Net Promoter Score: A guide to fostering loyalty

The year was 2003. Many companies found that they were spending a lot of money on tools to calculate customer satisfaction. But Frederick Reichheld from Bain & Company found that many organizations were focusing on the wrong metric. They were asking the wrong questions to the customers. He wanted to move from asking how satisfied customers were with their service, to something more actionable.

Over a span of two years of extensive research, he asked customers a variety of survey questions to find a link between the responses and actual customer behaviour. Was there a link between purchasing patterns and referrals and does it lead to company growth?

What he found out was shocking.

In most of the industries he studied, he found that the willingness to recommend a company to friends, families, and colleagues is one of the best indicators of loyalty and can ultimately lead to a positive impact on growth rates.You, your friends, and your families make recommendations all the time, and if the recommendation leads to a positive experience, a bond is created amongst you and the other person, based on trust. But if a poor recommendation is made, are you willing to trust that person enough to take their recommendation into consideration?

The question of credibility comes into question, and many customers don’t realize that an enthusiastic recommendation can put their credibility on the line.

So, if customers feel so strongly about a company, are they willing to do that?

And so the question…

“How likely are you to recommend this product or service to a friend or colleague?”

Ultimately led to the birth of the Net Promoter Score.

What is NPS?

NPS, or Net promoter score is a customer loyalty metric that measures customer satisfaction and the growth rate of companies. It uses an index that ranges from -100 to 100.

Companies first ask their customers-

“How likely are you to recommend this product or service to a friend or colleague?”

Customers can then select an option from a scale of 0 to 10, where 0 means that the customer isn’t likely to recommend the product or service at all, and a 10 is highly likely to recommend.

These answers are then segmented into 3 different categories.

Detractors

Detractors fall within the 0-6 range. They have a negative perception of the brand, are likely to lodge complaints, and spread negative word of mouth.

Passives

Passives score within the range of 7-8. Their feelings towards the brand are quite neutral. In terms of NPS, passives are considered less important as their scores don’t have an impact on understanding customer loyalty.

Promoters

Promoters score between 9-10. They’re advocates- likely to stay loyal, make regular purchases, and promote positive word of mouth.

The question is oftentimes followed up with a “why?” to further understand and analyze the customer’s reasoning for promoting or not-promoting.

How do you calculate NPS?

Once you gather the answers from the survey, you can determine your companies NPS with this formula:

NPS = (% of promoters - % of detractors)/total number of respondents.

While it’s easy to calculate NPS manually, it’s best to use a survey tool or a chatbot to facilitate the process as you scale up.

how to calculate net promoter score

What does a good NPS look like?

In an ideal world, a score of a perfect 100 is considered an excellent NPS score. Take the B2B NPS benchmarks from HubSpot as a reference point of where you stand against your competitors and to help measure your progress.

Department/Speciality Stores: 58

Tablet Computers: 47

Brokerage/Investments: 45

Auto Insurance: 44

Home/Contents Insurance: 42

Grocery/Supermarkets: 39

Hotels: 39

Online Entertainment: 39

Online Shopping: 39

Smartphones: 38

Credit Cards: 37

Laptop Computers: 37

Shipping Services: 35

Banking: 35

Airlines: 35

Life Insurance: 31

Cellular Phone Service: 30

Drug Stores/Pharmacies: 28

Software & Apps: 28

Health Insurance: 18

Travel Websites: 16

Cable/Satellite TV Services: 7

Internet Service: 2

Why is the NPS important?

1. High response rate

The shorter your surveys, the higher the chance of getting responses. Since NPS is, at max, a 2-question survey, it’s easier to get a customer to engage. And because it’s convenient for customers and doesn’t consume their time, you can gather insights in seconds.

2. Easy to use

You don’t have to have the most sophisticated software to understand NPS, and you don’t have to be a genius mathematician either. All you need is a chatbot that’s integrated with Google Sheets. The chatbots fetch the insights and import it to Google Sheets, and the formula can be calculated then and there.

3. Richer insights

NPS is a popular metric amongst many organizations. It can help you understand not only your customers, but where you stand amongst your competitors.

4. Makes segmenting a breeze

NPS has a defined grouping system- promoters, passives, and detractors. As you gather responses, the survey automatically segments your customers which saves a lot of efforts. Saving this time allows you and your teams to focus on understanding the “why” behind your score. It also allows you to better serve each group accordingly and to take action on the feedback you’ve received.

5. Boosts Customer Lifetime Value and overall loyalty

By identifying your promoters, detractors, and passives, you can better serve each group accordingly. For example, when you identify your promoters, you can continue to impress them through rewards which will ultimately lead to an increase in CLV.

How to improve NPS score

Now the part you’ve all been waiting for. Here’s how to improve your NPS score.

