June 27, 2018

What Is NPS? Building Your Business with Promoters

Posted by Raluca Marmureanu Category Icon2Checkout Category IconMarketing
What Is NPS? Building Your Business with Promoters

Net Promoter Score, or NPS, is something you might hear talked about often. But what does it really mean, and why does it matter to your business? In this post, we take a closer look at why NPS is important and how you can measure it with an NPS survey. The results of a good NPS survey can reveal a lot about what your customers want and how you can strengthen your relationship with them, so keep reading!

What Is NPS?

Your Net Promoter Score (NPS) measures how likely your customers are to recommend your product or service, by asking them the likelihood that they would recommend your business on a scale from 0 to 10. Customers who rate you a 9 or 10 are considered promoters, customers who rate you a 7 or 8 are considered passives, and anyone who rates you 6 or below is regarded as a detractor. Find your NPS by subtracting the percentage of detractors from the percentage of promoters. So if 60% of your customers are promoters and 20% are detractors, your NPS is 40%.

What Is NPS?Source: netpromoter.com

Why Is NPS Important?

There are many reasons why NPS matters to your business—here are just a few:

Recommendations Attract Customers

As HubSpot points out, 83% of respondents to Nielsen’s Global Trust in Advertising Report trust recommendations from family and friends more than any other form of advertising. This means that your entire ad budget might never make up for a lack of recommendations. Because NPS measures the likelihood that someone would recommend your product or service, it can indicate the health of a key promotional channel for your business. Think of it like the most effective ads you can buy (except, of course, you can’t buy NPS results!).

Additionally, because customers are more likely to share a bad experience than a good one, you may have to work all that much harder to encourage happy customers to actively promote your business.

Good Experiences Create Loyalty and Retain Customers

NPS is important not only for attracting new customers, but retaining existing ones. It’s very clear that retaining existing customers is less expensive than attracting new ones, and promoters are likely to grow their business with you over time. If many of your customers are not happy, you’ll experience churn and have difficulty building a consistent customer base to drive long-term growth. Understanding why customers promote your service or how you could win over detractors can help you boost customer loyalty and keep your customers around for much longer.

Good Experiences Create Loyalty and Retain Customers

NPS Scores Track Trends Over Time

Measuring NPS on a regular basis can help reveal important trends in customer satisfaction. A sudden increase in the number of detractors or passives might indicate that you’re at risk for churn, and need to take action. Try to figure out what changes in your business might have caused the shift in your score. Measuring NPS should involve a commitment to not just measuring the score, but taking action to improve it. That means, ideally, that your NPS should increase over time. If it doesn’t, either you’re not listening to your customers or something else is going on that might be putting your business at risk.

How to Measure NPS

The standard NPS question is clear: “On a scale of zero to 10, with 10 being highest, what’s the likelihood that you would recommend us (our company) to a friend or colleague? However, there are many other ways to enhance this question by asking for more information about why customers give the ratings they do, and what’s important to them. You can also focus in on understanding which touchpoints in the customer journey are more important to customers. Some easy ways to follow up include simply asking “Why?” or “What would it take for you to recommend us?”

NPS alone is not very actionable, so it’s crucial to understand the reasons for driving your customers to be detractors, promoters or passives. While converting a detractor to a promoter might be difficult, it will benefit your business to convert passives to promoters, so understanding why people are passive or promoters is absolutely necessary.

When administering your NPS survey, make sure to include qualitative questions or room for free-form comments about why your customers would or would not promote you. This will help you identify where to focus your efforts as you strive to improve your NPS by converting passives and detractors.

A commonly cited issue with NPS is that the 0 to 6 range is broad, and puts angry customers you’ll never win back alongside people who may be merely indifferent. That’s why it’s so important to ask your customers why they gave the rating they did: it will reveal what you can do to change that rating if anything.

As with any marketing effort, segmenting your NPS results can deliver important insights. If your long-term customers are promoters but new customers tend to be detractors, you may want to look at how you can improve your onboarding process to convert newbies to promoters earlier on in their time with you. Or, if your percentage of detractors grows over time, increase engagement and retention efforts to keep long-term customers happy. You can also look at your score by different products, regions or industries to identify actionable trends.

As you do, keep in mind that there’s no specific NPS score you’re aiming for: average scores vary by industry so you can look for benchmarks, but improvement matters most. For instance, according to a recent study, in the financial services sector, the average net promoter score (NPS) is +44, for B2C technology companies it’s +58 and for service providers +69.

Tips on Creating an NPS Survey

Keep it short: in addition to the core NPS question, you should ask only 2-3 follow-up questions about specific product or experience elements that are important to customers. One of the biggest advantages of NPS is its simplicity, so don’t go overcomplicating things with 30 extra questions. This could even take away from your score as customers may feel less likely to recommend you after a long survey!

Tips on Creating an NPS Survey

Another key for an NPS survey is to follow up in a targeted manner. Thank your promoters for promoting your business, perhaps with a discount or special offer, and ask your detractors what you can do better. Also, consider asking happy promoters to participate in a case study or testimonial with you, or leave an online review. If detractors provide information about what they want from you in the survey, make sure to listen and show to your customers how you’re reacting to their feedback. If you’re simply chasing down a score but not making efforts to improve things for your customers, your NPS score may end up declining over time as you continue to ask customers to score you without providing them a better experience.

Follow general best practices and listen to your customers as you implement your NPS survey. You’ll find that, as usual, the customer knows best—and that listening to their opinions can make all the difference for your business!

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