Why You Should Measure Net Promoter Score (NPS)

Many times, when I want to make big decisions like buying a new phone, any new gadgets, or investing in any mutual funds and share market — I always follow three rules. Might I suggest these rules to you? Here is why you should measure the net promoter score (NPS).

My rules for large or small decisions

First: I check other people’s recommendations on the websites. Second: I myself ask my friends, family, relatives, and my colleagues. Based on their thoughts about the product or service — Three: I take a couple of minutes — to think! Following these three simple rules — I can quickly make a firm decision.

Similarly, your customers may not even realize that they are following the same rules to make decisions.

Your family, friends and even customers buy products, services on the basis of the recommendations from other friends and relatives. According to a study, 83% of respondents said they trust recommendations from family and friends more than any other form of advertising.

It’s important for you and your business to know whether your customers are interested in your product or service. Start asking: who is recommending my products, services, and business brand to other people?

When you ask those questions — here is where the Net Promoter Score (NPS) metric can help you to track customers’ willingness to recommend your brand to others.

What is the Net Promoter Score?

Net Promoter Score is a leading customer feedback metric that helps you to gauge the customer experience, specifically customer loyalty and satisfaction. The Net Promoter Score can be achieved by conducting the Net Promoter Score Survey using the Net Promoter Score Survey Software (from zonkafeedback).

The zonkafeedback customer experience metric system was introduced by Fred Reichheld of Bain & Company in the year 2003  through his best-selling book named “The Ultimate Question: Driving Good Profits and True Growth.”

How Net Promoter Score System Works?

The Net Promoter Score comes from the simple NPS Question: “How likely would you be to recommend our (PRODUCT/SERVICE/BRAND) to a friend or relative?”

With that question, the customers are provided with a score scale from 0 to 10 to range their willingness to recommend.

After that, the business will segregate their respondents or customers on the basis of nature (positive, negative, and neutral) of their scores and broadly categorized them into Detractors (who scored you from 0 to 6 ), Passives (who scored you 7-8), and Promoters (who scored you 9-10).

How to Calculate the Net Promoter Score?

The Net Promoter Score can be calculated by using the simple NPS formula where you have to subtract the total percentage of the detractors from the total percentage of the promoters. The Net Promoter Score number can range from -100 to 100.

You can also use an Online Net Promoter Score Calculator.

Why You Should Measure Net Promoter Score?

The Net Promoter Score is the quickest and easiest way to get a clear picture of your customer sentiments. It can further help you to identify the strengths and anomalies of your products or services and make it better and more customer-centric.

There are many reasons why you should be measuring your company’s Net Promoter Score:

1. It measures customer loyalty
2. It provides an instant indication of customer satisfaction
3. It drives word-of-mouth traffic
4. It leads to product improvement
5. It enables to close the feedback loop
6. It reduces customer churn rate

Here is what you can now base your business on:

1. It Measures Customer Loyalty

Customer Loyalty refers to the customer sentiments or positive experience in which consumers express their satisfaction level achieved after using any product or service. Loyal customers will not only engage with your brand but also likely to choose your products and services consistently over other competitors.

According to the research report, 66% of US consumers make decisions based solely not on the product and its price, they are also considering the loyalty factor as well. They are willing to spend more on those brands to which they are loyal.

For example, there are lots of features in the iPhone that are similar to that of Android phones, but Apple loyalists will choose an iPhone despite it being priced higher than its competitors.

If you are choosing customer loyalty as a performance indicator, you need to take care of two things, first is choose an accurate way to measure it and second is the ways to control its fluctuation.

When it comes to measuring customer loyalty accurately, the Net Promoter Score and Churn Rate are two measuring metrics that can help you to drive accurate customer-powered data.

Calculate the Net Promoter Score

To check your customer loyalty, you can conduct the Net Promoter Score Survey among your customers. If they score their willingness to recommend your product/service/brand to others 9 or 10, then they are promoters and considered to be loyal customers. But if they score their willingness from 0 to 6 and 7-8, then they are detractors and passives respectively.

