BACKGROUND

The One Number You Need To Grow

When Frederick F. Reichheld identified a need for better satisfaction surveys, he explored the idea that a single survey question could be effective. Traditional methods of surveying were usually slow and too complicated to provide meaningful feedback to companies. Customer surveys had a tendency to be a mechanic ritual to tick off a checklist, as opposed to provide actionable insights to engagement and satisfaction. Reichheld’s solution was the Net Promoter Score®: a two-step survey that focused on customers’ willingness to recommend the brand, product, or service to someone else. Research showed that those companies who enjoyed high recommendation rates were also those who enjoyed higher growth rates when compared with competitors.

When Reichheld conducted further analysis, he observed that traditional measurements for loyalty were irrelevant at best, and misleading at worst. High retention rates could be explained away by high switching costs, indifference, or laziness. On the other hand, low retention rates weren’t necessarily an indication of poor customer experience either. A professional moving up the career ladder may upgrade their car to a more expensive brand, but that won’t stop them from recommending their original car model for their son, for example.

Yet figuring out what metrics can accurately reflect loyalty and satisfaction rates is crucial for companies to understand their effect on growth. You can’t set business objectives without appropriate measurements. Reichheld and his team uncovered strong correlations between high NPS® figures and average growth rate over a three-year period. While there were limitations in some sector-types, notably those with little consumer choice such as monopoly or near-monopoly market structures, the NPS® model worked across a wide range of industries.

The beauty of the NPS® model is its user-friendliness. The scale effectively separates customers into practical groups that can receive different follow-up treatment, without using complex algorithms that give employees a headache!

Net Promoter Score®

What it is and why you need to be using it

They say that happy customers are repeat customers. Provide a rich customer experience and establish a good brand image, and you’ll enjoy higher lead conversions and better customer lifetime values. Your customers will talk with rapture about how your products and services totally rock, and soon you’ll be king of your industry. If only there was a simple way to measure how likely a customer is to refer you to their friend, colleague, or obliging neighbour you borrowed milk from that one time…

Good news – there is! The Net Promoter Score® (NPS®) can help you assess how likely individual customers (and segments of customers) are to recommend your product, service, or brand. Companies that enjoy a higher NPS® usually are those that offer great customer experience.

How to calculate your NPS® 

It’s easy once you know how
Your NPS® score is simply the % promoters minus the % detractors, meaning you ignore those that are ‘passive’ for the purposes of determining your score (but not your reply to respondents – see the next session).

“But why can’t I take into account respondents who gave me 7-8?”

They may have been happy with your product, but you haven’t knocked their socks off (yet). For the purposes of the NPS®, it’s best to stick with people who are happy to sing your praises from the rooftops. Or, you know, recommend you in an excited whisper to a friend.

“But why can’t I take into account respondents who gave me 7-8?”

Getting a B may have got you through Grade 10 physics, but it’s not exactly bringing home the trophy here, is it? Someone who gave you a 6 may have been satisfied with your product, but unimpressed by other aspects during their interactions with your brand. Let’s say your name came up in conversation, reference to you may be something along the lines of “Their product was okay, but…”. In a similar fashion, ‘their opinion is okay, but…’ you don’t need to include them in your end score.

How to decide on a roll-out programme for your NPS® surveys

Timing and frequency can make a big difference
Your NPS® score is simply the % promoters minus the % detractors, meaning you ignore those that are ‘passive’ for the purposes of determining your score (but not your reply to respondents – see the next session).
Ideally, distributing a NPS® survey to your customers should form part of an integrated email campaign which aims to foster loyalty, improve customer experience, and increase engagement. Embedding an NPS® survey within an email encourages completion because it feels quick and easy to the respondent, who doesn’t even have to navigate away from their inbox. In addition, embedding a survey within your branded email keeps things personal and doesn’t confuse busy customers by sending them to a third-party’s site.

