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Why Use NPS? 9 Reasons to Know the Importance of NPS

Athira Unnikrishnan

Athira Unnikrishnan

7 min read

Net Promoter Score! NPS Surveys! NPS Software!

One hears a lot of NPS nowadays. Though there are various other metrics like CSAT, CES etc. to measure customer satisfaction and loyalty, NPS seems to have topped the charts! It has become so popular over the years that more and more companies have started adopting the metric to gauge client loyalty.

‘What’s all this noise about NPS?’

‘Is it just a hype or is NPS a mighty good metric, then?’

‘Should we adopt the metric as well?’

‘Why use NPS?’

‘What is the importance of NPS over other metrics?’

Yes, you would have tons of questions regarding the desirability of NPS. But before delving into all that, let’s define NPS first and get a clear picture of what exactly it is.

What is Net Promoter Score?

Net Promoter Score (NPS) is a metric that measures customer loyalty and brand advocacy. Being one of the simplest metrics it can help you gauge customer loyalty with a single question which is ‘On a scale of 0-10, how likely are you to recommend our product/service to your family and friends?’. Your customers rate your services/products on a scale of 0-10 and based on the rating they are categorized into three groups namely:

Promoters: The respondents who have scored you a 9 or 10 fall under this category. They are your biggest supporters and will be more likely to recommend you to their friends, family or colleagues.

Passives: Customers who have rated you a 7 or 8 are passives. They can’t be called happy customers yet they are not dissatisfied by your brand.

Detractors: If any of your customers have given you a score ranging from 0 – 6, then they are detractors. They are unhappy with your service and are very unlikely to recommend you to any of their close ones.

Why Use NPS?

Why Use NPS - Infographics.

Now, here’s addressing your questions. Is it really worth the hype? Well, yes. Net Promoter Score is indeed worth all the hype and we would suggest you adopt the metric too. We are not assuming it because of the metric’s immense popularity but stating it owing to some solid reasons which prove the importance of NPS. We assure that all your doubts will vanish into thin air once you take a look into it these 9 reasons to use NPS. And take it from us, you will start using NPS in your organization sooner than you think!

1. User-friendly and Simple Implementation

Unlike some of its counterparts, NPS surveys do not come with a long list of incomprehensible questions. Essentially there’s one main question which asks the respondent the likelihood of recommending the brand to family, friend or colleague and this question may be followed by one or two open-ended questions. All in all, NPS surveys are quick, simple and easy to understand making it highly user-friendly.

By indicating the promoters, detractors and passives, the NPS system helps you categorise your customers, which in turn lets you deliver them personalised services. Such a step can go a long way in helping your business grow. Moreover, the overall calculation of the net promoter score is no strenuous task. All you have to do is to subtract the percentage of promoters from the percentage of detractors.

NPS = %Promoters -% Detractors

You can track your NPS regularly and analyse on what scale your business has improved or even deteriorated. And with an NPS software in place, it becomes even simpler and time-saving. Be it calculation or automating the surveys or even sending it through multiple channels these tools take care of pretty much everything making it all the easier.

2. Gather Higher Response Rates

Time is one important element and the shorter your surveys, the better are the chances for a higher completion rate. NPS surveys can be done and dusted in a matter of seconds! There’s a single, straightforward question and customers find it easier to answer owing to the fact that these surveys don’t consume much of their precious time.

Some NPS surveys may come with a question or two in addition to the main one, but even then it wouldn’t demand more than 5 minutes from the users. When the response rates are higher, you have robust more reliable data in hand.

3. Collect More Reviews

Having a good online reputation is very much important for a business to flourish because a majority of your potential customers analyse the online reviews before availing your service. NPS helps you manage your online reputation by aiding in garnering more and more positive reviews. The biggest advantage of NPS is that it not only helps you collect more response rates but also lets you identify your biggest supporters, the promoters. And that’s when you score.

Ask the promoters to leave a review soon after they complete the NPS question, by including an additional step exclusively for them with a link to your profile on review platforms like Facebook, Google, G2Crowd etc. It is best that you take the help of an NPS survey tool that offers conditional logic.

You can also offer incentives and rewards for submitting a review, but make sure it is not portrayed as a tactic to buy more reviews. It should look and sound more like a token of gratitude from your side.

