Importance of Net Promoter Score (NPS) in Marketing

Net promoter score (NPS), commonly referred to as net promoter, is a metric that gauges how likely customers are to recommend the goods or services of a business to others. The net promoter score can be seen as a measure of client happiness and loyalty. The goal of the statistic is to identify customers who are less pleased with the product or service and turn them into brand advocates.

 

Referrals are essential in the contemporary business environment since 83 percent of individuals say they trust recommendations from their friends and family more than they do advertisements.

 

NPS assesses a client's general emotion about your brand rather than focused on a specific purchase, therefore even though it is a sort of customer satisfaction benchmark, it differs from customer effort scores or customer satisfaction scores.

 

Net Promoter Score, or NPS, was created in 1993 by Fred Reichheld and used as a method of predicting consumer behavior by Bain & Company and Satmetrix in 2003.

 

Out of all the surveys that were distributed to clients all across the world, Reichheld and his team discovered that one question stood out above the others. That one question turned out to be the most closely related to consumer purchase and referral behavior across six distinct sectors. The foundation of what we now refer to as Net Promoter Score is the inquiry, "How likely are you to suggest this business?”

 

How to determine NPS?

 

One straightforward question can be used to determine the Net Promoter Score. “How likely are you to suggest our firm to other people?” will be asked of clients once they consent to your brief survey. They must select a number between 1 and 10, with 10 being the greatest and most ideal choice.

 

Customers will be divided into 3 groups based on their responses:

 

1. Detractors 

 

Detractors are clients who provided a score of 6 or less. Additionally, these are the clients who are most unlikely to ever make another purchase from you or utilize your services.
 

2. Passives

 

Customers who gave you a 7 or 8 are considered to be passive. They are generally content with your company, but they are not very loyal. Additionally, if given the chance, these clients could be readily persuaded to switch to your rivals.

 

3. Promoters

 

The term "Net Promoter Score" refers to the group of respondents who scored the highest overall. They are the ones who are most inclined to advertise your business voluntarily because they are loyal and frequent customers.

 

The percentage difference between the promoters and the detractors is then used to compute the net promoter score. Simply add the percentage of Promoters (scoring 9–10) to the percentage of Detractors to obtain the Net Promoter Score (scores 0-6). Both active and passive answers are ineffective.

 

NPS = 100 * ( percent of Promoters - percent of Detractors)

 

Instead of being presented as a percentage, Net Promoter Score is often shown as an integer. Our score ranges from -100 when all respondents are Detractors to 100 when all respondents are Promoters. The NPS has a default value of 0 when the number of Detractors and Promoters is equal.

 

 

Why Use a Calculated Net Promoter Score?

 

NPS surveys can be used by businesses to get input on any element of the customer experience. The NPS survey may be sent out by the product team as soon as a customer utilizes the company's software product for the first time. Additionally, they could deliver it after the client has used the product for a year or 90 days.

 

NPS scores can be used by businesses across all sectors of industry to measure customer happiness. After doing their grocery shopping, renting a car, or making a purchase in a mall, customers may be asked the NPS inquiry.
 

Also Read | Top Growth Metrics to Track

 

How Can NPS Be Raised?

 

A business must create an organizational structure that focuses on continually improving the customer experience if it wants to raise its NPS.

 

In general, it is advised to form cross-functional teams out of personnel from the marketing, sales, and customer care departments to make sure that the departments stick to a shared objective to raise the NPS of the organization.

 

A business must also have a system that allows for the prompt receipt of client feedback and the utilization of that feedback to enhance the customer experience.

 

Why is NPS important?

 

1. It assesses customer loyalty

 

Customer NPS aids businesses in assessing client loyalty and the possibility that they will refer business to a friend. It also aids in determining the possibility that customers may "churn," discontinue their subscription or refrain from making a subsequent purchase in favor of buying goods or services from a different business.
 

Even while you want to draw in and convert new clients, there is a larger return on investment in keeping and empowering your current ones. It goes without saying that a crucial part of making this happen is recognising customers who are at risk of leaving, and tracking customer NPS over time aids businesses in doing just that.

 

2. Recognizing NPS Changes

 

Companies can determine how probable it is that the typical customer will refer you to a friend by monitoring changes in the general NPS. Customer success teams may also tell what way the entire NPS is heading by observing changes in the ratio of promoters, passives, and detractors.

 

For instance, it may indicate a good trend in consumer opinion if the proportion of detractors falls and the proportion of passives rises. On the other hand, a decline in promoters and a rise in passives can point to a risk of customer turnover and unfavorable evaluations.

 

A useful predictor of the current level of customer happiness and the possibility for churn could be changes in the customer NPS.

