One of the most important metrics for measuring customer loyalty is the Net Promoter Score. The metric indicates the willingness level of the customers so that they recommend your service or product. The metric was jointly developed by Satmetrix Systems and Fred Reichheld, Bain & Company. The year 2003 saw Reichheld saw introducing the Net Promoter Score in a Harvard Business Review titled “One Number You Need To Grow.”The popularity of this metric has grown by leaps and bounds over the last few years as higher customer loyalty indicates a higher level of customer satisfaction. The metric is being used today by a large number of companies throughout the world.
Need for Net Promoter Score
NPS ideally is about only one easy question – What is the likelihood that the customer would recommend the company’s product/services to their colleagues or friends? A key reason why this metric has become so popular over the last one decade is that many people are convinced that it is a powerful performance metric for increasing business profits and revenue. NPS is also extremely easy for the respondent to reply, as well as, for businesses to analyze.
Also, by focusing on a single metric that is highly visible and easy to understand, it allows organizations to motivate their entire staff to improve customer experience. Companies can also use NPS to flag at-risk customers and can work quickly with customers who leave low scores to address any issues raised. The score, a popular metric for measuring customer loyalty is simple to calculate and offers a snapshot of the performance of the company through the eyes of its customers.
The technique to effectively measure NPS
It has been already mentioned earlier that the calculation of NPS is done on the basis of responses to a single question that asks the customers whether they would be okay with recommending their services/products/company to a co-worker or a friend. The score is given on a scale of 0 to 10. It equates in between “not at all likely” to as good as “extremely likely.”
Promoters are those people who respond with a score of either 9 or 10. These categories of people are ideally looked upon as very loyal customers of your business. They tend to purchase more, remain customers of your company for a longer period of time and also give positive referrals to your other potential customers.
On the other hand, Detractors are those people who respond with a rating in the range of 0 to 6. There are fewer chances of them to exhibit a similar kind of approach like the promoters. This set of people can diminish the image of your brand through negative words or word of mouth.
There is a third category of respondents who are referred to as Passives and score in the range of 7 and 8. It is a set of customers that fall in the center of the other two earlier mentioned sets of behaviors. While these customers are usually satisfied with your company/service/product, they lack the same kind of an enthusiasm as shown by your promoters.
The Net Promoter Score of your company is that percentage of your customers who have emerged as promoters minus the customer percentage that is Detractors. Typically, an NPS or a Net Promoter Score, which is more than zero, is regarded as good while if the score is more than 50, it is regarded as excellent.
Take the maximum leverage out of your results
It is very simple to understand the model. After all, every business wants a higher number of Promoters as compared to Detractors. A business needs to keep in mind that the Net Promoter Score is simply a snapshot to measure your customer loyalty and not a holistic measure. In case you get a negative NPS score, it can be regarded as a red flag, which sends you an alert message that your customer satisfaction definition is at stake.
On the other hand, in case you NPS score is extremely positive, it actually means your support team is doing an excellent work. Irrespective of what outcomes you achieve, your business needs to act on various fronts after you get the scores, which are as follows:
- It is time to motivate your employees: Let your employees know the NPS score and inspire them to enhance your services and products. You need to also discuss with your employees what strategies you need to include or modify to create Promoters from the team of Passives.
- Do a follow-up research: You need to have a greater understanding of the root causes of your low customer satisfaction or greater customer joy.
- Also, concentrate on the good outcomes: It can be a great opportunity to know as well as expand the features customers perceive as your business’ best practices.
Peter Drucker, a renowned Management Consultant had said once that “If you can’t measure it, you can’t manage it.” It is indeed a big deal to retain your customers. Net Promoter Score can quantify your customer recommendations in a way so that it is actually possible to pit businesses against one another.