Understand what NPS (Net Promoter Score) is and how to implement this methodology in your company – WAU
The Net Promoter Score is a customer satisfaction methodology developed to assess the degree of customer loyalty of any company profile.
Making a business grow is certainly not an easy thing. And, often, in the desire to acquire more customers and increase sales, some organizations end up leaving customer satisfaction a little aside.
This scenario means that even with all these investments in foreign acquisition, these businesses continue with their numbers stagnant. That’s when they don’t collapse, losing several customers.
In this article, we will teach you to look a little bit more inside, not only of your company, but inside your customers.
Working with them to ensure the success of each one and, consequently, yours. Gaining not only customers, but partners and people who really defend and believe in your brand.
And the best way to do this is to use a simple methodology, called “Net Promoter Score” (or simply “NPS”), which makes it possible to win a sustainable development, based on good relationships.
With this in mind, this text will cover the following topics on the topic:
What is NPS (Net Promoter Score)?
O Net Promoter Score is a customer satisfaction methodology developed to assess the degree of customer loyalty of any company profile.
It appeared to the world in 2003 after the publication of Fred Reichheld, Consultant of Bain & Company, in Harvard Business Review (a magazine of publications of Harvard University, in the USA).
In this article called “The number you need to grow”, Fred presents his findings, which, later, would be explained in more detail in his book “The definitive question”.
Considered indispensable for managers who deal with the quality of products and / or service, the book addresses how to guarantee the loyalty of their customers based on this methodology.
What are the advantages of using NPS?
The Net promoter Score stood out quickly, being more effective when presenting several benefits when compared to other satisfaction surveys.
Among the main points, we can highlight:
Ease of use
The NPS can easily be used by any company, of any size or sector, being able to measure from the global satisfaction, as the one of each point of contact with the consumer.
In addition, with a clear number to be followed, the company is able to monitor the satisfaction of its customers at all times.
Simple for everyone
For managers, the evaluation of results happens in a simple way, with a guide number.
In addition, it is extremely easy to implement, and your company can use everything from a simple form and spreadsheets to compile everything, even one of the several existing tools to obtain powerful insights.
For customers, it is a single question to be answered. A simple assessment, taking just a few minutes, that does not generate any wear and tear.
Agility to act
The NPS aims to improve the company’s performance based on each feedback collected.
And thanks to the simplicity with which the results are obtained and shown (both quantitative and qualitative), it is possible to contact the customer right after contacting him.
Less chance of manipulation
Every search can be manipulated.
But the NPS decreases, and this margin a lot. As a single, objective question, the consumer cannot be influenced by the order in which the questions appear.
In addition, there are several good practices to ensure that responses are suitable.
By maintaining the methodology and the basis of the question, it can be adapted to the most different situations and to the most different markets. Like for example:
- “How likely are you to recommend a product X to a friend or colleague?”
- “On a scale of 0 to 10, how much would you recommend Company X to a friend or colleague”
Another advantage of NPS is that you can compare your grade with those of several other companies to find out how you are doing in relation to the market.
The average grades may vary according to the business sector, but we can generally establish the following rating scale:
- Excellent – SPL between 75 and 100
- Very good – SPL between 50 and 74
- Reasonable – SPL between 0 and 49
- Bad – SPL between -100 and -1
According to a survey conducted in 2018 by Customer Gauge, the average NPS by sector based on American players behaves as follows:
The Health, Services, Retail, Lodging and Restaurants and Manufacturing sectors are the leaders on the list, with an average NPS of 62, 58, 54, 53 and 51, respectively.
How does NPS work in practice?
Today there are several surveys to measure the happiness of a customer and in this case, you must have asked yourself: “So, what differs the NPS from all the others?”.
Well the truth is that most of them don’t work that well.
Since the results obtained do not appear individually, to generate a change in behavior, and not even the feedbacks happen in a timely enough time to generate relevant insights.
Thinking about that, the developers of the Net Promoter Score, related answers to a series of questions, with buyback data, indications, and other positive indicators that contribute to the growth of companies, to measure the relationship they would have with each other.
From this study, they found that a high score for a single question was directly correlated with these indicators in 11 of the 14 cases.
In 3 other cases another question did better, but the difference was so small that both would serve as an indicator.
“On a scale of 0 to 10, how much would you recommend Company X to a friend or colleague?”
This question allows us to quickly measure the customer’s feeling towards the company, as there is no greater indication of satisfaction for the company than to be indicated.
