What’s the most important question you can ask? Is it asking your partner if they’ll marry you? Or, is it asking which college you should attend or which career to pursue? There’s one question for small business owners that can do more for your start-up than any other when you pose it to your customers. “On a scale of zero to ten, how likely are you to recommend our business to a friend or colleague?” This seemingly bland query is how you quantify your Net Promoter Score®, also known as an NPS®. Companies worldwide are using it to grow, become more profitable, improve client relations, and become more accountable to their customers.
The idea is to take customer reviews and convert their responses into a number you can use to make your business better and figure out where you need improvement. As Marcus says, you have to know your numbers. In this article, we’ll tell you what you need to know about your Net Promoter Score®, including how to calculate it, why it’s essential, and how to use your NPS® to benefit your company.
Why Such a Fancy Term For a Single Question?
Years ago, Bain & Company, a management consulting agency, began a research project to figure out how best to get client reviews. Bain partnered with data supplier Satmetrix to test numerous review questions. They quickly found that one of them yielded the most accurate and useful data. Customer repurchasing, referrals, and brand loyalty all had a connection to how the customer answered the question, “On a scale of zero to ten, how likely are you to recommend our business to a friend or colleague?”
The higher the number, the more likely the customer was to advocate for the company and become a “promoter” rather than a “detractor,” a customer who bad-mouths a company and hurts its growth. A respondent who gives a seven or an eight on the scale is called “passive.” That was when Bain coined the term Net Promoter Score®.
To calculate an NPS®, subtract the percentage of detractors from the percentage of promoters. For example, suppose your company asked 100 customers how likely they are to recommend your business to a friend or colleague on a zero to ten scale. If 5% of the respondents were detractors, 10% were passives, and 85% were promoters, your NPS® score would be 80 because 85-5=80. Passives do not enter into the equation, but those customers are ripe for pursuing. Also, congratulations on such a high score!
Millions of companies now use their NPS® to guide their businesses. This includes corporate heavyweights like chemical company DuPont and organizations like the Boy Scouts of America. The car rental brand Enterprise Rent-A-Car has used a variant of the Net Promoter Score® it calls ESQi since the 1990s. The company takes its score so seriously; Enterprise will not promote managers unless their ESQi score is in the top 50%. This plan has worked out well for Enterprise, the largest rental car company in the United States, which opened its 10,000th location in 2018. This giant company values their customer service as much as any entrepreneur or small business owner should, and it has reaped the rewards of high customer satisfaction. (Wilczynski, 2017).
What Makes The NPS® Such a Big Deal?
Even though we have used the zero-through-ten scale in our examples above, some companies use one-through-100. The scale doesn’t matter as much as results do. So, does the Net Promoter Score® actually help businesses?
Bain & Company, the NPS® creators, estimates that “Net Promoter leaders” grow more than twice as fast as their competitors. (Siarri, 2019).
An NPS® is accurate and valuable because it’s based on many entries. That’s possible because it’s convenient for customers. You can ask your questions online, over email, on the phone, or via text. The survey doesn’t take very long to answer, it isn’t complicated, and the answers are definitive. Promoters (scoring 9 or 10) are likely to be loyal and excited about your company, its services, staff, or products. Detractors (scoring 0 to 6) are highly unlikely ever to give you their business again. More damagingly, detractors may discourage other people from doing business with your company.
Beyond overall company wellness and satisfaction, you can measure a lot of other things with a Net Promoter Score®. Simply change the subject of the question to an individual product or service, ask about specific employees, or even the design of your website. The scores you calculate can tell you a lot about where you are doing great and where you need help. With the right information, you can build a strong customer base who are brand ambassadors, sharing your company with the world.
Top 5 Benefits Of Having High Net Promoter Scores®
1. Repeat customers are profitable. As Marcus says, “Businesses are based on relationships and relationships are based on people.” When you value your customers’ opinions and ask them where you can provide better service, they will appreciate your relationship more. A high NPS® indicates extraordinary customer loyalty. That’s going to help your company grow, your brands to prosper, and make your revenue more stable.
2. Your Net Promoter Score® takes your whole business into account. Suppose you stick with the standard question for your customer (how likely they are to recommend your business). In that case, you’re asking them to assess your entire company at once. When a restaurant customer has an issue with their food, but their server goes over the top to help them, their overall restaurant review will be mixed. A strong NPS® tells you that you’re doing everything right. Following up on your original question by asking where you can improve is crucial for turning low scores around. Remember what Marcus tells us. “The key to business isn’t being smarter or wealthier, it’s being able to connect to people and relate to them.”
