Utilizing Net Promoter Score (NPS) has been growing as a marketing trend over the last few years. NPS is the ultimate chief indicator of client satisfaction and loyalty.Fred Reichheld is an author and American consultant who specializes in studying loyalty. He argues that a client’s loyalty is greatly linked to their likelihood of recommending the business to others. The more loyal your client, the more you can be certain they will recommend your brand. Like a snowball effect, NPS is closely related to your business’ profitability. Furthermore, NPS is a leading tool for assisting you in managing your clients’ experiences
How to calculate your NPS?
In comparison to other rating systems, NPS is extremely simple to measure because it requires asking your clients merely one question: “What is the probability you would recommend business X to a friend or colleague?” The client then responds by rating that likelihood on a scale of 1 to 10 (Extremely improbable to very probable).
The Net Promoter Score is then calculated as follows: NPS = % of promoters – % of detractors
The rating given by the client is sorted into one of three categories:
- The promoters (rating of 9 or 10): enthusiastic and loyal clients who will continue to buy your products and recommend them to others;
- The passives (7 or 8): satisfied clients who are less enthusiastic and could be persuaded to shop at competing brands;
- The detractors (0 to 6): unsatisfied clients who can harm your brand’s image.
All NPS scores can go from -100 (where all the clients are detractors) to +100 (where all the clients are promoters).
The more satisfied your clients, the higher your NPS score.
You may notice that we simply ignore the mean values — the passives. Essentially, the passives, contrary to the two other categories, have a weak level of engagement on both sides of the scale. They are neither good nor bad ambassadors.
Why use NPS?
- NPS is paramount within the context of consumer culture, a market that is evolving at the speed of light. In order to keep on top of big competitors, buyer profiles and the use of new technologies, a company must be reactive to survive. You need to perfectly understand your clients and have fast returns on their experience as a customer. You can’t just rely on maintaining customer satisfaction anymore.
- NPS is easy to calculate and intuitive: it is a clear number and is comprehensible to everyone within a company, from upper management to the newest employee.
- It allows you to compare your company against your competitors.
- In regards to customers, it is simple, fast and not intrusive, heightening their chances of wanting to participate.
How to benefit from your NPS ?
We can use different types of NPS
- Transactional NPS is quickly measured either before or during the purchase.
- Relationship NPS is measured through clients who haven’t made a recent purchase but who know your business.
- Comparative NPS is measured through clients who know your business or at least a competitor in your sector. These types of buyers can still have an effect on your image.
- In the domain of human resources, eNPS is emerging as a way of measuring the wellbeing of employees, as well as calculating the likelihood they would endorse their workplace, or even recommend working with their own superior, to their inner circle.
- Ideally, you will start your process the moment you receive your first three ratings. Your business will perform best if you are able to rapidly measure and increase your NPS, acting quickly to identify the detractors and transform them into promoters!
- If you use NPS to study your competitors, pay attention to whether the NPS study uses similar methods for collecting data and calculating ratings.
“Keep in mind the NPS rating depends on the business sector, the country, and the consumer culture.”
Last but not least, a quantitative study must go hand in hand with a qualitative study. On its own, NPS does not offer much clarity.
After asking the client to rate the probability of whether they would recommend your business, ask why they haven’t attributed a higher rating, or how you could improve your product.
This will allow you to prioritize which initiatives should be put in place (or not!) to reorient your products, your services and/or your global approach. You’ll know what needs to be done, and why!
Remember the objective is not the level of the rating. The final rating must be a seed in your future operational plans. For example, improving your speed of service, the quality of your relationship with clients, the quality of service, etc.
Do you know where you want to start?