The phrase Net Promoter Score (NPS) is a term used in many types of businesses. Here, we are trying to understand what NPS is, where it came from and why should companies use it.
What is Net Promoter Score (NPS)
What is NPS?
Net Promoter Score is a metric that measures how satisfied customers are with your products or services. Customers respond to a simple survey asking them how likely they are to recommend your brand.
Your Net Promoter Score (NPS) is a strong indicator of how much long-term growth your brand can expect, and that depends on the customer perception. Not to mention, Net Promoter Scores are metrics that give you an unbiased view of how well your customer service strategy is performing.
In simple terms, this is an indicator of the presence of super-loyal customers who advise using the services or products of your business.
History of NPS: Who Created it & Why?
NPS is a result of Frederick Reichheld research, the essence of which was to figure out a pattern among the questions to ask the client, and, depending on the answers, the company will be able to understand what they need to improve. As it turned out, the main question that allows you to understand how successful the business is as a whole is “Are you ready to recommend the company to a friend?”
An article based on the work of Frederick Reichheld can be read here .
What does NPS mean in business?
The answer is quite simple, the NPS shows the prospects for the possible growth of your company. It is easy to understand if you think about the fact that increasing the number of loyal customers increases the base of potential customers and the overall presence in the industry.
How to calculate NPS?
It is important to understand that the NPS indicator is among clients who have already used the services of the company and can appreciate it, but how do companies conduct the assessment?
Companies send a proposal for clients to take a survey, it can be via a phone call, a link, SMs, or email. The survey usually asks the key question:
“What is the probability that you will recommend our company to your friend? Please rate on a scale of 0 to 10.
**Note: Companies must systematically identify promoters and detractors among their clients.
**The NPS response scale ranges from 0 (unlikely to recommend) to 10 (highly likely to recommend).
Customers Can Be Divided Into Categories Depending on their answer to the NPS Question As Follows:
Promoters = respondents with 9 or 10 points (loyal enthusiasts who continue to buy from the company and encourage their friends to do the same and loyal customers who will recommend it)
Passives (Neutrals) = Respondents with 7 or 8 points (satisfied but not enthusiastic customers are easily attracted to other competitors). However, they will not express any negativity towards the company either.
Detractors (Critics)= respondents giving a score of 0 to 6 (dissatisfied customers who can damage your brand’s reputation through negative word of mouth)
The NPS formula is:
Subtracting the percentage of detractors from the percentage of promoters. (You should note use the percentage of passives in this formula.)
What is Good NPS?
Obviously, if there are no Detractors and Passives, and there are 100% promoters, this is ideal in a perfect world! However, the probability of it happening is almost impossible.
How important is it to make customer loyalty research?
Surely, any company wants to grow financially. But the issue of growth is that you can not simply start rolling out more products or services to the market without knowing how the audience feels about your business.
It is at this moment that it becomes clear that those who have not reached the doors of your company may not know about it. However, your loyal customers who use your product and enjoy it will help you by promoting your business. Also, one of the ways to get such buyers is the continuous and stable improvement of the quality of service or product.
Main Goal: Listen to Customers!
While most companies are obsessed with boosting their valuation, NPS is not really a quantitative metric for simple growth, but mostly a qualitative metric for reflection, analysis, and response. The most important aspect of NPS that many companies overlook is that the number is just a metric. More important is the quality feedback that you process and try to improve the customer experience. The main purpose of the Net Promoter Score is to help you track and maintain the relationship you have established with your audience. And your main goal should always be to listen to the voice of customers and act in accordance with them.
A well-optimized NPS program is one tool that helps companies build proactive customer service and adapt to customer needs. not only that but also a survey can provide a steady stream of data that you can use to improve your products and services and retain more customers while spreading the word of mouth by leveraging the power of your promoters.
Many companies around the world consider Ziwo Cloud Contact Center Software as the best tool to improve customer satisfaction and NPS rates, through Ziwo software you can send your customers NPS surveys and it will allow you to collect all information required. In other words, the software can help companies improve their NPS and customer loyalty metrics, not only that, but also it can improve many other critical metrics, these metrics are really worth keeping your eye on.
NPS is Great for Managemen!
When your company’s bosses are looking for a simple, generalized indicator of customer loyalty, NPS is the best choice. Net Promoter Scores not only help a company compare itself to its competitors but also help managers compare the performance of services in one department with other departments. For example, does the maintenance department get higher marks than the field service department? If so, what needs to be done in the company so that all departments receive equally high marks?
NPS: A Tool to Study Customers
Many companies use the Net Promoter Score index as a tool to study customer loyalty. But it is worth spending resources on collecting and interpreting data in accordance with the proposed methodology only if the business owner is ready to act in accordance with the result obtained.
It is not enough to know the NPS index. In other words, it is necessary to interpret it correctly and understand what led to this result. The right approach will help you find new ways to promote, connect other services, improve existing processes and prepare your business for innovation.
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