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5 Benefits of Net Promoter Score

Entrepreneurs and marketers constantly hear how difficult it is to be successful in today’s competitive market. As a result, we tend to overthink our strategy and make things more complicated than they need to be, which can be said about many marketing strategies. What is more, the list of tools, KPIs and metrics marketers attempt to analyze and draw conclusions from seems to be getting longer, but is that actually a good thing?

customers

Image source: Thinktiv

If you think about it, there’s one surefire way to grow your business - it’s to make your customers happy. According to Frederick F. Reichheld of Bain & Company, “evangelistic customer loyalty is clearly one of the most important drivers of growth. While it doesn’t guarantee growth, in general, profitable growth can’t be achieved without it.”

If your customers enjoy the experience enough to vouch for you, they are most likely pleased with your product, staff and the overall purchase process. Finding your weak spots, promoting your services adequately and maintaining high standards is the best way to get more customers through your door.

To do that, you can use a no-nonsense customer experience measure called Net Promoter Score.

Let me show you why you need NPS in your already busy life.


The one number you need to grow

Net Promoter Score® (NPS) is a measure which allows you to estimate loyalty of your customers based on first-hand feedback. The metric helps you to understand how happy your customers are based on what is often called “the ultimate question”:

On a scale of 0 to 10, how likely are you to recommend company X to a friend or colleague?

Net Promoter Score

Answers are marked on a scale of zero to 10 and collected in an automated customer feedback system. Some companies choose a simplified option of using a smiley face feedback form like UBT has done:

UBT

Customer insights can be gathered in a number of ways, i.e. via email or targeted website surveys, which you’ve probably come across while browsing sites:

Customer insights

Why recommendation?

Reichheld argues that in most of the industries he studied, “the percentage of customers who were enthusiastic enough to refer a friend or colleague—perhaps the strongest sign of customer loyalty—correlated directly with differences in growth rates among competitors”.

Because of the way our brains are wired, we trust recommendations more than any promotional materials. That’s because positive personal opinions remove some of the risk associated with making the first purchase from a company, trying a new product for the first time or switching providers.

In the words of Mark Zuckerberg, “People influence people. Nothing influences people more than a recommendation from a trusted friend. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising.”


How to calculate NPS?

Scores from NPS surveys are grouped into three segments: promoters, passives, and detractors. To calculate NPS, you simply subtract the % of detractors from the % of promoters.

NPS

Source: Survicate

  • Promoters: 9-10

These are the people who loved the product are will likely return or even recommend you to their friends and colleagues. The good news is that promoters tend to spend more than other customer groups, as Jim Bush (Corporate Officer, Global Executive at American Express) says “For a promoter who is positive on American Express, we see a 10% to 15% increase in spending and four to five times increased retention, both of which drive shareholder value.

  • Passives: 7-8

Passives probably liked what you’ve got but it wasn’t a slam dunk. They don’t dislike you but are VERY susceptible to competition, especially when it comes to pricing. In other words, passives are likely to jump ship whenever they get a better offer.

Because this is a very price-sensitive group, you can try offering discounts, special offers and other incentives to warm them up before someone else does.

  • Detractors: 0-6

Although it’s painful to read, feedback from detractors is your most significant source of knowledge. It gives you biggest potential for growth because detractors let you know where you’re making mistakes. Remember that you shouldn’t dwell on every word of criticism, but rather look for patterns emerging from the answers you collect.

Sadly, detractors tend to be most vocal about their customer experience and they are likely to badmouth you should the opportunity present itself. However, being attentive and solving their issues on the spot gives you a huge opportunity to turn things around.


Why (survey) size matters

Leonardo Da Vinci once said “Simplicity is the ultimate sophistication” and the NPS system proves he was right. There are a number or reasons why short surveys yield high-quality insights.

  • It’s very difficult to draw conclusions based on answers to long and complicated questionnaires,

The universal problem of lengthy questionnaires is that too many questions yield too many answers. As a consequence, it is virtually impossible to cut through the noise and fish out what needs to change.

If you gather customer feedback but are unsure what to do with it, you’re not alone. As Founder & CEO of Grove Alex Turnbull said,

they haven’t been very good at turning that feedback into quantifiable data that we can use to benchmark ourselves and measure the success of the steps we take to improve.

NPS solves this problem - results obtained this way signal which areas need more attention and steer you in the right direction, without taking hours of your precious time. You need to see a pattern which is virtually impossible if you go through answers to detailed questionnaires.

  • The more questions, the smaller your sample,
toystory

Let’s face it: people don’t want to waste time on providing feedback. Response rates plummet with every single question you decide to pose, and getting customer feedback is tricky because customers simply don’t want to spend their precious time answering your questions. It’s no wonder that when they see a lengthy questionnaire, they’re not interested in filling it out. Time is the ultimate luxury, even more, valuable than money. Not convinced? Society of Personality and Social Psychology research from 2016 indicates that approximately 50% of people value their time over making more money. As researcher Ashley Whillans says, “It appears that people have a stable preference for valuing their time over making more money and prioritizing time are associated with greater happiness.” That’s exactly why short surveys come with high response rates.

  • Turning results into action is virtually impossible if consider too many variables.

Feedback should be actionable otherwise it doesn’t drive change. Use surveys which give you a clear sense of direction and look for frequently occurring issues you can fix.

Need more proof? Listen to Frederick Reichheld who developed the concept of NPS. In his acknowledged 2003 article in HBR, he wrote: “By substituting a single question for the complex black box of the typical customer satisfaction survey, companies can actually put consumer survey results to use and focus employees on the task of stimulating growth.”

