When was the last time a customer told you they'd swap you for the competition? It usually never happens. Dissatisfied customers often make a fuss about their grievances, but they quietly switch companies. Having a metric like NPS is one way to avoid these sudden migrations.
The Net Promoter Score (NPS) methodology is guided by the answer to a single question. This simplicity of application and measurement allows brands to gain traction with loyal customers and apply more assertive strategies.
Despite its ease, the biggest challenge is putting the survey into practice. There is resistance on the part of companies to implementing it, whether out of fear of increasing tasks or vanity at receiving detraction. In any case, the short-, medium- and long-term benefits outweigh the effort of putting the customer at the heart of the business.
What is NPS?
The Net Promoter Score (NPS) is a metric created in 2003 by Frederick F. Reichheld, a business strategist, to measure customer loyalty through a single question about the possibility of recommending a product or service to a friend.
How to calculate NPS?
When he devised the NPS, Reichheld wanted a metric that would make it possible to measure customer loyalty and that would be scalable to all sectors of the market. In his surveys, the question that got the most responses was: "On a scale of 1 to 10, how likely are you to recommend this product?"
From this, Frederick formulated a grading scale for the notes that would be easy to understand, accessible to everyone and that would generate an agile response. He then divided the customers into groups of:
Detractors
People who scored between 0-6. They attract attention because they are willing to share the negative experience and damage the brand's reputation, as well as the risk of switching to a competitor.
Liabilities
People who scored between 7-8. They are partially satisfied, but inert to the brand and may be attracted to the competitor due to its neutrality. Liabilities are not included in the calculation, but indirectly influence the result.
Promoters
People who scored between 9-10. Every brand's dream lives here. From this score, loyalty is established and makes it difficult for competitors to flirt with their customers. In addition, they are willing to participate in success stories and share the positive experience with friends and acquaintances.
Based on the scores distributed, the NPS calculation works like this: 1TP3Promoters – %detratores= NPS calculation. The result can vary between -100 and 100 and are classified as follows:
- NPS Excellent - Between 75 and 100
- NPS Very good - Between 50 and 74
- Reasonable NPS - Between 0 and 49
- Poor NPS - Between -100 and -1
9 ways to build brand relevance from NPS
20 years after the creation of the NPS, most companies still use the methodology to measure and generate results. A survey carried out by Bain & Co. has shown success in maintaining the use of the method, as organizations with the best NPS scores in their segment outperform their competitors in 20%.
We took advantage of our experience in brand building and the practical use of the NPS survey to map out ways forward:
- Reduced customer acquisition cost (CAC)
- Product improvement and creation
- Increased customer retention
- Contribution to branding
- Communication and the customer at the center
- Quality certification
- Decision-making assistance
- Culture building
- Optimization of marketing efforts
1. Reduced customer acquisition cost (CAC)
Attraction strategies through paid media are essential to grow a business. However, the number of brands advertising has increased in recent years. This increases the cost of acquisition
There is a consensus among new businesses and old market giants that looking for new customers, without managing to build value for the current base, is wasted work. That said, the focus has increasingly been on the revenue potential that a customer can generate over their lifetime, if they are loyal.
Loyalty: Life Time Value (LTV) is an indicator that usually works alongside CAC. It measures the value that a customer generates for the company based on their length of stay. Loyalty is a medium- and long-term double task, as it increases the number of internal sales and promotes new sales as satisfied people refer new consumers. Using the NPS, it is possible to understand the customer's experience with the brand in order to develop loyalty strategies.
SegmentationCross-referencing the data obtained from the NPS with the segment of origin of loyal customers helps to prioritize the most valuable markets and thus reduce time and money.
2. Product improvement and creation
When products or services aim to solve people's real problems, listening to customers' opinions is a successful way to get results.
Companies that care about user feedback, especially in the technology sector, constantly release beta versions for use in an attempt to get answers and make improvements.
Detractors: the satisfaction survey together with a suggestion box motivates dissatisfied customers to provide constructive criticism. This feedback provides material for the teams to address improvements and create new solutions.
Liabilities: not deciding between one solution or another is directly related to unresolved doubts. In this case, listening to the opinion of the undecided can help clarify the product/service.
Promoters: discovering the reason for customer loyalty helps to identify product/service differentials and the most used resources.
3. Increased customer retention
The need to grow revenue sometimes prevents managers from seeing more sustainable solutions to keep targets on track.
Efforts to gain a new lead can be divided with efforts to retain customers, which in the long run can yield results similar to or better than those of new buyers. Here are a few reasons why:
- Loyal customers don't stop at the first purchase. As well as buying regularly, they are less price-sensitive and can increase in value over time.
- Satisfied customers will invite others to buy of your company.
- Loyal customers have more willingness to take part in new product tests.
4. Branding's contribution
The result of the scores obtained in the NPS evaluation is a good sensor to measure how people are perceiving the brand.
Companies with market relevance, such as Apple, Amazon and Disney, have some attributes in common that can be used in their strategy:
- Customer in the center: prioritize customer satisfaction through personalized experience and efficient service.
- Constant improvement: are always looking to improve the quality and usability of their products/services.
- Communication points: maintain an open channel so that the customer can count on support before, during and after the sale.
