A Beginner’s Guide to Net Promoter Score
Question: How much do your customers love you?
Typically, the answer to this question has been hard to find. Marketers looking to swap traditional brand awareness metrics for a more customer-centric one have found a solution.
It’s called NPS, or Net Promoter Score.
We’re about to walk you through the best ways to increase loyalty and encourage the best from your customers. By the end, your company will be well equipped to answer just how much your customers love you.
Why Does Net Promoter Score Matter?
It begins in 2003, with a man named Fred Reichheld. Harvard Business Review posted his research article titled “One Number You Need to Know.” In the course of studying customer loyalty in airlines and rental car companies, Reichheld established the industry standard questionnaire for determining whether or not a customer is loyal or not.
Years later, Reichheld trademarked his idea alongside Bain & Company and Satmetrix.
Given what we know about the importance of loyal customers, tracking how likely customers are to recommend you is the first step in creating a customer-driven culture committed to improvement.
Net promoter score is a metric that follows your customers and your competitors to provide a numeric understanding of your company's brand loyalty.
Apple utilizes NPS in its retail stores, boasting an impressive score of +76. GE used it to prompt growth in stock prices. Hundreds of Fortune 500 companies use it similarly.
Bill Macaitis, CMO of Slack, previously a CMO at Zendesk and SVP at Salesforce says NPS is a crucial metric:
“One metric that most SaaS marketers don’t measure frequently, but should, is Net Promoter Score. NPS measures the likelihood of customers to recommend the product. Best in class companies achieve a score of 70 on a scale of 100, but according to Zendesk data, the typical B2B software company achieves only 29.
NPS is a leading indicator of future growth. The larger the number of advocates for product, the lower the customer acquisition costs for the company, and the more effective a customer success team will be."
Slack has been on fire this year, thanks to word-of-mouth marketing tracked by a net promoter system. Macaitis summed up his enthusiasm for referral marketing with an NPS back-end by saying this:
“Every CEO should be able to answer this question:
What are the top 3 reasons why people recommend and do not recommend your brand?"
Net Promoter Score: It all starts with two questions..
A very simple number to calculate, the net promoter score asks only two questions:
“How likely is it that you would recommend my brand/product/service to a friend or colleague?”
This question is then followed by another question:
“What is the most important reason for your score?”
Here’s a great net promoter score example from Groove:
Here, you can see answers are scored from 0 - 10. Compared to a traditional survey, question and answer process is far simpler. Your survey is then splitting people into three groups:
- Detractors
- Passives
- Promoters
Promoters are the desirable group. And that’s why it’s called a net promoter score. How many people are loyal enough to promote your product or service? As loyal and enthusiastic fans, they’re willing to sing your praises and act as brand ambassadors. This group is more likely to remain a customer and are more likely to purchase more (and higher priced) products in the future.
Passives are satisfied, for now. With repurchase rates much lower than promoters, their referrals are less enthusiastic. Most importantly, if a competitor’s product hooks their attention, they are likely to defect.
Detractors are unhappy with your offering. They account for 80% of negative word-of-mouth. With high rates of churn and defection, their words can damage your company reputation, discourage new business, and prove themselves to be a massive headache for employees.
The Net Promoter Scoring Process
1) Engage Customers
So how do you get started? Just send an email?
Yes, basically. Either include both questions in one email or engage customers with a follow up email shortly after receiving a response to the first.
Apps like Typeform, Promoter.io, Bain & Company, or any one of the survey builder tools will assist with emails and follow-up questions. This will spare you from the grunt work of collecting responses, tracking and tagging replies, and sorting historical scores over time.
The more personalized and friendly the survey, the more likely you are to achieve a valid response. For the most accurate reply, keep formatting, visual design within the survey as closely alike your company’s brand as possible.
Remember: To maximize response rates, it’s important to offer the survey across both desktop and mobile interfaces. This is only a matter for formatting.
How many customers should I survey at one time? And how often?
Most companies opt for engaging with surveys once a quarter. Some leading companies survey a sample of their customers every week. Ultimately, it’s a matter of how closely you want to watch your customer interactions. A frequent net promoter system enables a company to monitor for unexplained variations, like this. And consistency is very important.
But blasting your customer base with a full-length survey or NPS email at one time is not recommended.
You will achieve a better perspective if you spread out the survey and send it to 1/90th of your users every day for the 90 days of the quarter. For example, if you have 1,000 users, you send out 11 or so surveys a day.
