Net Promoter Score or NPS measures the overall customer experience and is a prediction of business growth. Above all, the calculation of NPS is quite simple. The simplicity of tracking and monitoring NPS is what makes it so attractive for a business. Above all, NPS is a practical framework that represents a customer balance sheet for organizations. This popular metric takes the percentage of an organizations promoters and subtracts it from the percentage of their detractors. As a result, you get the Net Promoter Score for a given company. For example, we have provided an outline below:
% of Promoters – % of Detractors = NPS
In this article, our digital marketing company will show you why NPS is such an important tool for growing a business. Also, in this article we’ve provided details on how the Net Promoter Score is used and how it provides a comprehensive and actionable view of an organizations overall performance in the customer experience. Even more so, we’ve provided insight on how NPS plays an important role for all types of businesses including digital and internet marketing.
Breakdown of Net Promoter Score Calculation
So, before we can get into the details of why corporations are using this tool as a main indicator of customer satisfaction, it’s important that we outline how NPS is calculated. First of all, NPS is based on a 0-10 scale with zero representing the worst experience and 10 being an indicator of the best possible experience. Also, there are two main forms of NPS. One is transactional and the other is Relational.
Net Promoter Score Surveys which focuses on transactional targets are generally given to a customer after a recent interaction with a company. In short, this could be in the form a support call or actual transaction. In contrast, Relational NPS Surveys are normally administered quarterly or yearly and are used to get an overall pulse of your customers feeling towards your brand. Also, Relational NPS Survey’s, also referred to as eNPS (Employee Net Promoter Score) are used to measure how likely staff members will recommend a company as a preferred place to work.
As outlined above, NPS is broken down into three categories:
A customer that responds with a score of a 9 or a 10 is considered a promoter for that given company. A score of a 9 or 10 represents an NPS of 100%. A promoter is considered to be loyal to the brand. Also, this customer is looked at as someone who will promote and refer the brand to friends, family and colleagues. Customers that are considered promoters fuel the growth of a brand.
Promoters tend to be less price sensitive than other customers. Bain and Company did a research on the importance of retaining customers and came to the conclusion that an increase of 5% of customer retention could yield profits anywhere between 25% and 95%. To sum up, promoters spend almost four times more than detractors. In short, this study proved that promoters have the biggest impact on ROI.
Passives / Neutrals
Customers that respond with scores of a 7 or 8 are considered as passives. A score of a 7 or 8 represents an NPS of 0%. Above all, these clients were satisfied with the experience. However, they are not as enthusiastic about the brand as promoters are. These are customers that are considered to always be shopping for a better deal. They can easily be swayed by competition if the deal is right.
Passive Are Important
In my expert opinion, neutrals are almost as important as promoters. And, here’s why. Promoters are loyal. They will stay with the brand no matter what. Pricing doesn’t play a significant role in their decision making as it does with Neutrals and Detractors.
They care about the experience and they want insurance that their needs are being met. As a result, if you keep your promoters happy with good service, they will remain loyal. However, passives are different. Pricing, promotions and experience all play a role in their decision making. While this can create a bit of uncertainty, it also creates an opportunity.
As a company, the idea should not be to harp on the 7 or 8. In contrast, the idea should be what could we have done differently, to turn that 8 into a 9 or a 10. And, this is why I consider passives to be the most important segment. It’s much easier to turn a passive that responded with a score of 7 or 8 into a 9 or 10 than it is to turn a detractor into a promoter. Later, in this article, we’ll explore different ways tips and strategies to make this happen for your business.
This segment of customers represent unsatisfied clients who could potentially do more harm than good to your brand. Customers become detractors due to a feeling of sustained neglect or a singular event which left a bad taste in their mouth.
This segment of customers has high churn and high defection rates. Detractors are more likely to spread bad word of mouth about a brand which could negatively affect business growth. Also, while some detractors may have profitable accounts, the negative impact that they have on other clients as well as employee morale can hurt companies more than it will help it financially. Any customer response that’s a 6 or lower is considered a detractor for a business. A score of a 6 or lower represents an NPS of -100%.
NPS Calculation Recap
- Promoters (Survey Result – 9 or 10) = 100% Net Promoter Score
- Neutrals (Survey Result – 7 or 8) = 0% Net Promoter Score
- Detractors (Survey Result – 6 or lower) = -100% Net Promoter Score
So, What Is The Industry Standard
Different industries have different expectations pertaining to NPS. However, 60% seems to be a favored target among many big businesses. 70% and above would be considered excellent. Again, expectations may vary from month to month as well as every calendar year based on the organization.
