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NPS- What, Why & How

On 29 Jul, 2020 | No comments
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--By Sushant Banga--

What is NPS..?

Net Promoter Score, is one of the most commonly used customer experience metrics across the globe. Since its origin in 1993 till date the metric has evolved and being adopted a great deal. Net Promoter Score” or more recently  “Net Promoter System” (as mentioned in The Ultimate Question written by Fred ReichheldRob Markey).

Let us get to know about Net Promoter Score and later will talk about Net promoter System. NPS is a metric used in customer experience programs. It measures the loyalty of customers to a brand and the scores are derived with a single question. The scores ranges from -100 to +100, a higher score is desirable.

It was developed by Fred Reichheld in 1993 and later adopted by Bain & Company in 2003. At present used by businesses across the globe to measure and track how they’re perceived by their customers.

The Single Question…

How likely is it that you would recommend [Product /Service] to a friend or colleague?

Respondents give a rating between 0 (not at all likely) and 10 (extremely likely) and, depending on their response, customers fall into one of 3 categories to establish an NPS score.

  • Promoters respond with a score of 9 or 10 and are typically loyal and enthusiastic customers
  • Passives respond with a score of 7 or 8. They are satisfied with the service or product however not happy enough to promote the brand. They are typically tyre kickers and play role in swinging scores at either side
  • Detractors respond with a score of 0 to 6. Unhappy customers who are unlikely to do business or buy again, and may even discourage others to buy.
Calculating Net Promoter Score

It’s simple to calculate NPS score for a touch point or Organisation  – just subtract the percentage of Detractors from the percentage of Promoters.

For example, if 30% of respondents are Detractors, 10% are Passives and 60% are Promoters, your NPS score would be 60-30 = 30.

Type of NPS :

Brand / Relationship NPS

Brand NPS surveys are deployed on a regular basis i.e.- quarterly or once a year. The goal is to get a periodic experience health check on customers and understand how they feel about the company. This sample survey data can be used to check the health of customer on rolling basis and establish a benchmark for company success.

T-NPS (Transactional NPS)

T-NPS are Post interaction NPS Surveys sent out after the customer’s interaction at any touchpoint. Typically it follows principle of Omni Channel approach and surveys get triggered through similar interaction medium (Example- an online or retail purchase support call, Ticket Closure, Post Delivery etc etc ). It’s used to understand customer satisfaction on a granular level and provide feedback about a very specific topic. It plays a pivotal role in defining improvement road map for Brand NPS.

It’s recommended to use both types to understand your customer at macro and micro levels.

Some examples where Net Promoter System is used :

  • Voice of Customer B2B (Relational NPS)
  • Voice of Customer B2C (Transactional and Relational NPS)
  • Voice of Employee (Relational NPS)
  • Voice of Process

Why NPS and its Key Benefits:

1. Build Customer Loyalty

One way to determine precisely how loyal your customers are is with the Net Promoter Score. Measuring customer satisfaction is no longer enough, and this system acknowledges that. You need to know how loyal your customers are to figure out how happy they really are! The advantage with NPS is that it’s one of the only systems that allows you to connect improved customer loyalty to business results. Thus, you can accurately determine how pleased your customers are by asking a single question and then, in a few months, you can run another survey to see if the changes you’ve made have had any impact on the customer experience.

2. Improve Customer Satisfaction

As we’ve already mentioned, satisfaction shouldn’t be the end-game. However, it is a stepping-stone and an important one in your journey to achieving customer loyalty. First, you must satisfy your customers before delivering delight. The problem is that to achieve customer satisfaction, you have to know what customers are thinking, and that’s where NPS® comes in. It gives you the tools you need to determine how satisfied your customers are and then to keep improving until you increase the number of satisfied customers as well as their level of satisfaction. You have solid data to tell you whether you’re doing it right or not!

3. Convert more Customers into Advocates

Word-of-mouth advertising is one of the most effective promotional tools in any business’ arsenal. No tool is as powerful in acquiring new customers as recommendations from existing customers. In the NPS system, those customers who are most likely to recommend your business/products/services to others are called advocates. And with NPS, you can discover just how many advocates you have among your customer base. Importantly, the more promoters your business has, the better your bottom line will be.

4. Generate Increased Customer Feedback

It will help you identify those customers with whom you need to establish a better connect to discover what their issues are and fix them instead of making process changes blindly. So, make sure to take advantage and dig as deeply as you can into the issues that bother and displease your customers. Not only can you fix the problem, but you can also develop systems to ensure it doesn’t happen again to another customer.

However, don’t ignore your Promoters either. Just because they’re happy with your products/services/business doesn’t mean they might not have issues too. Only that they could be smaller, but they may be problems that still need to be addressed.