4. Analyse and Enhance Customer Loyalty

Customer Loyalty can act as a magical potion and elevate your brand to great heights. In fact, 57% of US customers prefer spending more on brands they are loyal to. It is therefore vital to monitor loyalty regularly and you can do it efficiently by using NPS.

First and foremost, the very focus of net promoter score metric is to measure customer loyalty. So, when you ask the likelihood of being recommended to a customer, it gives you a chance to know how happy your customers are with you and also to find the loyal ones. You can keep track of the NPS score and analyse them after each survey by benchmark your current score with the previous one to know if your business plans are working out or not.

If not, you can take decisive measures to improve your services. This how you close the feedback loop. You first listen to your customers by collecting their NPS scores, you analyse it, then act on it and finally grow by increasing customer loyalty. You don’t leverage your NPS survey unless and until you close the feedback loop. So, do note that down.

5. Increase Customer Retention and Reduces Churn

Phil Schefter and Frederick Reichheld, states that a mere 5% increase in customer retention rates can result in 25%-95% increase in profit. This is because your existing customers tend to make more purchases from you. Loyalty and retention rates are directly proportional. It’s a no brainer. When NPS helps you improve loyalty by gathering more response rates and positive reviews, it is sure to reduce churn and increase customer retention rates. It is as simple as that, provided you close the feedback loop.

6. Boost CLV

Customer Lifetime Value (CLV) indicates the overall profit that a customer helps you acquire during their lifetime. By finding the promoters, detractors and passives using NPS, you get to serve each group of customers accordingly. You can take necessary actions as per the feedback given by each group of customers, resolve the issues and then notify them.

When that much is done, be it a detractor or passive, you can easily impress and convince them to continue availing your services. Your customers would then feel valued and they are likely to stay with your brand for a longer period of time. You can gradually convert them into loyal customers by heeding to their feedback and acting on it. Thus, you can increase CLV.

57% of US customers prefer spending more on brands they are loyal to.

7. Benchmark against Competition

NPS is one such weapon that can support you in cutting through the intense competition and stand out in the crowd. Benchmark your NPS score with that of your industry’s average score and keep striving to reach and surpass it. It not only lets you overcome competition but also points out if you are on the right track or not.

When you don’t benchmark your score with the industry average, chances are that you could miss the mark. You would keep conducting NPS surveys and take actions to improve it, but your peers could be improving at a faster rate at the same time. So, when you keep track of the average of NPS of your industry, you also know at what rate you should keep improving and take measures pertaining to it.

8.  Identify the right time to upsell

Upselling is one of the finest ways to increase revenue. No second thoughts. But like anything, there is a time to do it. You cannot upsell to any of your customers. It may not bring you the desired result or worse it can backlash. So, how do you know when and to whom you should upsell? NPS has got you covered there as well.

Promoters are the section of customers who is extremely happy with you. Identify your promoters by using NPS. This is when you can upsell. List out the promoters, contact them through mail or a call, and explain the possibilities of serving them better with supplementary services or products of your company.

9. Create a Stronger Product

One of the best and most obvious ways to grow your business is by building first-class products of superior quality. For delivering such a product you need to keep upgrading it to meet the industry standards. NPS surveys can be used here as well. So, whenever you introduce a new feature in your product, you can send NPS surveys to your customers asking the likelihood of them recommending the new feature to their friends or colleagues.

You can then decide on keeping the feature as per the overall score. By following this continuous process, you can build a stellar product that your customers love, thereby increasing loyalty and retention along with reducing churn!

Winding Up

These reasons are enough to showcase the power of a metric as simple as the net promoter score. Even the who’s who of the business community has accepted the importance of NPS and is implementing it to thrive successfully. Popular brands like Apple, Amazon, Tezla etc. depend on their NPS score to grow consistently and is proof to the fact that NPS used the right way at the right time can really make a difference.

Well, it’s about time you started using NPS too. Conduct NPS surveys at regular intervals of time, collect the NPS scores, identify your promoters, detractors and passives, find your overall score, take necessary measures, close the feedback loop and see how it makes all the difference.

Net Promoter, Net Promoter System, Net Promoter Score, NPS, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.

 

Athira Unnikrishnan
Athira Unnikrishnan

Content Marketer at SurveySparrow

Just a plain soul enthralled by the power of words and the aroma of food!

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