Established by Bain & Company in 2003, the Net Promoter Score (NPS) is a way to gauge how customers feel about your business, but more importantly, it evaluates and measures customer loyalty.
It’s a simple process where customers are presented with a short survey – often one question based on:
“How likely are you to recommend this brand/product/service to friends/family/colleagues)
The answers are fed into a formula that produces a single figure that makes for easier benchmarking so businesses can have an effective way to monitor the impact of their customer experience strategies.
If you’re not already using NPS as part of your marketing strategy, read the rest of this article to discover 10 reasons entrepreneurs need to use NPS scores in their business.
1. Gauge the Effectiveness of Your Strategies and Ads
A lot of businesses treat the net promoter score like some meaningless “vanity metric”. But, it’s so much more than that. It’s a great way for entrepreneurs to understand the effectiveness of specific marketing strategies and ads.
You can use NPS to measure the initial score of your brand, and then reevaluate the score at a later date as a way to see whether or not your strategies and ads are getting the desired results.
Additionally, while NPS is typically used to evaluate the general satisfaction with the brand, a modified NPS can be used for specific parts of your digital marketing mix. For example, you can reframe the question to ask customers or fans about their satisfaction with:
- Your blog or specific blog content
- Social network posts you’ve shared
- Online courses you’ve created
- Email newsletters
- YouTube or other video content
In short, you can modify the NPS for any number of purposes. The point is to keep the test short and focus on the user’s satisfaction with all or some specific part of your brand’s presence.
2. Drive Growth
Loyal customers drive growth by making referrals that bring you new customers, and your NPS score can help you achieve this.
This study from Allianz proves the relationship between NPS and organic growth:
If you begin to study your net promoter score as one of your key metrics, you’ll have the insights you need to channel your customer service efforts so you can boost revenue through upsells, referrals, etc.
In short, when you take on the NPS question, it will help you discover opportunities to gain insight into your level of customer loyalty, which you can then use to promote customer advocacy.
The most effective customer advocacy schemes make use of personalized interactions as a way to transform current customers into promoters.
One way to do so is to build an online community and create a space for them where your customers can share positive experiences on your blog, social media page, forums, etc. You can offer appealing incentives to get referrals, as well as think of other creative ways to encourage them to share their experiences on social media.
Your NPS metric will also help you improve frontline communication.
Your customer service reps have to build human connections and show customers that you value their business.
When you can channel customers to reps that are equipped to offer personalized and efficient care, it will greatly improve your business’s bottom line, and the insights you get from your net promoter score can help you find ways to improve this aspect of your business.
3. Increase Customer Satisfaction
NPS differs from other benchmarks like the customer satisfaction score in that it indicates the customer’s general sentiment about a business or brand, whereas the customer satisfaction score focuses more on their opinion on specific interactions or purchases.
That’s why it’s an important measure to consider when discussing customer experience. It’s a common language you can use for the customer conversation, and it breaks your customers down into simple groups: promoters, passives, and detractors.
Here’s a brief explanation of each group:
- Promoters: This group is made up of people with a response of 9 or 10. These customers are most likely to create value for your brand, either by making more purchases, becoming lifelong customers, or recommending your products/services to others.
- Passives: With a response of 7 or 8, these customers are somewhat satisfied with your brand, but are relatively unenthusiastic and probably wouldn’t promote your products or services to others.
- Detractors: These are customers who respond with 6 or a lower number. They are not particularly happy with their experience with your brand and probably won’t make another purchase. They may even negatively impact your business by sharing their dissatisfaction with others in their network.
The NPS system helps you to easily differentiate between them so you and your team have a common set of definitions to work with.
For instance, you can ask promoters for their opinion, and since these people already like your brand, they will be more willing to help. So you might ask them questions such as “Where do they get their sense of connection?”
This will help you implement improvements to make it more likely that you’ll convince more customers to become promoters.
Of course, it’s always good to consider if the fault lies with your product.
You can use customer visits and focus groups to see how your target customers interact with your product. This will help you understand if it actually meets the needs, and, if necessary, where you can make improvements.
NPS can help you increase customer satisfaction because it lets you see directly the level of your customer’s satisfaction with your service. You’ll have a way to measure how many of your customers are happy, and then take the necessary steps to rectify it if the numbers are not what you want or expect.
4. Gain Insights on Customer Loyalty
The net promoter score is an effective benchmarking tool for customer satisfaction, but satisfaction means nothing if your customers are not coming back.
You want to determine true customer happiness, and NPS can be a powerful tool to help you achieve that.