5. Communication and the customer at the center
When Fred Reichheld asked leaders about the importance of the customer in the first place, only 10% believed it was important. This percentage goes against market trends, which point out that a Customer Centric experience, i.e. the customer at the center of all strategic business planning, is responsible for strengthening relationships and building customer loyalty.
Implementing a Customer Centric culture starts with the ability to create communication points and constantly gather feedback.
Identify the weak points: Building a relationship of trust with the customer is part of the interest in solving their problem. If something isn't working in the company's process, the NPS can help identify it, while at the same time showing an interest in resolving conflicts.
Automate responses: based on the answers collected in the NPS, it is possible to create a solutions guide and save the team time.
6. Quality certification
Michelin Star, ISO, Cannes and Oscar are some of the seals and awards that give value to the products and services that take part in the selection.
At first glance, they may seem to be just status-enhancing seals, but in recent times, the fine line in recognizing the difference between falsehood and truthfulness has made these seals a necessity.
The NPS, although not a seal, when the survey is done properly and achieves a remarkable score, it is worth sharing with the intention of increasing confidence in the product/service.
7. Aid in decision-making
Successful management is the result of a useful base of information, or rather, indicators and metrics that guide decision-making.
In this article, we've chosen NPS because it's simple to implement and guarantees promising results:
Cash flow forecasting: As the number of promoters grows, so does the possibility of winning new customers and repeat business. With this data, it's possible to set revenue growth targets.
Response to change: whether it's a new implementation or a change in your business process, it's interesting to measure the impact with the customer to avoid frustration. In this sense, the NPS is useful for gathering this feedback.
Performance evaluation: Applying the NPS to different stages of your process allows you to find out how your teams are performing. Comparing the results between one and the other can indicate where improvements need to be made.
8. Culture building
Culture is a fundamental pillar in building brands. Especially in recent times, as people's relationship with work and the way companies look at their internal environment has changed.
In addition to their duty to fulfill their work responsibilities, people want to feel that their professional performance positively changes the world. Therefore, if employees have a direct impact on customer delivery, it makes sense to share NPS results to demonstrate how their efforts affect the business.
- Customer-centric culture: NPS is a metric that contributes to continuous process improvement, which benefits customer focus, and also encourages the internal culture of always striving for a high score.
- Training: NPS responses serve as an opportunity to offer training to the team so that they can improve the customer experience.
- Engagement actions: managing customer satisfaction goes hand in hand with keeping employees motivated. The NPS of promoters can be used to boost team morale.
- Attracting talent: when the company has a high NPS score, it's interesting to show it when recruiting talent. This reinforces the credibility of the brand and creates a sense of purpose in those who will join the team.
9. Optimization of marketing efforts
After implementing the NPS survey and collecting feedback, your brand is ready to use it to its advantage. Here are some examples of use:
Prioritize potential consumers: Based on the profile of your promoting customers, you can create a similar audience and combine it with predominant segments. In addition, as you implement changes to your product or service, you should plan actions to win back detractors.
Success stories: word-of-mouth testimonials can happen spontaneously from promoting customers, but there's nothing better than ensuring this first-hand by doing a case study. Evaluation content by users is more effective in reinforcing the brand and making it stand out from the competition.
Common mistakes to avoid in NPS research
Most of the practices suggested for building brand relevance from the NPS depend on the choices made about how the survey is carried out. If the aim is to achieve a high score at any cost, this automatically invalidates the examples given above. So let's highlight some mistakes that should be avoided when carrying out the evaluation with customers.
- Avoid rewarding respondents. The practice of rewarding answers interferes with people's judgment, which leads to false results.
- Sending the evaluation at the wrong time, without the customer having completed the consumer experience, jeopardizes the rating.
- Implementing an NPS survey is a good place to start. But the results of the numbers alone, without feedback, do not guarantee success in implementing improvements.
- Not creating a periodicity for measuring results and putting improvements into practice is tantamount to throwing effort away.
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Enredo's results with NPS
Enredo has been helping to transform brands for 10 years through consultancy and innovation in branding, architecture and management. Measuring NPS allowed us to test the effectiveness of the methodology for brand maintenance and reputation building.
In our projects, we have certain stages that are validated with the client. Strategically, we use the NPS in the middle of the process, because at this stage the client is immersed in the process and can have valuable insights for our improvement. In the final stage, when the work is delivered, we send it out again in order to understand overall satisfaction.
All the surveys sent out contain a feedback field, and the first NPS, in particular, deliberately seeks to gather as many responses as possible that will lead to improvements. The results are passed on to area managers for them to evaluate with the team. High scores are also reinforced to motivate the team.
Looking at the market, the consulting NPS is 68, while our score is 85. Beyond a numerical result, receiving a significant score validates our internal goals and confirms that we are on the right track.
Next step: take action
NPS is a great place to start for companies looking to become relevant. The ease with which it can be implemented and measured makes it easy to get started straight away. On the contrary, applying the NPS alongside other methodologies, such as the CSTA (Customer Satisfaction Score), which measures customer satisfaction in relation to the product or service, can strengthen the brand's objectives.
It's also worth pointing out that the success rate of NPS depends on one very clear factor: the company's interest in improving the customer experience. All other brand attributes will depend on this in order for a lasting strategy to thrive.