Measuring the Net Promoter Score can help you to identify your detractors and passives (kind of disloyal customers) and follow up with them to solve their issues. This helps you to improve your customer experience and turn your detractors or passives into promoters.

2. It Provides an Instant Indication of Customer Satisfaction

It is clear that the NPS Survey gives you a concise understanding of the customer relationship with your brand. But along with the loyalty, NPS Survey also helps you to track instant customer satisfaction.

The Net Promoter Score Surveys can be conducted quickly after an event or transaction to track instant customer satisfaction. Let’s see, how?

Transactional NPS Survey helps you to gauge the real-time instant customer satisfaction immediately after the specific interaction or transaction or event like placing a new order, booking tickets, doing online payment and so on. The answer helps you to determine those things that caused an unpleasant experience for the customer.

There are different touchpoints in the customer experience journey where you can trigger the transactional NPS Questions and ask, “How would you rate our company on a recent experience?” Some example times to ask will be:

• After Ticket or Call Raised – Once you conclude the call with the customers, you can send them a Transactional NPS Survey to determine whether they are satisfied with your interaction and support services or not? With this practice, you can also gauge the level of effort your customers are putting with your customer service agents to get their queries resolved.
• Post-Order Survey – When your customers have placed a new order or completed any specific business transaction with you, always send them a transactional NPS survey via SMSes or Emails to track their real-time experience and customer satisfaction. Data collected through surveys can help you to streamline your product and customer strategies and improve the customer journey.
• Post-Delivery Survey – Post delivery surveys are very important if you are an Ecommerce business owner or a restaurant dealing in food delivery service. You can share transactional NPS surveys either through SMSes or you can also encode QR Codes on the boxes or bills. Post-Delivery Surveys serve you with the key indicator to analyze your delivery & logistic services.

3. It Drives Word-of-Mouth Traffic

In this competitive market space, driving customers to the business is the biggest challenge. It is important for a business to first focus on bringing new customers to the business and this can be achieved when your existing customers spread positive word-of-mouth for your brand. Here the Net Promoter Score Survey enters into the play.

It is already cleared that NPS Surveys data determine your detractors, passives, and promoters. But the whole thing revolves around how you are using the NPS survey data?

There are many ways to deploy NPS Survey data to get positive results. One among them is deploying the promoters’ scores, their positive word-of-mouth to build a strong brand image. When your promoters recommend your products/services/brand to their friends and relatives, they are indirectly quantifying the word-of-mouth traffic.

According to Nielsen’s latest Global Trust in Advertising report, 92% of consumers trust recommendations from their friends and relatives more than other mediums. Thus, online customer feedback and reviews have become the second most trusted source.

If you want to augment your word-of-mouth traffic, you need to get more and more promoters and for this, you need to conduct the NPS Surveys. If you are worried about detractors, then don’t worry, with the Net Promoter Score Survey Software, you can quickly follow up with them and solve their issues and improve their perception towards your business.

Quick Follow Up — Fix the Issue

Quick follow up helps you to turn your detractors to promoters. According to Lee Resources, 70% of detractors will do business with you again if you fix an issue they’ve complained about.

You can share the word-of-mouth (high Net Promoter Scores, positive feedback, recommendations) at different stages of the buyer’s journey including product consideration, evaluation, and purchase to develop the market and attract more new customers to the business.

4. It Leads to the Product Improvement

Products or services need time to time up-gradation and improvement to survive in the competitive market wherein customers can quickly switch to the other brand if they are not satisfied. So, it is important for every business to check whether the products or services are performing well among customers or not?

Deploying Net Promoter Score Survey can help you to understand the negative side of your product and service. Real-time tracking helps you to upgrade and improve your products and services.

How?

When it comes to surveying customers, NPS Survey system offers a two-part questionnaire:

• Close-Ended NPS Survey Question – The Net Promoter Score question itself “How likely is it that you would recommend [Organization/Product/Service] to a friend or colleague?”
• Follow Up NPS Survey Questions – These questions refer to the open-ended follow up questions where you ask the reasons for their scores.

