If you think Net Promoter Score (NPS) is about simply collecting a metric, tracking its growth and hoping things change, then allow me to set you straight: This customer satisfaction survey is anything but basic. When wielded correctly, Net Promoter Score can become a powerful tool that will change the way you run your business, treat your customer base, and improve your retention rate.
What is NPS?
Net Promoter Score (NPS) is a customer satisfaction metric first developed by business strategist Fred Reichheld, who wanted to generate a number that would accurately predict customer behavior.
Reichheld knew that customer satisfaction alone wasn’t a sufficient predictor. After all, a customer might be satisfied with your product or service, but quickly churn after one negative experience. A satisfied customer might be poached by a competitor. A satisfied customer might never refer your product or service to a friend or family member, or respond to an upsell.
But a loyal customer will behave differently. A loyal customer will enthusiastically refer your brand to a friend or family member. A loyal customer will be less sensitive to price changes. A loyal customer will buy more, give more feedback, and complain less. A loyal customer will be unlikely to churn.
Ultimately, Reichheld discovered that one powerful question was most accurate in predicting customer behavior: How likely are you to recommend this product or service to a friend, family member, or colleague?
Implementing a NPS survey
If you want to predict customer loyalty — and in turn the likelihood of retention, profit growth, and organic referrals — then you would ask the above question with a 0-10 scale for the response, 0 being extremely unlikely and 10 being extremely likely.
The resulting number assigns survey takers to one of three categories: promoters, passives, and detractors.
Promoters rated you a 9 or 10 on the survey. These enthusiastic brand evangelists are more likely to spend, make referrals, and provide constructive feedback. Maybe best of all, they are least likely to churn.
Passives gave a 7 or 8 on the survey. They are neither thrilled nor dissatisfied, and they won’t factor into your Net Promoter Score.
Detractors chose a 6 or below. For one reason or another, these customers have been disappointed — and they’re likely to tell you why (which we’ll get to in just a moment).
To calculate your Net Promoter Score, you’ll use the following equation:
[(# of promoters/total # of survey takers) x 100] – [(# of detractors/total # of survey takers) x 100] = NPS
But maybe just as important as tracking this metric is the feedback generated from the follow-up question: Can you explain your rating?
The open-ended follow-up question gives your customers — and specifically your detractors — a much-needed opportunity to share their perspectives with you. More importantly, this is your moment to hear critical feedback that could transform the way you run your business. Most NPS software will also track these open-ended questions providing a single source of truth for your customer satisfaction data.
Using NPS to improve company processes
Although it’s never encouraging to see that you have dissatisfied, disappointed customers, your detractors may be your most valuable source of feedback.
Your detractors will let you know what’s going wrong with your product or service. They’ll tell you if they’re frustrated with a particular process, or if your customer support team is performing poorly. Your detractors will be brutally honest… and inestimably helpful.
“Closing the loop” means that you actually follow through on feedback from your NPS surveys. You’re taking action to address common themes of discontent and dissatisfaction, all the while improving and creating processes that create a better customer experience.
Here are a few real stories from companies that have transformed internal processes to boost NPS, and most importantly, to improve overall customer loyalty:
At Progressive Insurance, support phone calls are recorded so that they can later be sent to the relevant employee if they generate NPS feedback. For example, if the phone call left the customer feeling unhappy or dissatisfied, the employee has the opportunity to listen to the call again and note any emotional response in the customer.
Allianz is a multinational financial services company that also happens to be exceptionally NPS-forward. In one of their health insurance sectors, Net Promoter Score feedback showed that unexpected delays were causing significant customer dissatisfaction. Claims representatives also learned that customers had to call again and again to ask about the status of payments, and had to describe medical conditions repeatedly.
In response, Allianz created a solution: Case managers were assigned to all client calls to help prevent delays and repetitive questions. If there was a delay in reimbursement, policyholders would receive a call or text message informing them about the status of their claim.
When American Express tried to identify the processes that generated the most NPS detractors, they found a significant issue with card replacement. Requests to replace a lost or stolen card often went unresolved, leaving members frustrated. Notably, they also saw that their highest value customers more frequently experienced a need to replace their cards — and gave a lower-than-average NPS rating after going through the replacement process.
To address this critical issue, AmEx made it a priority to improve their card replacement process, with the company increasing their resolution rates by a whopping 20%. Unsurprisingly, they also noticed an improvement in the NPS scores of cardholders who had requested replacements.
In all of these cases, these major corporations took actionable steps to improve their processes, and they saw success. But if they hadn’t engaged their customers to request an NPS score, they might have never discovered the source of discontent… and their bottom lines would have continued to suffer from the generation of more and more detractors.
Improved processes means greater retention
A high retention rate is a powerful indicator. It reveals how effective your business is at keeping customers happy at every stage of the customer lifecycle. It helps predict organic growth through referral marketing. And it’s a great indicator of future revenue growth.
Ultimately, your goal with implementing Net Promoter Score is to generate loyal customers and clients who stay longer. In other words, your goal is to increase retention.
By assessing and acting on Net Promoter Score feedback to improve processes, you’ll ultimately increase your retention rate. If your NPS feedback reveals that your customer support staff handles payment issues poorly, you might want to consider creating a firm protocol for dealing with payments. Alternatively, you might learn that customers are confused by the set-up required for your software service. In this scenario, you might consider creating a process where new clients are assigned a customer agent to help walk them through the set-up.
In any case, taking steps that specifically address customer complaints will help prevent churn, and it may even convert existing detractors into loyal promoters. You’ll see an increase in retention — setting you up for steady, consistent growth.
Letting customers drive key decisions
The belief that what customers think matters is at the heart of Net Promoter Score. Collecting, assessing, and acting on NPS means that you allow customer feedback and customer relationships to influence key processes and policies within your business. Ultimately, it’s about generating loyal, high-value customers who want to invest in your brand and will stay with you for the long haul.