Analysts agree - acquiring a new client is definitely more expensive than keeping the current one. Therefore, every conscious entrepreneur should strive to build long-term relationships with their recipients, based on loyalty and trust. It is worth monitoring customer loyalty constantly. A special NPS indicator is used for its measurement. What can you gain from it?
What is the NPS indicator?
According to the consulting company Bain & Company, the cost of acquiring a new client is even 5-7 times higher than the cost of maintaining it. Moreover, in highly competitive markets, this amount is systematically growing from year to year. Another problem is the declining loyalty of customers to specific brands. In order to operate effectively in today's market, you need to be constantly monitored customer loyalty and based on the results obtained, create solutions that are intended to improve the company's situation. The NPS index is helpful in the research.
The NPS indicator was invented in 2003 by Fred Reichheld, author of The Ultimate Question. The concept was disseminated by SatMetrix. Today it is used all over the world.
NPS is an abbreviation of the English term "Net Promoter Score" which can be translated as "Net Recommendation Score". The indicator is used to assess the loyalty of customers to a brand, company, product or service - it estimates the possibility of using the offer again and recommending it to friends, family or friends. The NPS applies wherever the business is based on the sale of products or services.
The idea behind NPS is to support the company in quality management, which in turn is to generate an increase in customer satisfaction.
What does the NPS test look like?
The basis for calculating the NPS index is one key question:
"How likely is it that you will recommend [company / product / service / website name] to your friend?"
The NPS survey questionnaire is usually sent to the target customer group via email or in-app notification. The respondent gives answers on a scale from 0 to 10, where 0 means that he will definitely not recommend, and 10 - he will definitely recommend. The responses of the respondents can be classified into 3 groups:
- critics (0-6) - people who have bad or average experience with the company, willing to share negative opinions, advising against cooperation on their own,
- passive (7-8) - people who notice the advantages and disadvantages of cooperation, are not loyal to the company and will easily take advantage of another offer, if it turns out to be more attractive,
- promoters (9-10) - people satisfied with services or products who are willing to share positive opinions, becoming natural ambassadors of the company.
Particular attention should be paid to those qualifying as critics. Their negative opinions are a threat to the company's reputation and are effective in deterring new customers.
The NPS indicator can be calculated according to a simple formula:
NPS (%) = (number of promoters - number of critics) x 100% / number of respondents
The NPS value ranges from -100% to + 100%. If the indicator is positive, it means that there are more people positively assessing the brand than the critics. On the other hand, a value below 0 indicates that dissatisfied people predominate in the group of respondents. Such a result is an indication for the implementation of appropriate measures aimed at increasing customer satisfaction.
Why is it worth using NPS research?
NPS is an extremely easy and at the same time extremely effective research method useful in business. One simple question is enough to determine the indicator. The collected answers are a valuable compendium of knowledge about the quality and value of the company.
- it is useful - it is used by companies around the world, including global brands such as Apple, American Express, Amazon and Phillips,
- is understandable to customers,
- lets you know the general company image in the eyes of customers,
- is the basis for analyzing consumer behavior,
- identifies critical points, weaknesses, problems and inconveniences that contribute to customer dissatisfaction,
- is used for benchmarking - the result can be compared with the results of the competition to assess the actual condition of the company.
The NPS indicator can be described as the "success rate". It is considered that any value above 12.5% confirms the company's high chances for further development and sales increase. Skilful use of the acquired knowledge and implementation of appropriate solutions increases the value of the NPS index, and thus gives the company the opportunity to achieve all business goals. How to increase the NPS value?
How to increase the NPS index?
The analysis of the received responses is of key importance. Customer Satisfaction Survey it is worth supplementing with supporting questions, e.g .:
- What influenced your opinion?
- Did you encounter any difficulties while placing the order?
- What do you like the most about our service?
- What would you change?
When analyzing the results, try to find any recurring problems. Their repair can significantly affect the satisfaction and loyalty of your customers.
Retesting your target audience may also be helpful. Find out what your customers expect, what values they live by in their lives, what their problems are, how they live, what they like, how they use your products or services.
The cyclical examination of the NPS index is an effective way to monitor the company's activities. Thanks to it, you will find out if you have accepted the good one business strategy and you have a chance of great business success!