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Guide to Know About Net Promoter Score 2021

On 26 Aug, 2021 | No comments
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Guide to Know About Net Promoter Score 2021


There are many indicators of a company’s success and future growth. Customer experience and satisfaction are benchmarks that help you gauge your brand’s perception and success.  But how do organizations measure, understand and track customer experience?


What is Net Promoter Score?


Net Promoter Score or NPS originally developed  in 2003 by Bain & Company’s Fred Reichheld  is a popular benchmarking metric that organizations use to measure customer advocacy. In other words, understanding a customer’s willingness to recommend your brand, product and services. NPS is highly effective because it narrows down the crux of customer experience to one simple question:
On a scale of 0 to 10, how likely are you to recommend this company’s product or service to a friend or a colleague?
Usually, the marketing analytics or a Customer Experience Management (CXM) provider collects these responses using the scale of 0-10 at various touchpoints in the customer journey. Low scores indicate poor customer experience and high scores reflect outstanding CX.
NPS is widely considered to be the core measurement for customer experience management programs around the world. At first, it may look relatively straightforward, but when combined with other customer experience data and metrics, NPS unlocks significant insights and actionable intelligence.

How to calculate NPS?


As mentioned earlier the NPS is calculated based on the rating given to the question ‘How likely are you to recommend company/brand/service to someone?’
The 11-point rating scale ranges from 0(not likely) to 10(extremely likely). Based on the score assigned by customers to this question, there are three broad categories of customers that can be classified as:
Promoters = Those who assign a 9- or 10-point score. These customers are considered loyal enthusiasts who will continue to buy and keep recommending others, fuelling further growth.
Passives = Those who assign a 7 or 8-point score. These customers are satisfied but not enthusiastic enough to recommend the brand. They may even switch loyalties if competition looks promising.
Detractors = Those who give a 0 to 6-point score. These are unhappy customers who can potentially damage the brand with negative feedback or word of mouth, impacting the growth.
Finally, you calculate NPS by subtracting the percentage of detractors from the percentage of promoters. This can range from a low of -100 to a high score of 100 based on the number of detractors and promoters you have.


How NPS relates to growth?

While researching on the net promoter system, market experts have established a correlation between relative NPS and growth. Fred Reichheld has conducted various studies to demonstrate a strong connection between industry leaders who had a great NPS and their business results.
Researchers identified relevant competitors in an industry and measured the NPS for each company with the same methodology and sampling. The relative scores were then matched with organic growth measures and the NPS explained 20-60% of the variation in the organic growth rates.  On average, net promoter score leaders outgrew competition by a factor that is greater than two times.
NPS is core metric for Customer Experience Management and there are various Net Promoter services providers in India.

Why industries need NPS services?


NPS benchmarks are used across a wide spectrum of industries starting from automotive to banking, insurance, software, Telecommunication and health providers. One of the core benefits of using NPS is to benchmark an organization against peers in the same industry. Here are some of the major sectors that use NPS benchmarking to measure customer loyalty and perception:

•    Automobile
•    Software
•    Appliances
•    Investments
•    Retail
•    Banking
•    Computers and tablets
•    Supermarkets
•    Insurance
•    Hotels
•    Fast food
•    Healthcare
•    Internet providers
•    Telecommunication
Almost everyone from Google, to Walmart to DHL, Citibank to BMW, Vanguard to GE and Starbucks rely on NPS to gauge customer sentiment and loyalty.  NPS in India has gained much popularity in recent years and there are several Net Promoter Services provider in India.


Customer Satisfaction (CSAT) versus Net Promoter Score (NPS) Surveys

CSAT survey is the traditional parameter of customer satisfaction and is quite a useful too. It was originally used to calculate customer satisfaction on a scale of 1-5. It was in 2003 that NPS was introduced to evaluate customer loyalty and brand preference.
The main difference between a CSAT survey and an NPS survey is that CSAT focuses on short-term customer loyalty whereas NPS aims to measure long term loyalty and satisfaction. Many experts prefer NPS and consider it to be the more accurate form of evaluation tool compared to CSAT.
However, both scores are relevant in many industries and can be used in combination to measure the success of your brand the overall customer perception and business growth.

Pros and cons of using NPS


Before an organization jumps into deploying NPS service, it is important to understand that like everything else NPS may have its own set of drawbacks. As with any customer survey program, weigh the pros and cons before you hire a (CXM) provider in India.

