Word of mouth is incredibly influential.
In fact, 74% of consumers say word of mouth is a key factor when it comes to making purchasing decisions. This is even more so true for generation Z and millennials. 63% say they trust what influencers say about brands more than what brands say about themselves in their advertising.
Given how common it is to perform online research before trying out a new product or service, your business can be one tweet away from attracting or repelling future customers. The same goes for referrals (or warnings) from friends, family and co-workers.
Keeping your finger on the pulse of how your customers are feeling and how loyal they are to your brand is key to keeping the lights on for your business. But, how exactly do you measure this?
That’s where a Net Promoter Score, also called an NPS score, can help.
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What is a NPS score?
An NPS score is one of the top customer service metrics businesses should track if they want to gauge customer satisfaction. An NPS score calculation lets you know just how likely your customers are to recommend your business to others they interact with.
It was originally developed by Fred Reichheld, a business strategist who researches and writes about loyalty.
Reichheld spent about two years researching survey questions that would link customer behaviour, such as referring and purchasing products, with business growth. He was surprised to discover the most effective question wasn’t directly about customer satisfaction or loyalty. Instead, it was about how likely someone is to recommend a product, service or company to friends, family and co-workers.
For someone to give a strong recommendation, it means they’re putting their own reputation at risk. This can be a good indicator of both customer satisfaction and loyalty. For most businesses to effectively grow their business, getting that customer loyalty is vital. For businesses to succeed, depending on their offering, they usually need repeat customers and referrals.
Why the NPS score matters and how to use it
The biggest benefit of the NPS is that it’s been shown to increase customer retention. That matters because it’s way cheaper to retain customers than it is to constantly acquire new ones.
NPS makes it clear who your promoters are. That means you have the opportunity to reward them for their loyalty and build your relationship with them.
Rewards can come in the form of perks, referral codes, and much more. Simply reaching out to them and acknowledging their loyalty will earn you brownie points, too.
On the flipside, it also gives you the chance to quickly connect with your detractors, reaching them before their opinion of your brand hardens.
Regardless of how you score, conducting regular NPS surveys should reveal the precise interactions that create your promoters and your detractors. With that level of specificity, you can quickly identify the areas you need to invest in to keep your customer base (and hopefully turn some detractors into promoters).
How to calculate your Net Promoter Score
Marketers can calculate a net promoter score by asking a single question: On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?
The NPS survey is really as simple as that.
Source: MailChimp
After asking the NPS question, you can group respondents in three different categories:
Promoters (score 9 to 10): Promoters play a key role in your business. They’re loyal customers who hype up your products and services to those around them. They can essentially act as an extension of your marketing department.
Passives (score 7 to 8): Passives are satisfied customers but they’re not exactly singing your praises. They could eventually become Promoters or they could be swayed by the competition.
Detractors (score 0 to 6): Detractors are unhappy with your company and less likely to be repeat customers. Worse, they can diminish your brand’s reputation by relaying their negative experiences to others.
To figure out your net promoter score, subtract the percentage of detractors (your unhappy customers) from the percentage of promoters (your loyal customers). Passives are not included in the formula. Your final score will fall somewhere between -100 to 100.
You can also fold more questions into your survey. Some common ones include:
- How did you hear about our company?
- Did you find what you were looking for today?
- How easy was it to find?
- How was your overall experience with our company?
Avoid overloading your customers with questions, though. The beauty of the NPS survey is that its brevity leads to a higher response rate than traditional surveys.
On top of your NPS score, you can add in user engagement metrics, like time on page, average length of session and bounce rate, into your analysis. That way you have more insight into your customers’ journeys — without bogging them down with survey questions.
When should you conduct an NPS survey?
The simplicity of the NPS formula is what made it such a game-changer in the marketing world.
Instead of asking customers to fill out long, general surveys about your company, the NPS can potentially capture their opinions at every step of the journey.
So how does that work in practice?
When it comes to the NPS, timing is everything. You want to make sure you’re reaching customers after every major activity they perform.
If there are a lot of steps in the customer journey, though, Harvard Business Review recommends offering the survey randomly to customers to fend off survey fatigue.
That way, you map out the entire user experience, capturing both the good and the bad aspects of the journey — with an emphasis on the good stuff. You might be creating ‘Wow!’ moments for your customers and not even realize it.
Technology is making it easier than ever to catch customers at just the right time. Some of the most popular channels for NPS surveys include:
- Instant messaging (Facebook Messenger)
- Text
- In-app
- Chatbots
You’ll likely want to use more than one of these channels to solicit feedback. There are lots of templated responses available on the net to help you get started.
What is a good NPS score?
NPS scores fall somewhere between -100 to 100. The higher the score, the better, and vice versa.
Bain & Company, which owns the trademark of the NPS system, defines any score above 0 as being a step in the right direction. The fact that you’re not in negative integer territory demonstrates at least some degree of customer loyalty.
Of course, you probably won’t be satisfied with a score in the single digits. Any score above 20 is seen as “favourable,” a score of 50 is “excellent,” and 80 or above is considered “world-class,” according to the firm.
However, deciphering the meaning of your NPS can be tricky.
First, as with any survey type, you want to make sure that you have a large enough sample size. Every industry is different, so there’s no clear-cut answer as to how many answers are enough. What is known is that more is definitely better, and that’s especially true if you have a limited customer base. You should definitely be skeptical of a high score after only surveying a dozen or so customers.
It’s also common for people to be surprised by how low their company’s scores are. A low score is not always an immediate cause for alarm and it may have more to do with the business environment you’re operating within.
For example, the location of your consumers will influence your NPS result. Research shows that respondents in Europe tend to be more conservative with their ratings. On the other hand, in the United States, customers hand out high marks more liberally, even though in real life they aren’t avid promoters.
It’s also important to consider industry norms. Some industries, especially ones that have tough relationships with clients, like collections agencies, tend to score low on the NPS scale.
Benchmarking data can help you understand where you stand in comparison to your competitors.
Some insights you can glean from benchmarked data include threats and opportunities for your business, and seeing if a competitor has recently implemented a change that has boosted their NPS. You can explore whether it’s worth replicating that process.
To find out what the benchmark NPS score is for your industry and location, that kind of data is available for purchase from a third-party market research firm.
If you’re operating in an emerging industry, where NPS scores for competitors aren’t available just yet, determining your NPS score is still a worthwhile exercise. In this scenario, you’d use your past performance as your benchmark.
It’s important to note that any improvement in score is an indicator of future growth. Of course, the opposite is true, too.
Free NPS calculators
If you’re not ready to invest in professional NPS tools just yet, there are free options you can explore. Our free Customer Service Performance Report template includes an NPS calculator, as well as calculators to help you measure other business metrics such as:
- Customer churn,
- Customer acquisition costs,
- Customer lifetime value,
- Net Promoter Score,
- And more.
Best of all, it’s totally free.
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The post NPS: What is a Net Promoter Score and Why Should You Care? appeared first on Social Media Marketing & Management Dashboard.
