Data, data everywhere.
Some businesses have torrents of it and don’t know what to look at.
Some businesses live in a data vacuum.
Recently I highlighted one number that is extremely important to every business.
Here’s another number that is very important and easy to collect.
Net Promoter Score
The Net Promoter Score was created by Bain and Company.
The mechanics of it are super simple.
Customers are asked a single question:
How likely is it that you would recommend our product/service to a friend or colleague?
It is an index to gauge a customer’s loyalty and overall satisfaction with a particular brand. Ranging from -100 to 100, it measures the willingness of customers to recommend a company’s products or services to others.
Based on the ratings, the customers are categorised as:
Promoters score the question 9 or 10. They are likely customers who love the product. They could be repeat buyers or most likely become a product’s evangelist or ambassador. They make referrals or bring in potential customers.
Passives give a 7 to 8 score. Their behavior may fall in between promoters or detractors. They can switch to a competitor product given the opportunity. They are not enthusiastic enough to spread the word about the product but they won’t likely say anything negative about it.
Detractors are those who rate the product from 0 to 6. They don’t exhibit any value behaviours towards your brand. They will happily drop the company and are very likely to say something negative about the product to as many people as they can.
You can then ask customers the reason for their score using open ended questions.
Why is Net Promoter Score (NPS) Useful?
- Simple way to collect actionable data
I’ve implement NPS in a number of businesses and it is the fastest route to massive amounts of customer data. Because of the simplicity of the question response rates are high and
- Cycle of measuring and evaluating shows how effective your strategies are.
If you ask customers at a certain time and after six months, you evaluate the same customers especially promoters, you can gauge whether strategies i.e. a customer loyalty programs or relationship building are effective. You can know when to adjust your marketing strategies.
- It Helps Identify Customer Advocates
Keeping loyal customers cost less than getting new ones. By using NPS, you will know who your Promoters are. You can build deeper relationships with them and leverage them for referrals.
- Customer-churn Reduction
Churn is the hidden killer of business growth. By identifying customers who have the potential to churn you lower your marketing costs and boost satisfaction and value.
- Boost Customer Lifetime Value
According to Ferrand and Valette (2010), there is a direct correlation between an increase on customer satisfaction and an increase of intention to purchase. Getting more Promoters and being able to build a good relationship with them can help boost your Customer Lifetime Value. They also cost less to maintain.
How to Implement It
CRM Extension – all the major CRM’s have NPS built in or available as an addon.
Customer Monitor – Enterprise level done-for-you solution backed by a research agency. I’ve implemented it with clients and it is very robust service.
Ask Nicely – Another home grown solution. I haven’t used it but heard good things about the platform and UX.