Pros


1.    Easy to use and intuitive survey
The NPS online poll is quite simple and intuitive for customers to participate in. The example survey is centred around the basic idea – whether your clients/customers like you enough to recommend it.

You can email your customers the survey or post it on the website. Calculating the score is also intuitive and there are plenty of templates available to handle the math for you.

2.    Provides the big picture to management

The C-suite and individuals across senior leadership are concerned with a high-level view of customer loyalty and satisfaction. NPS helps companies compare how they are performing against their competition and managers can leverage the tool to see how individual departments or product offerings fare against others.

3.    Universal language for classification
The NPS survey uses the standard, universally accepted categories to classify the customers: promoters, passives and detractors. This makes it easy to broadly classify the type of customers you have. The system makes it easy to tell apart the customers and act on the necessary follow up steps.

4.    Benchmark in a jiffy
Since the NPS program is used widely across industries globally, one can easily benchmark the score and see where they stand against the competition. For instance, if your NPS score is 65 but the industry average is 73, then you know that relative to the competition, you might have to put in some effort.


Cons


1.    Misses specificity
Many detractors of the NPS service say that while it helps to understand customer loyalty, it doesn’t specify the reasons why your customers gave you a poor score. It might be a good idea to follow up NPS with more specific surveys or CSAT surveys to get detailed information.

2.    No insight on improvement
NPS is a great first step in understanding customer experience and brand loyalty.  However, NPS alone won’t solve the larger issues around poor scores and low customer satisfaction. This leaves many organizations with the uncomfortable question of “Where do we go from here?” Before diving in with your NPS plan, it might be worthwhile to create a follow up plan to act on the next steps based on your score.

3.    It is possible to game the system

NPS results can be misleading if the managers under pressure might be tempted to game the system. An example of this could be to remind only the happiest customers to fill out the survey and fail to send the same reminder to a disgruntled customer.

Partnering with an NPS survey provider


The ‘Do It Yourself’ approach may have some loopholes and it is also possible for managers to rig the system. It can be useful to partner with an experienced survey provider to undertake the NPS survey project for your organization.

Benefits of this approach:
•    Standardised tools and platforms for capturing feedback
•    Ability to identify the gaps in organizational processes
•    Benchmark against competitors in the same domain
•    Expert recommendations to improve customer loyalty and NPS score
•    Smarter dashboards and real-time scores

Old versus new techniques of NPS

It has been more than 17 years since the Net Promoter Score methodology was launched to the public. Much has evolved since then and even the marketing landscape has transformed significantly. There is a lot of  change from the mail and email-based traditional techniques of NPS to the modern day approach where there is focus on elements like customer journey, continuous evaluation, promoter development etc.

Here are some differences between the two approaches:

Old

New

Focus on Score

Focus on Journey

Survey Data

Data Diversity

Detractor Recovery

Smart Closed Loop

Data Collection

Information Consumption

Promoter Stagnation

Promoter Development

New ways of conducting NPS Services in 2021
Contemporary NPS service uses technology and closes the information loop with the customers. Here are some of the best practices for NPS in the technology-driven era:

1.    Monitoring NPS continuously
Modern NPS service providers recommend measuring the score on a continuous basis to provide you with more authentic feedback.

2.    Short and sweet
NPS surveys have evolved to become short and sweet. They include just the NPS rating question and an open-ended feedback field if the customer wishes to fill it up.

3.    In-app surveys
Organisations set up triggered in-app experiences for NPS surveys to collect feedback straight from their apps. In-app NPS service has better engagement and reach because they are behaviour driven and delivered in context. They tend to be a more accurate metric to monitor customer satisfaction on an ongoing basis. NPS surveys enable organisations to keep a close watch on customer satisfaction on an ongoing basis which is important in today’s competitive marketplace.  

4.    NPS software or Customer Experience Software
NPS platforms help to capture transaction-based feedback and get real-time scores, alerts on detractors. With the help of smart dashboards, real-time insights and customised alerts, it helps businesses to take prompt action and close the loop. Additionally, customer experience software can also be leveraged to handle NPS survey questions and data.

Take Away:


Harvard Business Review has rightly called Net Promoter Score the ‘One Number You Need to Grow’. From email based surveys that were blasted occasionally to customers to web-based surveys and later in-app and platform-driven surveys, NPS has evolved into one of the most widely used benchmarks for measuring customer loyalty and advocacy. The key to improving business outcomes with NPS is to ensure that the gathered insights are used to drive change and improvement in the business.

Also Read: https://www.qdegrees.com/blog/nps--what-why-and-how



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