Also, expectations and goals may vary within different segments of a company. For example, the retail division of AT&T Mobility may have higher targets that the customer call centers associated with AT&T Mobility. To sum up, some companies may even consider scores as low as 30 as good. Even more so, these same companies may consider scores between 30 and 70 as great.
The History Of Net Promoter Score
NPS was first developed and initiated back in 2003 by Bain and Company. Bain and company are a global management consulting firm which advises business leaders on strategy and marketing related options. They developed this management tool to serve as a functional alternative to other generic satisfaction surveys.
Above all, the purpose of this tool is to measure the amount of loyalty that exists between customer and client. NPS is now widely adopted by more than 75% of Fortune 500 Companies. Business executives loves NPS because its focused on one singular question. An example of that question is:
“How likely are you to recommend our company/product/service to family, friends or associates?”
While this may serve as the main question, savvy businesses may add additional questions to better understand the perceptions of their clients. As a result, companies will be able to better target areas of opportunities and provide the necessary resources for improvement.
How To Use NPS Effectively
First of all, its important to set data points to better understand the key drivers of the score and what is influencing the score the most. Secondly, effectively developing key driver analysis will help to prioritize the areas of opportunity in a business. Finally, by adding more questions to an NPS survey, a company can create churn models to better predict clients that may leave a company.
Also, segmenting Net Promoter Scores allows companies to notice patterns more quickly. In short, this can allow organizations to set specific promotions, sales, etc., based on information derived from these patterns. For example, the segmentation of NPS can be done by purchasing behavior, demographic, or even the market. Ultimately, the qualitative feedback derived from the survey is what will make the most difference in improving the customer experience.
Finally, earlier we highlighted the importance of passives on an organizations ROI. The Net Promoter Score Survey allows a company to recognize these respondents more accurately and determine if feedback is needed. Sometimes, there was just some miscommunication or a misunderstanding that resulted in the bad experience. In most cases, this can be rectified with a follow-up interaction by a supervisor. While this may require more work, ultimately turning just a few customers from passives to promoters will pay huge dividends for a company.
Net Promoter Score and Online Marketing
Above all, from an online perspective, NPS plays a similar role for internet marketing. The objective is the same. Satisfy customers so that they will become loyal to your brand and ultimately refer your services or products to associates. While online marketing may be a bit more impersonal, the goal posts don’t move. Online based corporations, must work that much harder to meet the needs and demands of their clients. Most importantly, it comes down to delivering quality web contentin dynamic ways.
What’s great about online marketing is that there is no shortage of options. From email, to live chat, to phone support, the ability to connect and directly address the concerns of your clients are endless.
Net Promoter Score and Email Marketing
So, yes email marketing has a role in net promoter score as well. Consumers that actually interact with an email will spend upwards nearly 1.7 times more than clients that never open them. Above all this puts an emphasis on open rates, timing of emails as well as strategic email campaigns. In short, working with atop email company which specializes inautomation and real time data will help increase your net promoter score.
Here are some of things that will help increase your NPS results in online marketing:
- Communicate with Clients
- Deliver a quality service or product
- Deliver the service or product on time, every-time
- Follow-up to ensure satisfaction
Referral Marketing is also huge. According to Nielsen, more than 85% of satisfied customers are willing to recommend a company. Also, according to business2community, more than 82% of customers actively seek recommendations from friends and family. For online marketing, referral marketing plays a huge role because it can have traits of viral marketing.
Net Promoter Score Summary
Most noteworthy, setting up a reward program is a great strategy for online marketers. Above all, consumers love rewards. Also, it helps to increase sales from the same consumer. Even more so, according to a recent Bain research, consumers enrolled in rewards programs are more likely to spend 2.2 times more than non members. That’s a big number.
Also, customers are two times more likely to shop with a company that have both an online presence as well as in-store locations.
What It Really Comes Down To
To sum up, at the end of the day, stats are great. However, it comes down to customer retention and promoters. Stats only can provide direction. In contrast, companies must roll up their sleeves and produce a service that provides a need for the market that they are targeting. However, it doesn’t stop there. The product or service must be high quality. Most importantly, it should both meet and exceed the needs of the customer.
To achieve this, a company must have uniformity in the organization from top to bottom. In short, the message of customer satisfaction must be a message that is echoed throughout. The Net Promoter Score has manifested into something even bigger than it was originally meant to. Now, NPS results have direct implications on bonuses as well as raises within some companies. That’s how important NPS is.
Certainly, the companies that are able to be proactive and remain agile in their approach with NPS, will see the highest ROI.
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