How well do you know your customers?  Are they happy with the current level of customer service they’re receiving?  What metrics can you use to measure customer satisfaction?  Introducing the Net Promoter Score (NPS).  The NPS was first published in a 2003 Harvard Business Review article and is known as one of the simplest measures of customer loyalty and satisfaction.

How is it calculated?

The basic premise is; ask your customers this simple question.  “On a scale of 0 – 10, (10 being extremely likely) how likely is it that you would recommend XYZ business to a friend or colleague?  Based on their answer, customers are categorised as either Promoters, Passives, or Detractors.  These categories are defined as follows;

After collating survey results, your company’s NPS is calculated by taking the percentage of customers who are Promoters minus the percentage of customers who are Detractors.  This leads to scores that can range between -100 and 100 with a good score considered to be anything higher than 50.

 

Why should I care?

Most CEOs and successful business owners will tell you that it’s far easier (and cheaper) to get more business from your existing customers or to get new business via customer referrals than it is to secure a brand new customer.  With this in mind, you can see the importance of NPS straight away.  NPS is a gauge as to how likely a current customer is to recommend your business to someone else.

By providing exceptional customer service (alongside a quality product) your business is far more likely to produce Promoters who in turn are more likely to recommend you, growing your business.

Monitoring your NPS is important on the other side of the scale as well.  Identifying a downturn in NPS early allows you to analyse why the downturn occurred, what changed to cause the downturn and take action to rectify the situation.  This kind of pro-active customer care is likely to engender an increase in trust and loyalty with your customers, in turn increasing your NPS.

The other reason you should care about NPS is that it’s a completely transparent and benchmarkable metric that applies to all businesses regardless of industry or company size.  Once you’ve established a baseline number, you can see how you compare to similar companies in your industry.  Many businesses use their NPS as a marketing tool too.  In fact, co-CEO and President of Veeam (a $600M+ USD tech company) Peter McKay has a significant incentive plan attached to his salary that’s purely based around improvements in Veeam’s NPS and is open about their commitment to improving their score.  Just by publicly announcing that it’s a focus for the business has seen an increase in positive feedback from customers.

 

So what’s next?

The first step is to identify what your NPS is.  Our friends at SurveyMonkey have developed a simple template survey that you can circulate to your customers to see how they view your business.  It can be found here.  Once you’ve collated your survey results, you’ll have a good understanding of what needs to be done in order to turn Passives into Promoters and start reaping the benefits of having happy customers.

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