Net Promoter Score Advantages

10 Advantages of Tracking your Net Promoter ScoreSM

CloudCherry | Featured | October 26, 2015

There used to be a time when brands were yearning for a means to measure how loyal their customers are. They wanted to know whether a customer who had visited them once would not only come back the but also refer the brand to his friends and family. And all such doubts and worries were put to bed, following the adoption of the Net Promoter ScoreSM.

The Net Promoter ScoreSM is used to evaluate customer loyalty and uses one question to measure said loyalty: How likely is that you would recommend this product or company to a friend or colleague?

The answers are on a scale from 0 to 10, where 0 is not likely at all and 10 is extremely likely to recommend. The scores are then separated into three categories:

Promoters are those customers who have rated you 9 or 10. They are your most loyal customers who not only keep coming back to purchase from you, but also advise their friends to do so, making them your advocates;

Passives are customers with scores of 7 and 8. They aren’t ecstatic with you and neither are they totally dissatisfied, which means they can easily be enticed over by the competition;

Detractors are customers with scores of 6 or below. They are unhappy and not only will they never ever visit you again, but they’ll also make sure everyone knows precisely how poorly they were treated by your business.

The Net Promoter Score calculation is done by deducting the percentage of detractors from the percentage of promoters. So, if you have 50% promoters and 20% detractors, your NPS® is 30 percent. Of course, you want this score to be as high as possible.

Now that you understand the Net Promoter ScoreSM, or NPS®, you might be wondering how it can help you. Here are ten reasons you should be tracking your NPS Score.

1. NPS® Makes Life Simple

NPS surveys are very simple to run. They require two or three questions at most, which also increases the response rate due to the low burden on the customer. The main question requires a response on a simple scale of 0-10. Furthermore, the score itself is simple to calculate and doesn’t involve any complex indices or equations. It’s a number that can easily be tracked as frequently as in real-time, allowing you to keep a close eye on customer loyalty.

2. NPS® Is Easy and Effective

The Net Promoter Score survey is easy to conduct. You can do it by e-mail, via your website, or by phone. Of course, choose the option that offers the best response rate and that generates the most accurate responses. The scores can then be calculated quickly and easily, allowing you to get the information you need as fast as possible.

3. NPS® Gets You and Your Staff Thinking from the Customer’s Perspective

The standard performance metrics include things like revenues, profits, costs and so on and while revenues and profits will continue to be the ultimate measures, they aren’t always the ideal way of measuring potential future growth, or lack thereof.

The Net Promoter Score forces you and your staff to think of the future in terms of your customer rather than focusing on short-term benefits, which could be the results of strategies that annoy your customers. It allows you to look into the future, and implement strategies that can eventually improve the other metrics.

4. Most Effective Measure of Customer Loyalty

Customer satisfaction and customer loyalty aren’t always the same thing, and measuring solely customer satisfaction isn’t sufficient. A business must understand precisely how loyal a customer is to determine their true level of happiness. And the Net Promoter Score not only allows you to measure the degree of loyalty, but it also allows you to determine how effective any changes you’ve made have been by simply asking the same question twice, once before implementation and once after.

5. Makes Increasing Customer Satisfaction Easier

The more satisfied your customers are, the more loyal they will become. NPS makes it easier for you to increase customer satisfaction by determining the effectiveness, or lack thereof, of the programs you are implementing. So, by measuring NPS before you implement a customer loyalty program, for example, and then once again while the program is in progress, you can find out whether the strategy is working or not. You can then make changes as required based on the changes to the NPS score.

6. Helps to Increase the Number of Customer Advocates

Being able to measure customer loyalty in real-time makes it easier to increase that loyalty and turn as many customers as possible into advocates. By running NPS surveys regularly, you can see if your score is dropping or increasing. This way you can stop doing whatever is driving your customers away or keep doing whatever is growing that score.

7. Encourages Customer Feedback

Customer feedback is a critical tool for any company that wishes to thrive because it provides a clear blueprint on how a service or product can be improved. The Net Promoter Score tends to encourage customers to leave further feedback because by conducting NPS surveys, you make it clear to customers that you really do care about what they think. You can also contact customers categorized as passive or detractors to gain even more feedback about what you can do to improve their experience.

8. Lower Your Customer Churn Rate

Research has found that promoters, i.e. highly loyal customers, tend to abandon a brand less than passives or detractors. Thanks to NPS, you can improve the number of promoters and thereby reduce the customer churn rate, which is a sustainable business model that allows for more effective expansion of your company.

9. Improve Customer Relationships

Just by running surveys and measuring the Net Promoter Score on a regular basis, you can improve relationships with your customers, even the detractors. This is because it shows your customers that you do care enough to ask them how they feel about your company and product or service. With passives and detractors, you should go the extra mile and ask what you can do improve their experience. While there will be an immediate improvement in their perception of your business, to maintain and boost the improvement, you will have to also implement measures. Listening is the first step, but taking action is essential to generate real long-term results.

10. Improve the Lifetime Value of Your Customers

NPS allows you to focus on improving customer loyalty and increasing the number of promoters among your customer base. Studies have found that promoters have a higher customer lifetime value, spend more than detractors per transaction, have a lower churn rate, aren’t always on the lookout for the best deal, and they cost less in terms of marketing and advertising.
Furthermore, they are responsible for between 80 and 90% of referrals. In other words, the more promoters you have, the faster your customer base will grow.

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Net Promoter, NPS, and the NPS-related emoticons are registered service marks, and Net Promoter Score and Net Promoter System are service marks, of Bain & Company, Inc., Satmetrix Systems, Inc. and Fred Reichheld.