NPS: Why it matters, who you should send it to, and how do you read the results?
December 12, 2019 •
Understanding why NPS could be helpful to your business when to send it, and how to interpret results will help businesses create a powerful action plan and retention strategy to increase customer loyalty, revenue, and business growth.
A Net Promoter Score (NPS) is widely thought of as one of the optimum ways to measure how loyal a customer is to a particular business. The metric was introduced by Fred Reichheld in 1993 and is essentially a single metric that enables companies to ascertain how strong their relationship is with their customers. NPS also allows the operator to identify areas where an operator can improve, therefore bettering their relationship.
An NPS can come in different formats and can be modified to suit different businesses. However, the most important question is one that asks customers to give an overall rating from 1-10 on how likely they are to recommend the company to someone else. Businesses can also include several closed questions and a comment box where customers can write more freely or add specific details to explain their scores or describe their unique customer experience.
The overall rating reflects how likely customers are to recommend that brand or product to someone else. The closed questions are set to find out more about specific details, some of which may or may not be relevant to that particular customer, but are of interest to the business. The free text box, therefore, is essential, so customers are given the freedom to tell the company what they think and why.
Mike O’Connor, the Founder of Service Professionals Network, said of NPS “(It) nurtures growth because it collects detailed customer feedback on experiences. Nobody else is better qualified to tell a brand how they can improve! Using NPS helps any business develop their processes, people, products, pricing, and overall experiences for the long term.”
The NPS format us so useful because it gives businesses precise data on their overall performance in terms of customer loyalty, and by correlating scores given with the freely written responses, companies can get a much better understanding of why any single customer is particularly loyal or disloyal. By analysing the NPS in detail, they can then begin to create strategies that allow them to improve customer experience and boost customer loyalty.
NPS does not focus on how happy customers are with a particular event, service, or product within the business. Instead, it focuses on whether that customer would be willing to recommend the company overall, so the resulting score is a robust indicator of sustainability as well as the potential for growth through word of mouth recommendations.
In the 2003 Harvard Business Review, Reichheld wrote, “evangelistic customer loyalty is clearly one of the most important drivers of growth. While it doesn’t guarantee growth, in general, profitable growth can’t be achieved without it.”
Those who give a score of 0 to 6 are known as detractors, and are dissatisfied with the company and may share their negative opinion with others. Those who provide a score of 7 to 8 are called passives and are unlikely to go out of their way to recommend the company to anyone else. Finally, those who score the business a 9 or 10 are likely to endorse them to others actively and are known as promoters. The NPS score is calculated using a specific formula that subtracts the percentage of people who are detractors from those who are promoters. Passive responders are dismissed. The final score can be anything from -100 to 100.
Businesses can use this figure as a starting point to understand where they sit in terms of customer loyalty. If they have a positive NPS, this indicates that the number of people recommending the business outweighs the number who are saying negative things about it. A negative NPS score means the opposite.
It is also helpful to connect responses to the amount of revenue a customer brings in. From this information, they can better understand how much of their income is generated by customers who have a positive and robust relationship with the brand compared to those at risk of moving away and finding the same to similar products and services elsewhere. Doing this provides precious insights that can then be used to develop strategies to create growth year upon year.
Of course, why the score as a standalone metric is valuable, businesses that focus on their NPS score, in combination with the comments provided in the free text box, can gain even more powerful insights into customer behaviour. From this data, they can predict future actions more keenly as well as understand the areas in which the business needs to improve.
NPS is so valuable because it helps companies better understand their customers, and how those customers feel about the company. By sending NPS to customers at the right time, owners and their teams can hope to analyse the resulting data and not only better predict customer behaviour on an individual level but also pinpoint common denominators that affect customer experience and change/ remove/ improve them to ensure the NPS score improves.
If a company decides to engage in NPS, researching which customers to send it to and the best time to do so is crucial. A business will naturally want to ensure a significant response, and identifying at what point in a customer journey they would be most receptive can help with that. It is also essential to consider how frequently to survey members.
KeepMe software enables gym owners to send NPS to the right members, at the ideal time in their member journeys, meaning response rates will be high. It can also analyse the sentiment in easily digestible ways, breaking down information, so it’s easier to understand and turn into actionable and practical retention strategies. By using KeepMe as the vehicle to find out the NPS, gym owners are able to be proactive with customers. They are given an excellent insight into red flags that signify an at-risk member and can understand the bigger picture. An NPS can assess the overall ‘health’ of the relationship between members and the club while simultaneously identifying any specific issues that can be quickly addressed to ensure member satisfaction and loyalty once more.
If you want help with your NPS, why not book a demo to see how KeepMe can help today?