All about Net Promoter Score (NPS) and why it matters?
Net Promoter Score (NPS) has become a key business measure for many companies as a way to measure customer loyalty. In a simple definition, it is the number of people who are likely to be loyal to you and shop again with you expressed as a percentage.
NPS is typically measured with a single question that is something like “how likely are you to recommend this store to your friends or colleagues?” The person can rate you between 0 (not likely at all) and 10 out of 10 (extremely likely). Then we take all the people who rate you a 9 or 10, minus the number who rate you between 0 and 6, multiply that by 100 to arrive at the NPS percentage.
When Bain & Company first created NPS it was held up as the gold standard as a metric for customer experience. They suggested three categories depending on how customers responded:
Promoters - Gave a score of 9 or 10 and are typically excited, positive customers who are loyal.
Passives - This is the middle group who give you a 7 or 8 score. In this group they weren’t “unhappy” with your service, but not happy enough to be considered a raving fan or loyal.
Detractors - This group gave a lower score from 0 to 6. Something is wrong here and they are unhappy with your service. It’s unlikely they will buy from you again and some will say they will also be vocal with others to suggest THEY don’t buy from you either!
Like other business tools such as ‘The Balanced Scorecard’, NPS has become a widely recognised measure and very often the CEO or Executives have a proportion of their bonus linked to Customer Loyalty so there is attention placed on the measure.
Here in Australia where we run the majority of our programs, we have seen some companies place a huge amount of focus on NPS scores – even to the point where sales people in retail will say at the end of their sales pitch “if you thought I provided good service to you, can you give me a high rating on our NPS survey?” This totally defeats the purpose of how the NPS score was originally designed to be used of course and anecdotally when salespeople do this it ticks customers off, and very often they get a lower rating because it’s presumptuous and awkward for the customers!
From the many books written on NPS it appears originally the measure was designed to be sent out annually or quarterly as more of a pulse check to understand how customers are feeling about your company in general terms. Many companies will then benchmark the results and report this to their shareholders or Board to indicate that their customers are in general terms happy with the brand. Then other companies send it out after every transaction.
How does NPS relate to walking in the bush?
Wherever you are reading this article it’s likely you will have bush, forest, mountains somewhere near where you live – or you have visited mountains at some stage!
Here’s the deal, NPS gives an opportunity for customers to give you a score out of ten and it can potentially be impacted by a whole lot of subjective factors. You might want them to respond based on the specific experience they had with you today however they might not like your TV advertising or pricing, or you were out of stock on their favourite item, or they think you are a large multi-national and they just don’t like multi-nationals! Whatever the factors, once you get that score at best you have a general rating from a customer. If you put a whole bunch of these general ratings together you hopefully end up with a general rating and sense of how customers feel.
So the relationship to walking in the bush or mountains is this… you might liken NPS to the needle of a compass as a general way to indicate direction. However if you are in heavy bush or a place that is unfamiliar then you need more information like a detailed map or a person who knows the area in great detail to help you navigate to your next point. Simply aiming for a destination or hoping to get more people to rate you 10 out of 10 is at best a high-risk strategy without knowing how you are going to get there.
As we already explained, NPS has its roots in measuring customer feedback or customer experience however you can also use the technique to measure employee satisfaction or employee engagement. Would your current employees recommend your place or work as somewhere that their friends or family might also want to work? There are online companies where people vent their opinions about what it’s like to work at various companies and it’s obvious that when they are unhappy this can be quite damaging.
So whether you are walking in the bush or visiting a new city and driving from one place to another, you MUST have more than a compass needle to help you get there. In some ways you could argue that NPS is the end result of a whole host of smaller experiences that work together in a positive way to deliver a solution for your customer and when they are thrilled with how well you looked after them, then they are happy to recommend you and give you a 9 or 10. It’s the same with employees where all the aspects of their own experience working with you, means they are highly engaged and inspired and more than willing to suggest to their family that this is a great place to work.
So what is the best way to implement an NPS survey in your company?
There are many companies now who sell software related to NPS. Does this work? Well technically yes in the same way as you can go to a camping store and buy a compass and it works. However in 2021 coming out of Covid you we recommend you need a company who is an expert in leading you step by step and has the same focus as you do to make a tangible difference in your results and of course build the most loyal group of customers who will not only come back to you again and again themselves but will tell everyone they know about you.
To get to the destination or move more customers into rating you a 10 out of 10 you must get to the ‘why?’ In many ways (in our opinion and based on over 25 years’ experience in this field) it’s much more important to understand the why as this unlocks how you can fix the issues and exactly what you need to do, and who needs to do it.