While NPS® email campaigns are the most straightforward to set up, calling people up will provide better response rates. The best approach for your business will depend on your customer profile. For example, a B2B company with few, large clients may find phone interviews more efficient. In contrast, a B2C company with a large database of smaller customers may derive more value from email campaigns.

It’s tempting to send out NPS® surveys on an annual or quarterly basis, to all your customers at once. Strategically, though, it may be better to send out the survey in small increments on a periodic basis until your entire customer base is covered. This is so that you can observe any evolutions in NPS® scores alongside changes to your business activity, for instance if you’ve rolled out a new service or app, or raised prices. In this way, you get actionable feedback in real time. Ultimately, however, the best way to determine a roll-put strategy for your NPS® (or any other survey for that matter) will depend on the number of customers you have, your business objectives over a set time period, and logistics. There is definitely a balance to be struck between sending an NPS® too often (for instance after every purchase) and too little (which means important changes in sentiment may be missed).

Finally, it’s a good idea to keep your NPS® format as consistent as possible to mitigate methodology sensitivity to changes. Plus, it just makes sense to have a consistent survey that gives you comparable results across time.

Actionable results using a two-question approach to NPS®

You found out your score. Now what?
An NPS® will provide insight into customer sentiment and indicate growth, but it doesn’t in itself point you in the right direction when figures are low. To get actionable insight from the survey respondent, the first question ‘How likely are you to recommend [Company X] to a friend or colleague?’ has to be followed up with a second, open-ended question: ‘What’s the most important reason for your score?’. By limiting yourself to only two questions, your NPS® survey does not come across as burdensome or time-consuming to answer. You’re minimizing drop-out rates by reducing the journey to goal completion.
A customer feedback program should be viewed not as “market research” but as an operating management tool.

Research shows that for each added click or question, there is a 50% chance that the respondent will give up. That means for a survey composed of four separate questions, only about 3% of respondents will complete the entire survey. For a two-question structured NPS® score, the response rate is 25%. That means NPS® surveys can provide 8x more data than traditional short surveys.

Case study: Apple’s success in securing customer loyalty

Apple is an exemplary example of high customer loyalty. The iPhone boasts over 90% retention rates in 2017, 6 percentage points up from the previous year. The tech giant dominates NPS® ranking across numerous product categories such as smartphones and laptops.

Apple introduced their NPS® system ten years ago, leveraging the results to manage and act on feedback. Their survey is a good example of how simplicity can have a profound impact, using questions like ‘Anything else on your mind?’.

They didn’t get to where they are by collecting NPS® numbers and leaving them to get dusty. Acting on feedback and taking steps to better understand what makes customers happy. A critical component to their success is their reactivity concerning detractors – unsatisfied respondents are contacted by phone within 24 hours: providing a 10% increase in retention.

NPS® is not just about a number. To get the best return on investment, you need to think about your strategy for responding to promoters, passives, and detractors. Let them know their opinion – no matter what it was – matters to you. Making effort to acknowledge the time your customers give you is part of customer engagement too. It’s also an opportunity to continue the conversation in a bid to improve your products and services.

A potential follow-up is to invite respondents who qualify as promoters to leave a review, a rating, or share their experience on social media. For respondents who have provided a good, but relatively neutral score, you can ask them about what was missing from your service that prevented you from earning their unreserved recommendation.

Limitations of using NPS® scores and how to address them

Get the most out of your score

Determining an appropriate sample size and selection

The inherent nature of an NPS® survey means that customers who are more engaged are those more likely to respond. This is why your sample selection should take into account engagement levels across your customer base. Smaller companies with fewer customers should therefore allow for minor changes in scores.

Determining an appropriate sample size and selection

While regular, periodic feedback is indispensable for identifying trends across your customer base, it doesn’t allow you to get into the nitty-gritty of day-to-day business activity. For example, if you’re testing a rebrand of your website, you’ll want to use A/B testing to get specific feedback to design options that you can react to immediately.

Leave a Reply