Since the customer indicates a high possibility of referring him, he certainly trusts the structure offered by his company and the way it delivers the product or service.
How does customer classification work?
According to the answer given, customers are classified into 3 distinct groups:
1. Promoters (grade 9 or 10)
People who give this rating really saw the value in your product or service and really feel better about using them.
Are loyal customers, staying connected to the company and recommending it to friends or colleagues.
They are people more willing to answer surveys and participate in activities, always with constructive feedback and good suggestions.
It is essential that the company creates mechanisms to increase this number of customers and offer benefits as a reward for this posture.
Maintaining a good relationship with this type of customer is super important, since according to the market average, 20 to 50% of the companies’ revenue comes from indication.
2. Neutral (grade 7 or 8)
They are customers not engaged with the company. Passively satisfied, but not loyal.
They usually do not make recommendations or do so with reservations.
Besides, they don’t mind going to a competitor or looking for another option if they notice a better condition or more attractive offer.
3. Detractors (score from 0 to 6)
They are customers dissatisfied with the product or service and who, instead of feeling helped by it, feel that acquiring it only made their situation worse.
Because instead of solving your problem, the company only brought more “headaches”, criticizing it to its friends and colleagues.
In addition to the discomfort caused by the friction caused by them and the employees, they are still more costly customers, as they need more support and attention.
As soon as a customer with this profile appears, it is necessary to raise the causes of dissatisfaction, apologize to the customer and come up with solutions to solve that problem. If this is not possible, it is recommended that the company avoid attracting or doing business with this customer profile.
A curious fact is that, according to studies, 40 to 50% of the customers who are in this profile will cancel their service subscription within 90 days.
How to calculate the Net Promoter Score?
For the calculation of the NPS, passive assessments are disregarded. Then take the percentage of promoting customers and subtract the percentage of detrimental customers from them.
The result is a number ranging from -100 to 100.
% PROMOTING CLIENTS – % DETRACTING CLIENTS = NPS
It is assumed that we had 10 responses, being 6 promoters, 2 liabilities and 2 detractors.
For the calculation, we disregard the 2 liabilities remaining 6 promoters and 2 detractors.
- The 6 promoters represent 60% of the answer, or 0.6.
- The 2 detractors represent 20% of the response, or 0.2.
For the account, we have 0.6 – 0.2 = 0.4
Turning to%, we have a result of 40, which would be the NPS score.
Keeping up with this metric is fundamental to the success of any company that wishes to grow in a healthy way.
If your score is low, it means that you have a lot of detrimental / passive customers, indicating that there is something wrong with your planning / execution, and the way you deal with feedbacks.
Detractor x District Attorney
The need to have promoting clients becomes even more evident when we compare them with Detractors in relation to some fundamental criteria for the entire company. Check it out:
Clients with the promoter profile tend to change companies less, hardly migrating to the competitor or looking for new solutions.
Unlike the detractor customer, who is not only willing to migrate to a competitor, but can also choose not to have this product / service in any way, due to the frustration that this experience has brought.
Promoting customers are much less sensitive to price changes, as this is not the main factor of choice. Seeing much more value than just this number.
Repurchase / plan increase
Satisfied customers are more likely to increase the plan they have and / or have a higher recurring expense with your company. For trusting the services provided and having high engagement of use.
The financial value of promoters can also be measured indirectly, since they make less use of support (whether for questions or complaints) and need less training.
Furthermore, the costs generated by the Detractors are not only related to the financial value, but also to the mental strain and stress that it can cause on the employee.
As the question already indicates, a satisfied customer has a high chance of recommending your company to a friend or colleague, generating new customers. Unlike detractors, who often defame it.
Furthermore, dissatisfied customers are much more likely to share the negative experience than satisfied ones have to share the positive experience. Doubt? Just go to a telephone operator’s Facebook page.
How to generate healthy growth?
Well, now that you know what NPS is and how important it is to your business, it’s time to use it to make it grow. After all, that’s what you’re here for now, right?
Before, just to undermine any doubts you may have about the correlation between the Net Promoter Score and healthy growth, it is worth mentioning the case of Apple.
The technology company started using NPS to measure customer satisfaction in stores in 2007, with a score of 58. 4 years later, in 2016, after a lot of investment in training, the average grade rose to 72.
What does that mean? Well, usually the turnover of a store and is US $ 1,200.00 per square foot (American measure that is worth approximately 1/10 square meters), for Apple, this value has now been US $ 6,000.00.
