step involves asking the customer to rate the recommendation of your product or service to others on a scale of 0-10. Based on the responses the customers are categorized into 3 personas: namely, Promoters, Passives and Detractors
Promoters: These customers have rated your service from 9-10 which indicates that they are in love with your offering and are highly likely to recommend it to others, i.e. net promoter score good.
Passives: These customers have rated you between 7-8 indicating that they are happy with your service but may or may not be periodic buyers. They are not highly loyal and might go to other competitors.
Detractors: These are your unhappy customers and have rated you between 0-6. They are not satisfied with your services and are likely to give a negative suggestion about you to others.
The 2nd step involves calculating the percentage of promoters and detractors and subtracting them from each other. This gives a NPS score which ranges from -100 to +100.
NPS= %(Promoters) – %(Detractors)
5 strategies to increase your NPS:
1. Setup a feedback system and collect Net Promoter Score:
The most crucial and basic step of understanding the customers is collecting feedback through surveys or interviews. Feedback could be collected through multiple ways, like contact forms, website widgets etc. It is required to ask for a NPS rating followed by an open-ended question that helps the customer justify their rating.
2. Engage your Promoters:
As promoters drive your business passively, it is time to put them to work. According to the 2017 Temkin research, promoters are 4.2 times more likely to buy again, 5.6 times more likely to forgive a company after a mistake and 7.2 times more likely to try a new offering compared with the detractors. Thus, it is required for you to provide them with an opportunity to help you grow your business. This could be done in several ways. As mentioned by ‘Jim Bass’, Firstly, by increasing your reference programs. For instance, financial companies like Commerzbank offer a 100 EUR bonus on referral. Secondly, by making use of webinars, white papers and testimonials from the promoters.
3. Regularly analyse your feedback to improve Net Promoter Score:
Net Promoter Score interpretation perhaps must be the most crucial and important strategy of your process. Here you have an opportunity to convert your detractors and passives into promoters and this could be done by hearing them out. Analysing feedbacks from all channels will help you realize the pain points of different customers. Analysing thousands of feedbacks manually can be troublesome and thus it is recommended to employ a software that helps you analyse feedback and provide insights. Pyoneer is one such software that analyses feedback through the power of AI and provides you actionable insights quickly. Since Pyoneer is a SaaS, you could now analyse the feedback at any given time, as many times without any external support.
4. Reinvent and Redesign your products and Services:
The goal should always be to provide the best customer experience for your users. This might involve redesigning your offerings at regular intervals and may include reinventing it with additional functionalities and features that increases your customer satisfaction. As per PwC 2017 research, 60% of CX leaders see larger returns from CX initiatives relative to other initiatives in their organization.
5. Set up a NPS officer for each product/service line:
Within the value chain model, the company has various functions like R&D, Manufacturing, accounting, Marketing etc. The dissatisfaction of the customer may not always be related the fault within the product but might be due to the services he/she received from other departments. For instance, the sales team did not communicate with the customers effectively. In such cases, it is required to appoint a NPS offices who identifies the root cause of the concern of the customer, i.e. Net Promoter Score interpretation and thus rectifies the operations of the respective department within the organization.
There are few companies who are still unaware of NPS and have not implemented the net promoter system within their customer experience metric systems. While NPS is not extremely complex process to implement, companies have to employ it as it is a major driver of business growth.