What is Net Promoter Score and How Small Businesses Can Benefit from NPS

February 7, 2017 Company News

Customer satisfaction is critical to the growth of any business, regardless of its size. Happy and satisfied customers easily turn into brand advocates and help brands grow and thrive. It’s no wonder then why businesses put tracking customer loyalty on the top of their list.

When it comes to tracking customer loyalty, businesses adopt a wide range of methods to measure their customer satisfaction metrics. One of the most popular metrics is Net Promoter Score (NPS).

Source: checkmarket.com

Source: checkmarket.com

What is the Net Promoter Score (NPS)?

Net Promoter Score (NPS) was developed by Fred Reichheld and Laura Brooks in 2003 as a single metric to measure customer loyalty metric more accurately. Fred published an article entitled “The One Number You Need to Grow” in Harvard Business Review which introduced a simplified approach to tracking customer loyalty with just one number. Since then, the metric has been used by countless businesses across the world successfully.

If you ever have purchased any product or used any services, you would have come across the following question at least once:

“On a scale from 0 to 10, how likely would you be to recommend our company to a friend or colleague?”

This question is typically followed by a 11-point scale (from Unlikely (0) to Very Likely (10)) for the customer to give a score based on their experience. In short, NPS helps businesses quantify their customer loyalty.

Net Promoter Score Calculation Example

Calculating Net Promoter Score is very simple and straightforward. Once you put the aforementioned question to your customers, you need to record their answers and classify them in the following manner:

Anyone that gave you a score between 0 to 6 is termed as a Detractor.

Anyone that gave you a 7 or 8 is termed as a Neutral.

Anyone that gave you a 9 or 10 is termed as a Promoter.

Therefore, the Net Promoter Score (NPS) = % of Promoters – % of Detractors.

In terms of equation, NPS = (Number of Promoters / Total Responders) – (Number of Detractors / Total Responders).

What Is a Good Net Promoter Score?

No matter what kind of business you run, you can’t always please every customer you serve. Therefore, your focus should be to optimize the ones that you can. It’s nearly impossibly for any business to get a perfect NPS of 100. In fact, there’s no universal score as such; rather, it there are industry benchmarks in each sector. For example, the standard NPS in the airlines industry would be different from that in the hotel industry. Businesses should try to strive to match the industry benchmarks rather than attain a perfect score.

For example, Southwest Airlines’ NPS is in the 60’s which is considered excellent in the aviation industry. This sets a standard for other airlines to match by improving their customer loyalty.

As per the global NPS standards, any score between 0 and 50 can be considered good, while an NPS of 50 and above can be considered excellent. Likewise, NPS of 70 or above is considered world class.

Simply put, a positive NPS means you have a lot of promoters or brand advocates who are likely help your business grow through word-of-mouth. On the contrary, a negative NPS indicates you have earned a lot of detractors and unhappy customers who are likely spread a negative word-of-mouth, hurting your brand image.

How to Boost Your Business’s NPS

Positive customer experience is the sum total of great products and excellent support services. The Net Promoter Score (NPS) vividly reflects your customer loyalty. Therefore, your entire staff must wholeheartedly strive to exceed the expectations of your customers and improve the Net Promoter Score of your company.

Here are some tips and tricks to boost your business’s NPS.

Take Care of Your Employees

According to Richard Branson, “If the person who works at your company is not appreciated, they are not going to do things with a smile.”

In order to boost your Net Promoter Score, you need to make sure your employees are happy and motivated enough to treat your end customers right.

This requires that your company adopts an employee-centric management strategy, ensuring that the workforce is valued, appreciated and incentivized appropriately. Your employees’ emotional profile rubs off on your customers because they are the direct point of contact.

In fact, companies with a positive NPS tend to prioritize their employees first, customers second and shareholders third.

Aim for Customer Loyalty

While many businesses direct their focus on customer satisfaction, it’s essentially just a part of the overall customer experience which plays a crucial role in transforming happy customers into loyal customers and brand advocates.

Companies with higher Net Promoter Score go beyond their selective focus on customer satisfaction and optimize areas responsible for driving customer loyalty.

To boost customer loyalty, companies must act proactively, visualizing the customer goals and their potential challenges. This helps them build a positive ecosystem for the customers, ready to address any pain points beforehand.

Boost Employees’ Control Quotient (CQ)

Businesses aiming to empower their employees with education and knowledge, often underestimate the power of an important skillset – personal control or Control Quotient (CQ). While employees are trained to interact positively with customers under normal circumstances, they are rarely ready to handle challenging and unforeseen situations that arise from time to time and require a great deal of personal control. In other words, employees who deal with customers directly should be trained to empathize with customers to not take their emotional reactions personally.

Organizations aspiring to boost their employees’ Control Quotient (CQ) need to offer the following:

  • A positive ambience for employees to feel connected with company’s bigger mission.
  • A strong peer network for support for employees
  • An empowering atmosphere for employees to feel trusted and make right choices.

In short, helping your employees improve their control quotient will help you improve your Net Promoter Score.

Low-Cost NPS Software

There is a wide range of NPS software tools available for companies to track their customer loyalty. Small businesses can take advantage of some of free and low-cost NPS software provided by companies such as Delighted, Customer Gauge, Promoter.io, Recommendi, and Qualtrics.

Final Thoughts

In today’s competitive business landscape driven by word-of-mouth, organizations can ill-afford to ignore their customer sentiments. By adopting Net Promoter Score mechanism, tools and software, they can develop a competitive advantage and boost their customer loyalty.  

Are you using any NPS software for your business and did you see any improvements in customer loyalty? Please share your thoughts in the comments below.

 

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