3. It’s the easiest way to get usable data. Calculating your Net Promoter Score® is easy. The question and its follow-ups aren’t hard to answer, and there is minimal cost involved for your business. The average survey takes under five minutes, so aim to keep yours about that long.
4. You can track your score as often as you like. Setting a regular schedule to send out NPS® surveys will show you how your business is tracking in the long run. You can also identify standout products, excellent employees, and market trends. You may want to send out surveys after a new product launch, and that’s a great idea, but you may also want to try a bi-annual report. These scores are important bellwethers, and it’s wise to use them in your decision making. As Marcus puts it, “At the end of the day, the numbers don’t lie.”
5. Want to know how you stack up against your competitors? They’re probably using Net Promoter Score® surveys, and you can find their data online. By some estimates, two-thirds of Fortune 500 companies use NPS® surveys, and small businesses are following suit. (Colvin, 2020). Do a quick Google search for NPS® benchmarks in your industry and you’ll be able to compare your company to others. Some sites or services offer local search options for a closer comparison to your nearby rivals.
Top 5 Tips To Boost Your NPS®
1. Customize your surveys.
The standard NPS® question is amazing for finding out how your whole company is doing, but tweaking it can allow you to gauge your customers’ opinions on products or services. For example, instead of asking how likely customers are to recommend your restaurant, ask how likely they are to recommend the bacon and bleu cheese burger. If you are looking to diversify your customer base (check out our article on why that’s important!), then you can ask respondents to check off their gender, age, income, or anything else. Be careful about making the survey too long, though. The goal is to be fast and efficient.
2. Don’t chase perfection—chase improvement.
Marcus says, “Things are always going to go wrong. People make mistakes. I know I do. It’s how you resolve it that matters most. Listen, be open to criticism, resolve it with speed and empathy, and take responsibility.” Instead of dwelling on a bad score, improve your customer relations. You can make big or small changes with your customer interactions, then track your score to see if it improves. Keep in mind, “Performance is the best way to shut people up.”–Marcus.
3. Remember to follow up.
Customers love knowing that they’re important, and the easiest way to do that is to follow up with them and let them know that their opinions were heard and valued. It shows your commitment to them. It can help you fix small mistakes or issues, improve loyalty, and a simple follow-up call can turn detractors into promoters. Apple, the world’s largest tech company, improved its Net Promoter Score® from 57 to 72 by having its store managers contact every detractor who left a negative review to find out what went wrong and how the store could improve. Recent studies show that every detractor contacted could bring in an average of $1,000 of business a year. (Wilczynski, 2017).
4. Allow your managers and employees to make changes on the spot.
Instead of letting issues get to the point where you might receive notes from detractors, allow your customer service reps to respond directly to complaints and take action to resolve any problems. Cutting off issues before they become big problems is always the right way to do business.
5. You can spend all the money in the world on advertisements.
Still, nothing is as effective as a person sharing a positive experience with their friends. On your customer survey, offer incentives for customers to share their good reviews on Facebook or Twitter. You can turn customers who had a passive Net Promoter Score® into promoters with a well-timed and lucrative coupon or promotion.
Satisfaction, and It Feels So Good
According to a London School of Economics study, for every 7% increase in a business’s NPS®, their revenue grew 1%. (Patel, 2020). Even small seeming increases in revenue are worth pursuing, especially if the method of gaining those increases is as inexpensive as sending out a survey. If you find that your first Net Promoter Score® is lower than you expected, don’t be disheartened. Make the necessary changes and keep tracking your NPS® trends for the next few months. Trust the process. And, remember what Marcus says about building loyalty and satisfying customers.” If you have a good relationship with clients, people for the most part will stop shopping on pennies.”
- Do you currently know your business’ NPS®?
- What steps can you take right now to begin improving your business’ NPS®?
Colvin, Geoff. (2020, May 18). The simple metric that’s taking over big business. https://fortune.com/longform/net-promoter-score-fortune-500-customer-satisfaction-metric/
Patel, Snigdha. (2020, Jun. 16). 8 Proven Strategies to Improve Your Net Promoter Score (NPS®). https://www.revechat.com/blog/improve-net-promoter-score/
Siarri, Phil. (2019, May 6). Everything You Need to Know About NPS® (Net Promoter Score). https://potloc.com/blog/en/everything-need-know-net-promoter-score/
Wilczynski, Shayna. (2017, Apr. 19). 3 companies achieving success using NPS®. https://www.jrni.com/blog/3-companies-using-NPS®
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