The statistical validity of any survey score depends on the response rates. The more responses, the greater accuracy. This in mind, the smaller your customer base, the larger sample you’ll need to survey at a time. Or you’ll need to wait longer to accumulate more responses to attain a higher response rate. This a reasonable limit to have on your surveys.
What is vital is a high response rate from the core of your target customers - those who are most profitable and those whom you’d most like to become promoters.
Time needs to pass so that people can give you a response based upon your company overall, not just a product purchase. Surveying customers once a quarter seems neither too invasive or annoying. Wait any longer and you might miss out on important feedback or shifting customer sentiments that may develop into churn.
How to Reduce Churn Rates of Detractors
The most actionable part of the NPS survey is the second open-ended question.
Analyzing the promoter comments and categorizing them into both ‘promoter benefit categories’ and ‘detractor issue categories’ will enable you to then respond to and act upon the ideas within their ideas, across many survey results.
Entelo is a recruiting analytics software company that switched to NPS to field issues that improve customer experience every day. The Customer Success team’s job is to monitor satisfaction, reduce churn, and react to complaints quickly. The team’s director, Loni Spratt said this is a case study interview:
“Some of our customers are actually shocked at how fast we react when a negative comment comes in. We’ve definitely received comments of, “Whoa. I just did this an hour ago. Is this an automated thing?” They think it's really cool."
Now, the team can take action to prevent churn from happening.
Focusing on the Promoter
But the team can also track customers with high scores. This way, the Customer Success team finds the most profitable target for upsells and cross-sells. Even the marketing team gets in on this goodness. They can identify satisfied customers for future cases study, use cases and referral marketing efforts.
Spending time to understand your promoters and what creates a successful experience for them can be huge. Run a correlation analysis and graph behavior between your product and high NPS ratings.
Look at the relationship between logins, searches, profile views and positive product actions. This will help you find that “magic moment,” the one where users are taking delight in your product. By studying the relationship between actions and successes, you can focus on product optimization to bring more of your customer base to this moment.
Should I send an NPS survey immediately after someone places an order?
If you want to understand customer loyalty for your shopping cart process, then yes. Sending a survey right after someone orders will be effective here because the experience will be fresh in their mind.
In order to know whether a customer will recommend the product to others, schedule the survey further out. Giving people time to use the product - but not so long as they forget you exist. This way they can give you relevant, actionable feedback.
3 Criticisms of the Net Promoter System
1) Low Sample Size:
The margin of error within your NPS will depend upon your sample size. Often, you’ll need to wait to get a larger sample of customer to reduce this margin of error and achieve accurate results. So don’t sweat small changes between surveys.
2) Responder Bias Is Real:
Responder bias occurs when the individuals who respond to the survey differ in a significant way from the overall survey population. Fred Reichheld, creator of the Net Promoter System speaks to this issue directly:
“For instance, imagine a company with a 20% response rate. Their survey indicates that its NPS is 50% (60% promoters minus 10% detractors). Now imagine that the firm studies the behaviors of nonresponders— behaviors such as repeat purchases and increased purchasing over time, among others—and determines that the mix of that group is 10% promoter, 40% passive, and 50% detractor. In other words, the 80% of customers who ignored the survey had an NPS of negative 40%. So the true NPS for the company—the weighted average of the two groups—is negative 22%, not 50%. That’s responder bias.”
If you cannot do the necessary research to confirm this, consider scoring nonresponders as detractors (not to far off in a B2B setting) or as a 50-50 mix of passive and detractors.
3) It Stops Short:
Customers are not numbers. NPS is a means to an end, not the end itself. To prioritize this number above customer interaction is to put the horse before the cart. Customer loyalty is not earned with a number. Loyalty is earned through an authentic relationship with consumers post-survey. To not engage customers directly and strategically after a survey is to forgo solidifying the impact that will connect to bottom-line metrics. NPS opens up a line of dialogue with customers. Don’t waste these good moments, use them to your advantage.
Takeaways
While a net promoter score isn’t a perfect day-to-day operational tool, it does prove to be very useful over time. Any B2B marketer should employ a simple email survey or a survey tool to take advantage of the feedback capabilities of a NPS. With a steady stream of data from customers, your organization will be better equipped to engage future customers, retain those at risk of churn, and maximize current promoters. By establishing a reasonable and rolling survey process, you can tap into your net promoter score continuously. This will deliver a real time show of customer loyalty. And that’s a number worth knowing.