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@jairekrobbins
10 November 2020

What Is A Net Promoter Score and Why It is So Important?

Jairek Robbins

If you own a business or are planning to start one, or if you are a manager in a business, you ought to know about and track the Net Promoter Score (NPS) of that business. This metric helps you to know how willing clients are to recommend your business or product, and that means the success of your business could as well depend on your score on this metric. Read on and learn more about NPS and why it is so important to your business.

What is Net Promoter Score (NPS)?

A company’s Net Promoter Score is an indicator quantifying what proportion of clients are happy and willing to recommend the company to the members of their social circles.

At its simplest level, the NPS survey asks website visitors or customers to rate, on a scale of 1-10 how likely they are to recommend that business or product to their friends. A follow up question can then be provided to give survey participants a chance to explain further why they rated the company the way they did.

People who give a score of 0-6 are referred to as detractors. They had an unhappy experience and they are likely to express their displeasure on social media and among their friends or family. These people are certainly unlikely to recommend your product or service to anyone.

The people who indicate 7 or 8 are referred to as passives. They aren’t complaining and neither are they raving about your business. They are the neutral group, so to speak.

The promoters are the people who give a 9 or 10 when asked how likely they are to recommend your product or service to their friend. They had a great experience using your product or service and they almost have nothing to complain about.

How to calculate the NPS

Now is the time to crunch the numbers once you have the raw data from your survey. Follow the following steps to determine your NPS.

Number one, group the responses into 3 categories (0-6 detractors, 7-8 passives, 9-10 promoters). Total up the number of respondents in each of those three categories and also get the total number of people who took the survey.

Two, convert each group of respondents (detractors, passives and promoters) into a percentage of the total number of people who took the survey. For example, if 50 out of 100 participants gave 9 or 10 as their likelihood to recommend your product, then the promoters are 50%.

Number three, subtract the percentage of detractors from the percentage of promoters. For example, if you found that detractors make up 30% of the respondents, then your Net Promoter Score will be 20 since that is what you get when you subtract 30 from 50.

Note that the NPS can vary from -100 to 100. However, those two extremes are rare and your score is likely to lie somewhere between that range.

Why is NPS so important?

As a business owner or manager, you may already be tracking several metrics of your business and you may be wondering why you should add NPS to that mix. Here are some of the most compelling reasons why you need to track NPS.

It helps to align your team

Your company is likely to make limited progress if all employees and managers aren’t working for a unified purpose. For example, if the product development team doesn’t care about what is happening in the marketing team, then the company is likely to suffer.

Keeping track of the NPS helps to align the entire team so that they all work to attain the same goal. Once you decide to track the NPS, different departments at your company are likely to do what is within their power to improve theirs and the whole team’s scores.

For instance, the follow-up question after a rating a given by customers can reveal a product design flaw which is giving customers a bad experience. Once that defect is fixed, chances are that the NPS will increase if other departments are also doing their best to improve the customers’ experience.

The NPS therefore helps to give your team a unity of purpose, rather than having different sections “minding their own corner of the room.”

Measuring customer loyalty

While a number of metrics, such as repeat purchases, can help you to get a glimpse into how loyal customers are to your brand, NPS is a swifter and more real-time way to gauge customer loyalty.

It is harder and more costly to attract a new customer, and loyal customers ensure that the long-term survival of your business is (almost) guaranteed since any new customers you win over will be joining a growing list of satisfied clients.

Those loyal customers can be targeted for upselling drives since they already have a favorable impression of your products and services.

If you notice that your NPS is trending downwards, then something is wrong and corrective action needs to be taken swiftly. If it is trending up, keep analyzing the information provided on what you are doing right and maintain it while finding new ways to wow them even more.

You learn what needs to be improved

NPS surveys are a great way to get timely feedback about what is going wrong in your business. For example, if a respondent expresses dissatisfaction about how quickly pages on your website load, you can get the IT team to rectify the anomaly quickly before a lot more site visitors are turned away.

Additionally, all departments in your company can get feedback from this tool since participants are free to voice their concerns about anything and everything connected to your business. 

It’s user-friendly

The NPS survey only takes a minute or less to complete, unless you add several follow-up questions to the question asking participants to rate how likely they are to recommend your product or service.

This user-friendliness increases the odds of customers taking the survey, and that means you will always have useful feedback to take the pulse of your business, at least from the customer-facing angle.

You also don’t need any special skills to analyze the data collected during an NPS survey, so every member of your team can calculate this score at act upon that information collected.

Minimize the spread of negative information

Research shows that people who have a negative experience are thrice as likely to talk about it among their circles as compared to those who have a positive experience. The NPS gives your unhappy customers a chance to voice their concerns directly to you. In so doing, they will be less likely to “vent” using other channels, such as social media. By availing a communication channel for dissatisfied clients, you therefore learn what is going wrong while also limiting how much damaging information about your business spreads.

Don’t look at the NPS as a vanity metric intended to boost your ego regarding how well your company is doing. Remember that it is a lot harder to stay at the top of your industry than it is to get there, so the NPS should therefore be tracked on an ongoing basis so that you can have real-time data to inform the decision which you need to make as you grow and consolidate your business. With time, the culture of your company will be transformed into one that practically puts customers at the center, and your bottom line will show the positive results of that orientation.

To Your Success,

Jairek Robbins

 

 

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Source: https://hbr.org/2003/12/the-one-number-you-need-to-grow

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