We have different types of NPS Follow-Up Questions that can help you to go into the meat of the issues faced by your customers. Some best Follow-up NPS Survey Questions are:

• What is the primary reason for the score?
• What was missing or disappointing in your experience with us?
• What do you like & dislike about (company or product name)?
• How can we improve your experience?
• How can we make you happier?
• Logic-Skip Based NPS Questions

These questions help you to identify the strengths and anomalies associated with your products or services and quickly improve them to ensure a better customer experience.

It is not necessary that you can only approach your detractors with follow up questions. You can also effectively use the follow-up questions among your passives and promoters. In the case of passives, when you ask the reason for their scores, you’ll get to know the things that stop them from being promoters. This again provides you with scope to make your products or services better.

In the case of promoters, this helps you to understand the positive side of your products and services and make it even better.

5. It Enables to Close the Feedback Loop

This is one of the most important strategies you should consider when you are deploying the Net Promoter Score System to follow up with your detractors. Why? Keeping your detractors unaddressed can be dangerous for your brand image and business growth.

Detractors usually not only give negative feedback and bad scores but also spread bad word of mouth for your brand. According to the study published on LinkedIn, 75% of consumers stated that they share a negative experience with their friends and colleagues, whereas 42% of them stated they’d recommend a product/service. The negative feedback has more impact on the mind than a positive one.

Addressing detractors and close the feedback loop is a healthy practice for your business.

When it comes to closing the feedback loop with your detractors, you need to understand the Customer Feedback Loop Anatomy. It helps you to identify and address each and every kind of issue of your customers. There are basically two types of customer issues in customer feedback loop anatomy:

• Recurring Customer Issue – It refers to the common and general issue which happens with many customers. Say, if customers (guests) give feedback about the hotel’s washroom, its cleanliness, availability of toiletries, etc. These issues are considered to be recurring issues and are solved on the business level.
• Personal Customer Issue – It refers to the issues that specifically happen with individuals. These issues are based on the personal opinion of the customers. These issues are solved by following up personally with the customers.

Once you understand this anatomy, it will help you to look at every nook and cranny of every concern of your detractors and swiftly solve them to improve their experience.

To close the negative feedback loop with detractors, first follow up with them personally, either through an email or through a personal phone call. You can open your conversation with the apology and then ask some really engaging questions like

What is the thing that they couldn’t find in your products and services?, How we can improve your experience, etc. These questions will help you to convince your detractors and coney them that you are really concerned to fix their issues.

Besides, personally following up with them, you need to make them feel very special. For this, you can provide them with some free giveaways like free products or service guides or you can also provide an extension of the free trial.

6. It Reduces Customer Churn Rate

Determining the inflow (who stay in) and outflow (who go out) of the customers is very important for improving overall business growth. And with churn, forget about improving, you can’t even achieve the ground level of the business growth. So, start focusing on reducing Customer Churn Rate.

Customer Churn Rate refers to a business metric that enables you to calculate the number of customers who leave your business over a specific period of time. When you calculate your churn rate, you could able to find your churned customers. These churned customers provide constructive criticism that works as a great source of products, services or business improvement.

If you want to calculate the Customer Churn Rate, you can use the given formula:

Churn Rate % = Number of Churn Customers ÷ Total Number of Customers ✕ 100

Total Number of Customers = Number of existing customers + Number of acquired new customers – Number of churned customers

For example, say if you want to calculate the customer Churn Rate for a period of 30 days. Say, on day 1 you have 500 customers and during the next 30 days, you acquire 100 new customers. During the same 30 days, 10 of your existing 500 customers do not convert or cancel for whatever reason (assumed lost).

Customer Churn Rate = Number of Churn Customer Total customers ÷ (Number of existing customers + Number of acquired new customers – Number of churned customers) ✕ 100

Total Customers = 500 +100 -10 = 590

Therefore, 10 ÷ 590✕ 100 = 1.69%

So, Customer Churn Rate = 1.69%

Conclusion

Measuring and using your Net Promoter Score to the best advantage for your business will bring increased business and satisfaction.