 

3. It enhances affiliate marketing

 

Customer NPS helps businesses determine how probable it is that they will receive positive customer recommendations, which are ‌quite influential.

 

In order to entice potential new consumers, businesses can use the power of referral marketing by requesting client case studies, testimonials, and online reviews. Brand ambassadors and incentive programmes can give customers who are devoted to them gift cards, gear, or discounts for their business.

 

NPS data can assist you find those satisfied consumers. Referral marketing can be a mutually beneficial relationship between brands and their customers.

 

4. It suggests ways to enhance

 

Customers may provide a low score, or even a 0, in response to the NPS question. When that occurs, especially when it does it repeatedly, it can be difficult, but it also offers a chance to focus on consumer input and make product or service improvements as a result.

 

We advise an NPS survey that includes an additional opportunity for customers to provide detailed feedback on why they gave the score they did. By doing so, you may assess the quality of consumer feedback from people who might ‌point out particular modifications you could make to enhance their experience with your goods or service.

 

Certain complaints about bugs, poor user experience (UX), or a terrible contact with a customer success manager might be rapidly forwarded to the right team to handle. Sure, not all input will be beneficial — there will always be trolls on the internet — but some issues may be quickly resolved.

 

5. It enables you to give contacting critics ‌priority

 

Detractors are those NPS survey participants who gave your product or service a score between 0 and 6, suggesting that they are unlikely to promote it to others. Additionally, focusing on your critics is crucial, just as investing in your promoters can pay off for the expansion of your business.

 

When you obtain the NPS findings, categorize the replies into three groups and examine the rationale behind the respondents' selections. Following up with your cherished customers is crucial, but it's crucial especially if they highlight a problem or difficulty they're experiencing while using your product or service.

 

If you follow up with critics, you can help them feel heard and valued and may even reduce their likelihood of leaving you or, worse yet, recommend that others not buy from you. It might be a case of misunderstanding or user error, or it might be a larger-scale complaint that you alone can't resolve.

 

Also Read | What is Affiliate Marketing?

 

Advantages and Disadvantages of using NPS

 

Evangelistic client loyalty is undoubtedly one of the most significant growth factors, as Fred Reichheld put it. While it cannot always be relied upon, in general it is necessary for profitable expansion.

 

The Net Promoter Score is made to be easy to understand. You and your team can obtain a lot of relevant data with very little effort. You can learn a lot about how well people are responding to your company with a short and easy survey. You can make a decision based on your findings.

 

The following are some ways that NPS might improve your customer service:

 

1. Finding these commonalities will enable you to create a more effective user persona by giving you a better understanding of who your consumers are and how they feel about your business.

 

2. Your customer care representatives will be able to address each consumer appropriately if you display their score.

 

3. Of course, simply being aware of broad public perceptions of your organization can aid in guiding your decision-making as a whole and for individual divisions.

 

NPS has drawn some criticism, with many detractors contending that it doesn't accurately depict the reasons why a consumer isn't offering a recommendation. By following up and interviewing clients, or by asking the follow-up question, "Why did you choose this rating," this criticism can be corrected.

 

1. Even though Net Promoter Score is a pretty straightforward tool, some may contend that it is too straightforward. The genuine level of customer happiness, according to NPS critics, cannot be measured on a straightforward 1–10 scale. Rather, it results from correlation, causes, and effects.

 

2. Customers may also state that they are content just for the survey's sake, but then demonstrate that they are not by their behavior.

 

3. The fact that not all customer recommendations are created equal is a further extremely strong defense. Many consumers totally rely on the advice of friends and family in markets where there is frequently fierce competition.

 

4. However, the fact that the NPS solely considers paying customers may be its worst flaw. It doesn't take into consideration those who aren't considered consumers but are nonetheless being negative.

 

5. Whether you choose to believe it or not, the NPS has a flaw. Consider the scenario in which your business has 25% of detractors and 75% of promoters. 

 

As a result, the NPS is +50. Let's imagine, however, that a different business has 50% promoters and 0% opponents. The NPS for the business is still +50. Although each of these scores are identical, their percentages are quite different.

 

6. The fact that you are utterly neglecting the passive is perhaps one of the NPS's major drawbacks. They are not considered while calculating the score. These clients are also highly significant. Because of their ambivalent attitude, they have the potential to switch from being a supporter to a promoter with just one action.

 

A firm can assess its performance with customers at any moment with the help of an NPS survey, which is quick and easy to complete. Because of this, a critical performance measure called a net promoter score might be quite useful KPI. 

 

Don't stop there after analyzing NPS data and (hopefully) identifying many satisfied promoters. To keep delighted customers and gain more clients in the process, start a conversation with them and ask if you may include them in a referral programme.