5. Lower Customer Defection Rates

Bain and Company, conducted some studies and discovered that Promoter have lower defection rates than passives or detractors.

Considering that customer acquisition costs are high by comparison and are continuing to rise, minimising the number of customers that leave your brand is a very powerful way to grow your business. And since you know that promoters tend to defect less often, you can put more money and effort into converting those customers that are “Passives” and “Detractors” into “Promoters” instead of going all in into acquiring new customers. 

6. Increase the Lifetime Value of a Customer

By using NPS®, you’ll have the data you need to help create more promoters for your business. The more promoters you have, the more money you will be making and the easier it will be to grow your business.

Statistics show that promoters tend to spend more than new customers, detractors or even passives. They also tend to be less price sensitive, meaning that a slightly cheaper option somewhere else won’t tempt them to defect. Promoters also help reduce acquisition costs and improve your lead generation efforts because they account for most part of referrals. So, the more promoters you have, the more referrals you gain.

7. Integral Business KPI

NPS can be used as a key performance indicator for your entire business because it will tell you how many customers are likely to recommend re purchase your product or recommend brand to other people. It can be used to discover how effective your frontline staff is but also help them understand where they need to focus their efforts more. The more tools and resources you provide your employees with, the better able they will be to offer your customers the outstanding experience they’re looking for.

8. Incredible Degree of Scalability

The idea is that the question you use for the NPS survey can be as broad or as narrow as you need it to be. NPS is so easily scalable because it’s something everyone understands. It’s a familiar idea that your entire business can get behind, with your entire team being on the same page, compared to other more complicated metrics that don’t have the same effect.

9. Strong Co-relation with Business Growth

NPS could explain between 25% and 65% of the organic growth rate variations between competing companies. Thus, a leader in NPS generally expanded more than two times faster than their competition. In other words, NPS can be used to predict how a company will grow in the future.

10. Lower Research Costs

The Net Promoter Score helps to lower these costs because it is simple enough to be done in-house without the need for external assistance. In other words, companies gain valuable insight at very little cost, making it easy to run the surveys on a regular basis, which is essential to staying competitive.

How of NPS ?

Deploy Net Promoter System instead of Net Promoter Score

Knowing about the Net Promoter score will help to understand the Net promoter system better. It would not be wrong to say the Net promoter system completes the journey from an organisation’s standpoint. Deploying Net Promoter System is a different ball game as it is much more than getting scores and trends. It’s a tectonic shift from target driven culture to developing a system for brining Voice of the Customer to heart of the business. Making Organisation Ecosystem more customer centric and developing most important skills like listening, Servicing with Empathy and Smile. Each Omni Channel interaction can be converted into a moment of truth for its customers. 

Where Net Promoter Score (NPS) Can Go Wrong 

Think of Net promoter score or Net Promoter System, like rocket fuel. If you leave it alone, it won't do much. But when you load it into a responsive, proactive, customer-driven company: Shoot off. The most successful companies are those that take NPS data and use it to fuel and direct their marketing strategies, customer success best practices, and even product development.But while obtaining your NPS is easy, knowing how best to use the information is anything but.

Key Avoidable Failure aspects in NPS Deployment

  • Focus remains on scores –Organisations should develop Net Promoter System and align entire ecosystem around it.
  • Driving NPS is an individual’s or functional responsibility – NPS should the common KRA for entire organisation, Customer Success Teams / CS Teams should be responsible for coordinating improvement discussions among functions.
  • Lengthy / Complicated Survey Designs – Keep it Short and Simple.
  • Over Ambitious NPS Targets –Moving NPS needle at times require tectonic shift in strategy, its sudden positive or negative movement should be questioned /reviewed diligently across hierarchy. In an ideal scenario It should move in accordance with business outlook.
  • Discussing Only Detractors – Understand reasons behind Promoters and Celebrate even Small Wins
  •  Technology Dependency – Latest sophisticated tools provides 1st at times 2nd level of insights and actionable however seeking support / relaying on set of SMEs or Consultant is advisable especially during transformation phase.
  •  Close Looping – Reaching Back to detractors to win back the lost experience and carrying out  root cause analysis for each lost experience acts as a bridge in building back customers confidence and slowly change brand perception.
  •  VOC only through NPS – Take a consolidated view of Social Media Hearing, CRM Analytics and NPS insights for a robust “Voice of Customer” model.

Conclusion: Net Promoter System is robust CX Measure, if aligned with Business Goal it can yield transformational outcomes. Important is how we select the right mix of technology and consulting teams to ensure success at each step of CXM. 



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