Being very clear on exactly why a customer has provided their end NPS rating – whatever that number is – makes it so much easier on everyone in your company to take stock of what they real issue is and make plans to address it. So instead of chasing NPS scores (which can be like trying to catch a bowl full of soft jelly in your bare hands) you instead become extremely focussed on the one priority that will have the most positive impact to drive improvement for your customer. So your focus is on the causal issues and the improvement you are making on these, that have a direct statistical relationship back to your NPS.
Don’t get me wrong, NPS is very important. What we are saying is the company who is your partner in improving your business must know the linkages between behaviours and your overall NPS and there is a very definite way to statistically analyse this, but this needs to be broken down to key steps that makes it easy for everyone to deal with and becomes part of the operating rhythm of the way you work day-by-day.
We believe the only way to really drive NPS and more importantly lasting loyalty and creating raving fans of your company… is when you can identify these key priorities down to an individual employee level. So each person (including you as the CEO) is very clear on exactly what your number one customer led priority is. When everyone is taking action on their priority, it gives you control and a positive way to actually CHANGE and IMPROVE your NPS score.
Back to bush walking… the difference is that you have a goal destination in mind. Your board or owners make it clear you “need” a compass, so you buy one or buy software and although it’s expensive, every walker needs one especially if we’re leading a bunch of people, right? However, if you have a partner who has spent 25yrs leading people to the destination safely and knows the way and is willing to show you how to do it and teach your teams so they are confident and strong, which would you choose?
Moments of truth are the DNA of any business. We know that turning them into action creates real momentum. By focusing on improving your sales and service productivity, we help you visibly generate ROI and improve NPS.
What should I expect?
In 2021 most of the companies we speak with have an urgency around what matters most in their business and a complete lack of tolerance for anything that is a nice to have but not must-have. What this means is there is an urgent need to boost tangible results and it need to happen fast. It might be sales results, service levels, and many times it’s to boost the comments people make about them on social media (e.g. google reviews)
We recently had a large national client who were extremely frustrated by poor word of mouth on social media – when we discussed it with them the most painful aspect was that the comments were totally out of whack with their values and what they felt was reality. So the noisy minority were spreading comments that were untrue and for them the urgency was to fix this word of mouth and flood social media with positive, true and enthusiastic comments telling future customers about the good things they could expect!
So if you are creating an NPS program, you probably already know what the actual NPS question looks like (see the top of this article) but let us urge you to consider the overall approach and what we know works best.
Some software companies will suggest that all you need is to add is an open-ended question asking why that score, how they could do better, and can they call them to follow up?
While there’s nothing wrong as such with this it doesn’t go far enough, and customers are way too busy. Many are also dealing with ‘fatigueback’ which is where it feels like everywhere, they go there’s some sort of survey that is typically really generalised and benefits the company asking about it rather than improving the customer experience – if we are brutally honest.
We conduct tens of thousands of real customer feedbacks every year and we find customers are more than willing to provide actionable feedback and NPS scores when the approach is personalised to their specific experience. It’s not only the lovers (high NPS scores) or haters (lower NPS scores) but when you customise the questions to the specific situation you can quickly find out exactly what you need to know about what is working and where you need to focus your training and improvement effort – you can still have a “short survey” but actually learn about critical aspects of marketing, selling and operations, and behaviours that relate directly to training or the type of people you are hiring! And if you have those staffing levels right (e.g. weekend vs weekday).
If you are going to spend money on introducing an NPS program or updating what you do now don’t just buy a new compass!
Imagine if you are a high-end flooring showroom retailer. Maybe add to that challenge that it’s a Dealer or Franchise situation… Future customers spend time on the internet at home, they research you and your competitors perhaps even telephone and ‘shop around’, they have an experience in the showroom with your Dealer. Let’s say they do meet someone who has terrific people skills, great product knowledge, and makes it feel really easy.
There’s a measure and quote, there’s a price comparison, wait times, delivery and installation and finally whether they are satisfied with the product (might be 6-8 weeks’ time or longer).
To ask an NPS question – even with a ‘please explain’ just won’t cut it!
You need to know by Dealer and, by Salesperson what is working or not for every stage – in a way that makes it easy to take action and drive ongoing improvement.
Ultimately yes, you do want to see your NPS scores improve but also the tangible $ results.
Done correctly you can have a tool that is GOLD for marketing, HR, Training, and Operations to generate results quickly and grow the business.
Your partner will show every person how to reach the destination and in a way that is extremely practical, positive and results focussed not just chasing an NPS score.