It gives you insights into the number of customers who are actually loyal to your brand by measuring their willingness to recommend your business to acquaintances and friends. When looking at customer loyalty, NPS also makes it easier to see the big picture at a glance, at any given moment.
5. Improve Customer Service
Customers who experience poor customer service aren’t very likely to return or refer others to your business.
Issues like cart abandonment, failed transactions, inventory shortages, delays in shipping, etc. can give people a negative impression and dramatically impact their level of satisfaction with your brand.
When this happens, NPS usually goes down, so you must look at your score as a consequence or outcome, which will give you the best way to figure out if and where problems are occurring. In other words, when used effectively, NPS can provide you with a stepping stone to improve your business’s customer service.
Instead of simply measuring the metric as a way to gauge the competitive range in your industry, you can use it to integrate customer orientation as a bigger part of your company culture.
And the best part is that the net promoter score is extremely easy to use, and you don’t need to be a trained statistician in order to administer an NPS poll.
Moreover, it’s a simple and intuitive survey that takes just a couple of minutes for customers to complete, which means that you’ll have an easier time getting customers to engage. You can present it to them in a variety of ways, including email, or as a pop-up on your website immediately after the transaction. You can then calculate the formula with a basic spreadsheet.
By measuring your net promoter score, you’ll be able to properly channel your customer service efforts which will ultimately lead to an increase in revenue.
6. Determine Your Brand Reputation at Any Specific Time
NPS is the standard benchmark used by a lot of companies across the globe, and as such, the metric is a great way for you to gauge how you are performing in comparison to your competitors.
It allows you to place your overall score in the context of other businesses in your industry so you can see how well you measure up.
The net promoter system also gives you the chance to close the feedback loop, which allows you to go vertical to gather more information from your respondents. At this point, you’ll have the opportunity to change any negative impressions.
For instance, you might ask your detractors how you could improve certain aspects of your brand presence. As an example, if you’ve discovered that respondents are generally dissatisfied with the look of your website, you may ask them how to improve your web design and then use web design software to implement the changes.
Adding these sorts of improvement-based questions to your NPS test, allows you to get real and genuine value from these people that will help you improve your business, products, and services – as long as you accept their criticisms and leverage them as the foundation for sincere reflection.
7. Reduce Customer Churn
Another reason to use NPS scores in your business is so you can reduce customer churn. While it’s important to focus on the performance of your business in creating promoters, it’s also crucial to find ways to reduce customer churn.
Promoters are a lot less likely to churn, but if you know your NPS, you can invest more into creating an awesome customer experience that will encourage detractors and passives to move into the green.
As a marketer, you know that acquiring new customers costs significantly more than keeping your existing ones. And, rather than allowing your passives and detractors to switch to your competitors due to poor service, rather work on ways to transform them by listening to their feedback and making the necessary changes to your products, services, or brand.
Overcoming Limitations of the NPS
Although the net promoter score is a powerful tool to use for your business growth, it also has certain limitations. For instance, there’s a higher likelihood for customers to report bad experiences than good ones, which means that some of your best customers might not bother leaving you a score at all.
For this reason, it’s important not to treat the NPS metric as an end unto itself, but rather to look at it as a guide for the direction your NPS is trending.
The focus should be less on the actual net promoter score, and more on the insights you learn from customer feedback.
Important Note: To get the most from your net promoter score, make sure to get everyone on your team involved.
When all the people you work with are aware of your NPS scores, the benefits, and reasons to use it, you’ll be able to brainstorm ideas from sales, marketing, customer service, and other areas of your business on the different ways you can define communication with prospects and get them interested in and excited about your business.
And remember, when working to improve your net promoter score, empathy is key.
After all, your customers are human and they want to feel that your brand resonates with them – their values, wants, needs, goals, challenges, etc.
So, if your company has a unique culture or hard-hitting values, you might think of different ways to show it off so you can increase your NPS score.
The NPS system has huge potential to help you move your business forward, as shown by the reasons outlined in this article. It will help you increase customer satisfaction, boost brand reputation, improve customer loyalty, and enhance customer service.
Use it to discover the story of your customer relationships. For instance, is the number of promoters growing? This could mean that your brand image is improving. If, on the other hand, you notice that your promoters are decreasing in relation to the number of passives, then you could be experiencing an increase in churn.
The NPS system will help you act quickly on customer insights so you can enhance your customer experience and improve the results of your marketing efforts.
Over to you. Are you ready to use this diagnostic tool to do analysis and find opportunities for improvement in your own company? Share your thoughts below!
Ron Stefanski is a website entrepreneur and marketing professor who has a passion for helping people create and market their own online business. You can learn more from him by visiting OneHourProfessor.com