Net Promoter Score (NPS) - The Only KPI That Matters
Interested in gauging the loyalty and level of your customers’ satisfaction? Then Net Promoter Score (NPS) is the ideal tool you can use to perform this very important role in the operations of your organization.
Net Promoter Score is a key performance indicator (KPI) that is focused on measuring customer loyalty (Frenay, 2016). It was introduced as an alternative to customer satisfaction surveys that were seen as rather time consuming. Customer loyalty behavior plays a pivotal role in promoting commercially meaningful scores as determined by KPI. Customer satisfaction significantly contributes to the success of the firm since it helps to create loyalty among the targeted customers.
Likewise, satisfaction needs to be measured so as to give your company insight about its operations in order to be in a better position to establish if it is operating within the desired direction. Essentially, the aim of each firm is to maximize its profits through offering satisfactory products and services to all the targeted consumers. The level of customer satisfaction can help the firm to make meaningful decisions that can impact on the overall strategy of the company.
If you are surely interested in ensuring the growth of your business, then Net Promoter Score is a strategic pointer that can be implemented. There is a correlation between NPS and growth of business that can be used to predict and to improve the performance of your firm. Accordingly, the basic hypothesis that is applied in this case is that the higher your NPS is, the higher you have chances to outperform your competitors (Frenay, 2016). In simple, when you have higher NPS, you are in a better position to gain competitive advantage by virtue of the high level of satisfaction experienced by the consumers.
The NPS performance indicator score is calculated by asking the customers a simple survey question about how they are likely to recommend the company, brand, product or service offered to other potential customers (Frenay, 2016). The responses are then put in categories ranging from 0-10. There are three levels of loyalty groups which involve the following: Promoters 0-10 score, Passives 7-8 score and Detractors 0-6 score. Likewise, promoters are happy and loyal customers who are likely to recommend other customers to your products and services offered. Passives are satisfied customers at the current period but are likely to be swayed by the other competitors. Detractors on the other hand need to be converted since they are not satisfied and can thereby discourage other customers from purchasing the products and services offered.
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There are different pointers that are found on Net Promoter Score to show the level of customer satisfaction and these also guide in the decision making process to appeal to the interests of many customers. The score is perfect when it is 100 and it is imperative for the firm to maintain consistency in its operations. The score is excellent when it is between 70 and 84. The needs of the customers are satisfied and the firm should continue in that direction. The score is average when it is between 25 and 39 but this pointer is not healthy enough for the firm. Effort should be made to attract many customers to the organization. The score is poor when it is -25 to – 1. This means that customers are not ready to invite other potential customers to the products and services offered by the firm. The score is abysmal when it is -100 to -51. In such a scenario, there are no customers to talk about.
In order to achieve positive results through the use of Net Promoter Score, you need to turn more customers into promoters while at the same time eliminating detractors (Burke, 2015). Unlike promoters, detractors do not positively contribute to the growth of your business hence the need to convert them to passives and ultimately promoters of your business. This gives you competitive edge since you are in a better position to attract many customers as long as their level of satisfaction is high.
NPS is used as an effective tool to improve customer experience. When Net Promoter Score is higher, existing customers to the company are likely to invite their peers to experience the great service they will be enjoying from the firm. This helps to increase the customer base to the company and chances of customer retention are very high if they are satisfied by the level of service they are getting from the company. This helps to ensure long term survival of the firm if it is characterised by loyal customers who are keen on returning for more business.
The major advantage of NPS in the firm is that it enables you to monitor customer relationships that exist with real time insights and also help you to make quick and effective decisions that are also based on real data (Frenay, 2016). The level of customer satisfaction plays a pivotal role in determining the quality of the decisions made in the organization. As the saying goes, “The customer is king” hence the need to make every effort to ensure that the buyers’ needs are satisfied.
Burke, C. (Last updated 2015) 10 Actionable Tips to Improve Your Net Promoter Score (NPS).
Frenay, D. (Last updated 2016). Net Promoter Score (NPS): the customer loyalty KPI. Emolytics.