Consumer attitudes are important for any brand.
Customer loyalty and word-of-mouth endorsements are both central to your marketing and brand-building efforts.
They represent repeat purchases, referrals, and positive brand sentiment.
Loyalty and recommendations are particularly important for smaller businesses, which don’t tend to enjoy the same hefty marketing budget as big, legacy players.
So how can you find out how your customers feel about your brand? How do you know if you’re providing a level of service that inspires their loyalty?
A little thing called NPS has the potential to reveal all.
NPS stands for Net Promoter Score.
It’s a measurement of how satisfied and loyal customers are to your brand.
To find out your brand’s NPS, you ask people how likely they are to recommend you to a friend or colleague on a scale from one to ten.
Survey respondents can then be placed in one of three customer categories:
1-6 = Detractors: unhappy customers with the potential to damage your brand via negative word-of-mouth
7-8 = Passives: satisfied but unenthusiastic customers, likely to be swayed by a competitor
9-10 = Promoters: loyal customers who are likely to spread positive word-of-mouth and buy from you again
By calculating the ratio of Promoters to Detractors, you get your NPS score.
This score is one of a number of metrics you can use to assess your customer experience and brand performance. But there are a couple of really good reasons why NPS proves particularly useful.
The NPS concept was created by Fred Reichheld, a partner at Bain & Company, in 2003.
He’d been inspired by Enterprise (the car rental company) and their approach to measuring customer satisfaction.
The company asked just two simple questions of their customers and — when ranking branches — focused on counting only the most satisfied customers.
This was very different from what had come before.
Customer surveys were often lengthy and complicated. This made it less likely that customers would bother to respond. It also made it more difficult for an organization to draw reliable conclusions and insights from the findings.
Seeing what Enterprise were doing, Fred Reichheld set out to hone the process. Two years, and a lot of research later, he produced the Net Promoter Score.
By comparing customer survey responses to their actual behavior (their purchasing habits and referrals), he found that a single question provided the best correlation between the two. For the vast majority of industries, this question was:
How likely is it that you would recommend [company] to a friend or colleague?
It wasn’t about churn rate or complicated feedback responses. Customer answers to this question provided the best indicator of brand loyalty and business growth.
Reichheld had found an easy way for businesses to maximize customer satisfaction response rates, gain real insight into customer loyalty levels, and for staff on the ground to understand what they needed to do to turn customers into loyal Promoters.
As we’ve just discovered, your NPS score is an easy but in-depth way to perform a company health check.
You discover the level of loyalty customers feel towards your company — knowing that this corresponds closely to company growth.
Companies with long-term profitable growth have an NPS two times higher than the average company.
But let’s break it down a little. Why is customer loyalty — and therefore your NPS — so important?
It all comes down to the way in which customers talk about your brand to their friends, family, and all of those random people on the internet.
Positive or negative word of mouth has the potential to make or break your business.
By measuring your NPS, you keep testing the temperature by finding out whether your Promoter to Detractor ratio is good enough and knowing when you have to take action to improve it.
So we know that NPS is important. But how do you actually measure it?
First, you need your customers to answer your feedback question.
You can send them an email or have a survey pop-up appear on your website when they visit. There’s lots of great NPS software that can help you to put a survey into action.
You can also choose whether to conduct:
NPS pros recommend you incorporate both of these surveys into your customer feedback strategy.
Next, take survey results and work out the percentage of Detractors, Passives, and Promoters.
Your NPS score can then be calculated using this equation:
% of Promoters – % of Detractors = NPS score
An NPS score of over 30 is considered good, over 50 is great, and over 70 is excellent.
But average scores vary depending on your industry. For retail, the average NPS is 61 — so if you’re working in this sector, you’ve got some pretty impressive competition to contend with.
NPS score not what you’d like it to be? Then there are plenty of things you can do to increase the number of brand evangelists you have bigging up your company and its offering.
First things first.
NPS is only valuable if you monitor your results over time. So, as you would with any metric — track it!
You can set NPS targets:
And then create a strategy as to how you plan to meet them.
Understanding why your NPS isn’t as high as you want it to be is the first step to making changes.
You may already have a clear idea based on the single, simple NPS question.
But it can also help to dig a little deeper.
Tweak your question and ask customers whether they would recommend a specific store, product, web page, or staff member.
Also, ask a few additional questions so you can segment NPS responses based on customer demographics and psychographics.
This extra info will help you to find patterns. You can then delve into the reasons why and make focused and impactful changes.
Your NPS is all about how a customer feels about their interactions with your brand.
They’ll only want to put their rep on the line by recommending you to friends and family if they really think you provide a great customer experience.
To improve your customer experience, you can do any or all of the following:
With NPS, a lot of focus is inevitably put on nurturing Promoters. But your Detractors are important too.
If you can persuade just a few Detractors to shift their perspective, and slide on into the Passive camp, then you’re improving your NPS.
So follow up with Detractors. Respond to their feedback. Try to resolve the issues they have with your store or service.
And remember that, according to a Harvard Business Review study, customers who have a complaint handled quickly and helpfully, go on to spend more on future purchases.
So there really is the potential to change minds and improve that score.
Another key to improving your NPS is making it a company-wide initiative.
Be transparent about your scores and share your vision for winning over as many Promoters as possible with the whole of your organization.
Encourage regular NPS meetings, where staff can talk about customer issues and devise solutions together.
You may like to incentivize teams based on NPS ratings and feedback — whilst also allowing managers to take action where they see fit.
Every department should own their NPS score and feel inspired to improve it.
If you’re not already measuring NPS for your brand, then you should be!
It’s a quick and easy way to learn how customers feel about your brand. And by focusing efforts on improving your score, you can be confident that you are actively driving business growth.
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