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.
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.
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…
How to calculate your NPS®
It’s easy once you know how
“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
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?
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.
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.
About the Author
Manuela leads the Marketing division at IMS, advising clients on branding and market positioning in both Europe and Asia.
Prior to joining IMS, Manuela worked in financial regulation and compliance. Past experiences include representing France in roundtable discussions in Brussels for the European Venture Capital Fund (EuVECA) Regulation.
She obtained her LL.B (Hons) at UCL before graduating from Sciences-Po, Paris, with a Master’s in Financial Regulation.
Connect with Manuela Burki on LinkedIn