Do you think Apple is a point out of the curve due to its size? Well, studies show that an increase of 7 points in the NPS score represents, on average, 1% growth in the company’s revenue.
Convinced? So we can move on.
Avoid bad profits
At this point you must be thinking, “Bad profit? Since when does it exist. Profit is profit, why ”.
But the truth is that it is not so. In order to deal with customer satisfaction, bad profit is basically any profit made on top of a customer’s dissatisfaction.
Imagine that you received an undue charge from a telephone operator, which, however small, is money that is yours and you want back.
Then you get in touch with the operator to get it back, but you will find a series of difficulties to get it back.
In the end, the company may or may not have refunded the money, but at what cost?
- Wear of the consumer and employees;
- Hours of service and support (which are costs for the company)
- Customer dissatisfaction, which can lead to:
- Cancellation with the company (then a recurring customer. Who would buy more often will not do this anymore. Since, very easily, the amount he would spend constantly would exceed, and much, the value obtained unjustly).
- Influence on other potential buyers, leading to a loss of potential future revenue.
Although this is an extreme case, it is worth applying this to any revenue obtained based on negative experience, such as difficulties in exchanges, access to information, among others.
The important thing to think about here is: “Worry more about the customer and less about his money.”
Increase NPS x Improve NPS
Let’s say you started measuring your company’s SPL, or already do. You see that number generated daily, but what you do about it is much more important.
This number alone is just a vanity metric. Many managers have already fallen into the trap of increasing it at all costs, importing only with the metric, but not with consumers.
It may seem subtle, but thinking of NPS as a number that you improve, but not increase, makes all the difference in terms of corporate philosophy. Check it out:
- Increase NPS: “I need to increase my grade and show how good my company is”
- Improve NPS: “How to improve my customers’ experience based on what they say.”
This simple change of posture has a great influence on employees and within the work environment. At first, employees can simply focus on a number, forgetting the human factor.
With the other thought, the focus is on improving customer service / service, with the improvement of the grade a direct consequence of this work.
Metrify and segment results
As I said, the NPS final score alone is a vanity metric that doesn’t tell you much. But then you certainly asked yourself now:
“If the NPS alone is a vanity metric, why are you talking about this text all of its importance?”
The answer is quite simple: The final score of the Net Promoter Score gives you an overview of the Clients satisfaction.
But what will give you really relevant insights on how to improve your product / service is the crossing of these responses with your company’s key metrics.
For example, you can separate customers into 3 different groups:
And then, cross-check the results of each group with everything you think is relevant:
- Lifetime Value;
- Contract time.
Didn’t you understand the importance of this? Look at this example:
Imagine that we have customers divided into 4 plans, from the cheapest to the most expensive:
The overall NPS for this company is 30 points. There is certainly something to improve here. But where to start?
Well, by separating the bill by the plans, you can find that 50% of customers are in the 3 most expensive plans, with an average NPS of 50.
The other half of customers are already on the Yellow plan, the cheapest, and have an average NPS of 5.
Well, there is certainly something to be done for the customers of this plan, right?
If with something as simple as this you already understood the importance of segmenting, imagine the information that is waiting to be discovered there in your company?
“The purpose of research, after all, is not to promote a philosophical discussion or to establish eternal relationships, but to create a practical categorization, with results that lead to action. ” – Fred Reichheld
How to close the cycle with the customer?
NPS is a methodology designed for you to be able to close the cycle with the customer. That means always contacting him after the feedback given.
Whether to solve the problem found by Detractors and Liabilities, or to encourage promoters.
It may seem like a simple thing to do, but companies need to have a clear playbook on how to deal with their customers. So that the whole process happens quickly, in a standardized way and that solves the problem.
The “penultimate” final question
As much as I said that the NPS is the definitive question, the truth is that the score given by the answer is the “penultimate question”. Ideally, the note should be followed by another question so that he can explain the reason for it.
Usually this question is quite simple:
- “What is the most important reason for the grade you gave?”
Like the NPS scale, this question is also customizable and should be aligned with the company’s objective when obtaining feedback.
For example, your company may want to know what it can do to improve a specific product:
- “What can we do to improve our product X?”
You can even ask more questions, but it’s worth thinking that the more questions, the less motivated customers will be when it comes to answering.
That is why it is recommended only one free question, which helps to better understand the reasons that lead the client to have this posture in their own words.
No external interference and ensuring the minimum distortion of information.
Acting with Feedback
When sending an NPS to the customer, you need to worry about 3 things:
The customer should never be left unanswered
He’s gladly telling you something. When you don’t respond, not only will he be unmotivated to answer the next few times, he may also feel that your voice is unimportant.
