If you have a business, chances are you’ve heard of Net Promoter Score, but you may not realize just how important it is to the success of your company. If you don’t know your Net Promoter Score, you might be keeping your company from reaching its max potential.
What it is
Net Promoter Score (NPS) is a metric developed by Satmetrix, Bain & Company and Fred Reichheld. It has become the standard in measuring customer satisfaction and loyalty. NPS encourages companies to strive for more and more loyal customers (promoters), using the metric results as a guide to success.
How it works
- It all starts by asking customers one simple question: How likely is it that you would recommend our company?
- The answer will identify your promoters (those who answer 9-10), passives (those who answer 7-8) and detractors (those who answer 0-6).
- Next, additional questions are asked about quality, value and customer service, in order to get at the “root cause” of the customer’s feelings about the company.
- The overall results will tell you where to make changes or focus your efforts in order to increase your number of promoters and reduce your detractors.
In order to make NPS effective, the entire company needs to focus on customer loyalty.
- Customer service and sales reps are kept informed about the NPS results and are trained to improve the customer experience. They work directly with detractors to resolve concerns and convert them into promoters.
- Managers and executives should use NPS results to make strategy and investments choices that will improve customer loyalty.
Why should you know and care about your Net Promoter Score?
This list from satmetrix.com makes the benefits of increasing your promoters pretty clear:
Higher Margins: Promoters are usually less price-sensitive than other customers because they believe they’re getting good value overall from your company. The opposite is true for Detractors, who are more price-sensitive.
Higher Annual Spend: Promoters buy more, more often, than Detractors do. They tend to consolidate more category purchases with their favorite supplier. Promoters’ interest in new product offerings and brand extensions also exceeds that of Detractors or Passives.
Greater Cost Efficiencies: Detractors complain more frequently and consume more service resources. In contrast, Promoters reduce customer acquisition costs by staying longer and helping to generate referrals.
Higher Retention Rate: Detractors generally defect at higher rates than Promoters, which means that they have shorter and less profitable relationships with your company. Rescue those Detractors—turn them into Promoters—and experience higher margins.
Greater Word of Mouth: What proportion of new customers selected your firm because of reputation or referral? The lifetime value of those new customers, including any savings in sales or marketing expense, comes from Promoters. If you’re using the Net Promoter model, you’ll attribute 80 to 90% of referrals to Promoters. On the other hand, Detractors are responsible for 80 to 90% of negative word of mouth, so you can attribute the cost of this drag on growth to them.
Net Promoter Score is a simple, sensible metric that is proven to work, but it is not a quick fix. NPS provides the data, but in order to see positive results, you must do the work. Put in the effort to really understand the results, know how to improve results starting from inside your own walls, and truly desire to improve your company. At Thrive4, NPS is one of our passions. We love to help our clients interpret the results and develop strategies that lead to success. We’ve seen companies thrive and yours can too! Give us a call for details about how we can help improve your NPS today: 303-940-5544.