1. When segmenting, remember not to ignore promoters

It’s very easy to get lost in trying to convert detractors to promoters, but in doing so, you end up neglecting the most important vital part of your audience. Your promoters can provide lots of valuable information, to ignore them would be similar to converting them to a passive. Avoid alienating your promoters, reward them, and give them a platform to voice their opinions and suggestions.

2. Don’t ignore detractors either!

If you want to see a shift in your Net Promoter Score, you have to get into your detractors shoes to understand what went wrong. Hearing criticism isn’t easy, but you have to understand how important it is to hear it and act on it. Detractors will rarely criticize and give a negative score for no reason.

They can provide valuable suggestions on how to better meet their needs, and it’s better to know precisely than it is to read their minds and guess. This extra step might actually encourage them to turn the other leaf and to become promoters.

3. Keep your eye on the score

The silent killer in customer experience is complacency. Having a perfect score does not mean you can turn a blind eye. You have to pay attention to it, and continue making improvements. You have to understand why your customers are giving you a certain score and what you can do to improve it.

4. Engage with your customers

In any healthy relationship, communication is key. If your customers are giving you a score, you have to respond, regardless of how gnarly the score is. Show your gratitude, and respond immediately. Actively engaging with your customers will make it easier for you to earn loyalty points and further increase your Net Promoter Score.

Why?

Because customers want to know that their opinions are valued. When you appear aloof and uninterested in their feedback, it makes them feel unappreciated. When asking for NPS, always follow up with a “why?” to open the platform up for communication. Engage, thank, and implement to deliver an enhanced customer experience.

5. Consistency across all boards

Regardless of where your customers are in their journey with you, you have to provide a delightful experience across all boards. This means:

Offering fast and transparent service

Treating each customer like royalty

Reducing average response and resolution time

These steps may be simple but they always guarantee success.

Customers these days, though they may come in all shapes and sizes, all demand the same thing- Speed and attention to detail.

Personalize each interaction but provide options that allow for easy convenience. Say your customer is facing an issue with a product, and your engagement strategy is to go through a chatbot to collect information.

The customer is already distressed, so provide them with the option to directly talk to an agent to avoid harming CX and lower NPS scores.

6. Be customer-centric

Many customer service departments have plans in place that make things convenient for agents, or for the business. It might be more affordable, but spending money on unnecessary tools adds up, and the cost of losing a customer with these tools is much higher, than the tool itself.

Always have a plan in place that benefits your customers. Don’t look at what’s convenient, or what your competitors are doing. Focus on your customers and them only.

This means providing your agents with the best tools and resources to handle your customers- Be it a CRM, a customer engagement platform, knowledge bases, chatbots, integrations to 3rd party applications to allow efficiency. You have to provide your agents with the tools that allow them to be truly customer focused to see a positive change in your net promoter score.

7. Rethink your pipeline

It is statistically impossible to get the customer journey right at the first instance, and there are many touchpoints that affect NPS scores drastically. Processes like ID verification, providing documentation, compliances, contracts- these activities have a tendency to tune the customer out, cause them to drop off, and hurt your NPS.

Customers are on the hunt for processes that are quick and convenient. Always be on the lookout for new, innovative, and interactive ways that better handle these heavier processes.

Let’s take an example.

There’s a free trial of a highly-coveted service that many customers are in line for- in fact, the hype is so apparent, that now you've formed an interest. You see the word “free,” and think of the convenience. “All I have to do is create an account and I am free to explore the service for the time offered,” you think.

But imagine if the reality didn’t match up-

Imagine instead going through a hefty, 10 page registration process, with over 50 forms to fill and an extensive terms and conditions page. And all that to be met with “please enter your credit card information.”

You’d be pretty bummed, wouldn’t you? Your customers are exactly the same.

In the words of Customer Experience guru, Dan Gingiss, “if the process takes 3 clicks, make it 2. If it takes 2 clicks, make it 1.” Make the process as seamless and as convenient as possible.

8. Don’t operate in silos

Remember- customer experience is a culture. It has a place in every department.

Think of customer experience as the oxygen of your business. Everything you do, every product you make, every service you provide is ultimately for the customer. This has to flow through your organization.

Be sure to increase the transparency of your data through all departments. NPS scores can indicate how the brand is performing to the C-suite and can indicate loyalty. By implementing the score into agent feedback, you can provide insights on how well your agents are performing when handling customers.

NPS can also indicate the performance of your product. If customers are likely to recommend one thing from your line, but not another, your product team needs to be aware to improve the product.

This transparency overall enhances your customer’s experience when they have an inquiry that relates to multiple departments. Transferring between departments is extremely frustrating for customers. By allowing your teams to have access to customer data, you can allow them to serve your customers better. Since teams are aware of the problems, almost anyone can handle the inquiry to speed up the process of resolving the query.

Are you ready to take your NPS to the next level?

To be truly customer-centric, you need to provide your agents with the most sophisticated tools to handle your customers. An easy way to get started is with a digital customer engagement tool like Engati.

Register now to get started.

This article was originally published here.