Which brings us to the second point.
Customer must know that their feedback is important
When asking a customer to answer your questionnaire, try to warn them beforehand and ensure that they know the power that their feedback has (depending on the case, it is worth training employees not to manipulate the results in this conversation).
In addition, you can notify them of improvements made based on the responses.
Or wouldn’t you think it was legal for that airline to send you a notice that the space between the seats was increased after listening to customers and, by chance, you were one of those?
Actions should be taken based on feedbacks
Feedback is essential for the company to know what can / should be improved, see the example of the seats above.
These actions can be both in the individual field, that is, the company resolving the situation of a specific customer, such as, for example, an undue charge on the phone bill, as well as to improve a product / service.
Using the previous example, after hearing various feedbacks, the airline realized that the major complaint factor was the small space between the seats.
By removing some seats, she could increase the space between them.
Thinking only of the number of seats to be sold, she would even lose money, but she realized that due to customer satisfaction with this new attitude, she could increase the average ticket, in addition to having a better relationship, which would cover these costs.
In a simple way, whether for the macro or micro, it is worth following the following cycle:
I received my note, what now?
As we have seen, it is very important not to leave the customer unanswered, so we have separated some tips on how to act according to the grade given by the customer.
Thank them. After all, they are clearly expressing their satisfaction and you must value it.
Encourage referral and testimonials. Have they already demonstrated that they are willing to share their enthusiasm with the world, why not make it easy?
Treat them with care and grant them benefits. They can be as simple as T-shirts, stickers, an extra course, discounts or anything else. The important thing is to show that you care for them too and make sure the benefit is useful.
Liabilities and detractors
Gather information about what may have caused dissatisfaction.
Imagine you are going to complain to an attendant about an extra charge on your account. In addition to being passed through different sectors, each time you have to explain everything again.
In the end, if you were not frustrated with the situation, you will surely have to repeat the problem several times.
And all you wanted was a simple phone call saying: “Hi, I saw here that you were charged R $ 32.30 on the 17th of this month. That’s right? I am already calling for the account XXXX-XXXX that is previously registered ”.
If you expect something like this, why do you want to do it differently for your customers?
Get in touch as soon as possible.
When the customer signals a problem, he expects it to be resolved as soon as possible. For him, the longer the company takes to contact, the less importance it has. In addition, he will have more time to have negative experiences.
Make a commitment to improve. When contacting the customer, talk to him and propose a solution to solve the problem.
And more than that, set a time limit to execute E EXECUTE. Actions are worth more than words, and words are not worth much at this point.
What is the NPS of some of the main companies in the market?
So that you can become familiar with this methodology and have an understanding of how NPS is distributed in the market, we thought about bringing some numbers of relevant companies, check out:
|Credit card||American Express||60|
The data were taken from Satmetrix’s Net Promoter Benchmarks survey, conducted in 2018 and which takes into account data from the United States.
Some recurring doubts
When applying NPS, some doubts may arise. For this reason, I have separated some of the most common ones here to help you.
What would be a valid sample?
Several business models use NPS. From companies with a list of recurring customers by contract, to large events with more than one million people.
So, how do you know the number of people to get a relevant and reliable score?
Good methodology practices suggest that in order to have a relevant statistical number, the ideal that has answers from at least ⅕ of your contact base. Whether in a single or recurring campaign.
How often should I ask the question?
Avoid asking your customers less than 90 days apart. To ensure this, it is worth using the 1% rule, which is basically to interview 1% of your customer base per day.
In this way, a large part of your clients will be interviewed every 3 months.
Who should follow the Net Promoter Score?
The final grade of the NPS can be shared both inside and outside the company. Several managers participate in forums with different benchmarks.
In addition, it is highly recommended that this number be shared with the entire company, so that employees are engaged and also have their focus on the customer.
Not to mention, most solutions come from the bottom up, since employees who have greater contact with the customer tend to have better ideas to solve the problem.
Should I act only on detractors and promoters?
Some companies usually act with only these two types of customers in mind, since the calculation appears to take only them into account. And this is very wrong.
Firstly, because the number of SPLs takes into account the total number of responses, which includes liabilities. Secondly, as we have already mentioned, this thought provides only for the increase in the grade, not the satisfaction of the client itself.
Well, after reading this, you are certainly ready to guarantee the satisfaction of your customers and the healthy growth of your company.
If you already use NPS, let