Amen to that.


Why you need open-ended verbatim”

NPS gives you an idea of how you’re doing, but it doesn’t tell you WHY. In other words, you don’t know what you’re doing right and what you’re doing wrong.

The score on its own is pointless because it doesn’t drive change. For optimal results, it’s usually followed with a quick question asking for a quick explanation of your rating, i.e.:

What is the most important reason for your score?

In fact, I’d argue that the follow-up question designed to elicit the motivation behind the score given is more important than the NPS question itself. That’s because feedback gathered by follow-up questions allows you to find your strengths and weaknesses. Example? Here are the strengths of Groove HQ, as seen by their users:

pie chart

Source: Groove

Groove would never obtain that precious knowledge without the follow-up question. Same goes for learning your weaknesses - this knowledge is even more important because being able to identify your weak points gives you loads of room for improvement and subsequent growth.

5 benefits of NPS

  • Proactively reduce churn

NPS is a great retention booster because it lets you see problematic areas which make people walk out the door. To get the most of it, I strongly recommend integrating it with external tools such as a CRM system.

I also advise you to look at historical NPS survey responses from customers who churned or thought about leaving but didn’t. This way you can identify which scores and issues reported were associated with the highest churn and highest risk of churning out.

The general rule is to close the loop whenever your customer stumbles upon a problem.

Remember that the NPS survey is an invitation to talk - offer to help and be genuinely interested in your customer’s perspective. It may be tempting to think of them as “a number”, but NEVER forget that they are individuals. Ask about their issues with your product or service and offer to help.

  • Increase customer loyalty & engagement

Loyal customers are “worth up to 10 times as much as their first purchase” (The White House Office of Consumer Affairs via Help Scout), so there’s a lot at stake here.

The more engaged your customers are, the more likely they are to both endorse your and make recurring purchases. One of the ways of monetizing their engagement is to enable in-app referrals gamification and loyalty clubs with special offers or premium content.

  • Reduce shopping cart abandonment

Shopping cart abandonment rate from the last 6 months reaches 77% (Source: Listrak) which is huge. Yet, according to Baymard Institute, it’s possible to bring this number down. Based on research from Baymard, “1 out of 4 shoppers have abandoned a cart in the last quarter due to a too long/complicated checkout process, yet for most checkouts, it’s possible to make a 20-60% reduction in the number of form elements shown to users during the default checkout flow.” Furthermore, findings of the study indicate that the average website can increase CRO by 35.26% through better check out design alone. For more info on checkout design, read this original TemplateMonster post.

Your customers get lost in the checkout process and it’s essential for you to know where exactly this happens. The majority of cart abandonments occur because people are just browsing - according to Baymard Institute, 58.6% of US online shoppers left without completing their purchase because they were just looking around. Findings of a qualitative study by Baymard present the reasons why people abandon carts without this particular segment:

reasons

Source: Baymard Institute

Knowing that your clients come across some major usability issues or feel that pricing is too high is way more important than knowing your overall score.

  • Use NPS feedback in product development

If you’ve been working on your product or service for a while, chances are you’ve gotten too close and are susceptible to personal bias. Feedback received from your users allows you to take a step back and look at what you’re selling from their perspective. You should listen to the voice of your customers - after all, they’re the ones using the product.

Sometimes people ask for features which cannot be introduced for various reasons - explain why this is the case and try to find a way to accommodate their needs. If you’re not a fit, don’t pretend that you are, they will churn out soon anyway.

If the feature they’re after is in your calendar of work to be done, tell them when it’s planned to be released. Reach out once it’s been released - it shows people you turn their feedback into action which makes them feel valued.

  • Build relationships

What makes NPS so valuable is that it’s a very low-effort entry point to conversations. The number on its own doesn’t really do much, but because it’s an invitation to discussion, you can get to know your customers and find out why they’ve chosen you above your competitors. My final word of advice is to stay human when you talk to your customers. Remember to personalize your communication so it doesn't look generic, no one likes robot-like emails and chats.


Conclusion

Remember that the NPS story doesn’t end with the first survey you send out. It’s all about continuous improvement. Don’t rest on your laurels when you get your initial feedback and make the first round of refinements.

From what we’ve seen with our clients, the best solution is to collect feedback continuously on the site or send email surveys in small batches every day to a small part of your customer base. This way you get to see the impact of changes you’re introducing as you go. If you’re interested customer satisfaction surveys but have no idea where to start, I strongly recommend this guide which will tell you what questions you should be asking your visitors.

Have you ever used NPS surveys? If so, to what effect? I’m looking forward to your questions and comments!

Net Promoter® and NPS® are registered trademarks of Bain & Company, Satmetrix Systems, and Fred Reichheld.

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Don't forget to check out some business themes.


Lucjan Kierczak

Do you think feedback is important? I do. work at Survicate - the fastest way to collect feedback from customers. Besides that, I write for Feedback Academy and you can find my posts there and on Quora.

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4 responses to “5 Benefits of Net Promoter Score”

  1. Piyush Gupta says:

    Insightful, thanks for sharing Simplest Guide 🙂

  2. Sam White says:

    Great article! I would like to add here that NPS is a calculator to gauge the performance of businesses in order to measure how they are performing and how loyal the customers are!

  3. John G says:

    Really likes your point here Proactively reduce churn, Businesses need to focus more on NPS to reduce their churn rate and in increase customer loyalty to stay on top. The top companies hear the voice of their customers and make changes real time like google, apple, samsung etc.

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