uku-website-banner_Blog_new_Blog

Everything inbound

The latest research, case studies, and inbound
marketing strategies

Client Management

Do you know what your NPS is? You should

October 29, 2019

According to research conducted by HubSpot, 81% of customers trust their friends and family’s recommendations over those of a business. 

A challenge most business today face is lack of trust, but the caveat to that lies great opportunity.

The opportunity is for you to create loyal, happy customers who evangelise your product or service. 

Customer loyalty and satisfaction should be central to your growth strategy

Enter the NPS. 

The Net Promoter Score - a metric developed in 2003 by Fred Reichheld of Bain & Company and Satmetrix. It’s used to measure the loyalty of customers to a company. 

Today, this metric is used all over the globe to understand your potential for profit growth and to determine your levels of customer satisfaction. 

Customer loyalty is, of course, no foreign concept to most businesses across the globe, but unleashing the NPS on the globe back in 2003 makes us wonder how we ever grew our businesses without it.

I’m going to tell you why…

Historically, customer satisfaction survey’s never proved to be particularly useful. They were too long with very low response rates and often only the most enthusiastic customers were asked to participate. This, as you can imagine, would present a somewhat bias perception of a business and its services. 

The results from these surveys would often satisfy board members, but they never really played a role in driving the changes needed to boost loyalty and satisfaction.

The NPS offered simplicity - one question that could be used to measure this loyalty: 

“On a scale of 0 to 10, how likely are you to refer us to a friend or colleague?”

This one question allows you insight into the health of your business. This is why companies like Apple, Amazon, Airbnb, and Netflix use this metric to help determine their growth.

In fact, this is what Jeff Bezo’s, CEO and founder of Amazon had to say about customer satisfaction: 

"It used to be that if you made a customer happy, they would tell five friends. Now, with the megaphone of the internet, whether online customer reviews or social media, they can tell 5,000 friends."

According to research conducted by the Temkin Group: loyal customers are 5x as likely to make a repeat purchase, 5x as likely to forgive, 7x as likely to try a new offering, and 4x as likely to refer.

 

How to calculate your NPS:

You’ve spent time surveying your customers and have asked them to rate whether they would recommend your business to a friend or colleague on a scale of 1-10. 

The scores are then collated into three different categories namely: 

  • Promoters. The scores that are collected between 9-10. These are the customers that frequently recommend your business and continue to purchase from you. 
  • Passives. The scores that collected between 7-8. These are generally satisfied customers, but may be open to switching over to a competitor of yours. 
  • Detractors. The scores that are collected between 0-6. These are unhappy customers and can do a lot of damage to your brand. 

Once all the scores are in you will subtract the percentage of detractors from your percentage of promoters. 

(% of promoters) - (% of detractors) = Your Net Promoter Score. 

The Bain and ROIRocket 2017 Advocacy in Retail Study indicates that customers who are promoters spend 3.5 times more than detractors, on average. This highlights the importance of developing great customer experiences and investing in customer service.  

The benefits of understanding your NPS can not be overstated: 

  • It has the ability to help build brand loyalty. 
  • It has the ability to boost customer satisfaction. 
  • It has the ability to increase the life-time value (LTV) of a customer. 

There’s more though…

An NPS is merely a number and I’m not disputing that its a highly valuable one. But this number doesn’t give you insight into why your customers are satisfied or dissatisfied with your business. 

Bill Gates had this to say:

“Your most unhappy customers are your greatest source of learning.”

This means that you need to have proactive customer success strategies in place in order to truly drive change that will positively influence your customer’s ongoing experience with your business. 

Take a look at AOL’s story: 

Back in early 2000, AOL adopted a fairly aggressive customer acquisition strategy, at first thought, we’re thinking yes, that makes sense, drive more customers equates to growth in revenue and market share. 

On closer analysis, there was little to no focus on any customer satisfaction leaving AOL with 42% of their customers as detractors and only 32% of their customers as promoters. 

This saw AOL losing valued customers to competitors like MSN and EarthLink who were able to leverage this gap in their strategy to monetise and grow off of it. 

Your NPS should provide you with strategic business insights, that allow you to drive a sustainable competitive advantage. 

READ: Marketing funnel vs marketing flywheel: welcome to the future

 

What NPS should you aim for?

The below image shows the NPS results from the NICE Sametrix 2019 NPS benchmark report, they collected data across 23 different industries.

NPS

Image source: Satmetrix

Every industry is different, but what these scores allow you to do is benchmark a target Net Promoter Score for your industry. 

When its all said and done you need to work hard to provide your customers with exceptional experiences that actively push them to share their stories on social media and with their friends and families. 

I will leave you with Mr Reichheld’s own words “This number is the one number you need to grow.” 

Customer Acquisition