How Net Promoter Score (NPS) leads businesses/companies to a better customer experience?
When a customer seeks information or plans to buy a product/service, she might recall her own experiences, search the Internet, or consult family, friends, or colleagues. The reviews of relatives or friends, therefore, have a great influence on consumer shopping decisions. If a customer has satisfying purchasing experience, not only will she return to the store next time, but will also promote the brand to other people. This is the reason why businesses are trying hard to improve their product customer experience. The question is, how can businesses know if a customer is satisfied with the provided product/service? Will she recommend the product/service to her relatives and friends? In trying to answer this question, the term NPS, or Net Promoter Score, was invented.
Table of Contents
- What is NPS?
- Why is NPS crucially important to businesses?
- Types of NPS
- Relational NPS (rNPS)
- Transactional NPS (tNPS)
- Employee NPS (eNPS)
- Syno International’s Customer Experience Solution
What is the Net Promoter Score?
The Net Promoter Score (NPS) first appeared in 2003 in the United States. It measures the customer’s willingness to recommend a product/service to relatives or friends. Therefore, NPS also reflects the level of customer satisfaction with a products and said customer’s loyalty to the brand.
NPS is measured through conducting customer surveys. A customer is asked to answer, on a scale of 0 to 10, his or her willingness to introduce brand to those around him/her. The question looks like this:
Considering your complete experience with our company, how likely would you be to recommend us to a friend or colleague?
Based on their answer to the above question, are then divided into 3 groups:
- Promoters (9-10 points): Your most loyal and enthusiastic customers. They are always willing to introduce your business to family or friends—potential customers in the future. They are often quite satisfied with the product and service after the experience and are likely to use the company’s products and services over and over. These customers are very valuable to your business and should be pampered as such. Businesses can take advantage of their enthusiasm by offering them discount packages to friends/relatives.
- Passives (7-8 points): Indifferent or passive people. They seem to be quite satisfied with the product/service but not confident enough to spread the brand to others. This group is at risk of switching to a competitor’s product if there are better options. It is quite difficult to make these customers loyal.
- Detractors (0- 6 points): These are known as critics to your product/service. They are unsatisfied or very disappointed with the product/service that they used. Not only will they not buy the company’s products again but also share these bad experiences with the people around them, causing brand damage. For this group of people, once identified, the company must take specific actions and create a monitoring plan before their negative feelings have too much an influence on the brand, and also find a way to regain their trust.
How to calculate Net Promoter Score (NPS)?
NPS = % (Promoters) – % (Detractors)
Using the above image as an example, let’s say a company conducted a survey with 345 customers: 212 Promoters (61.5%), 93 Passives (26.9%), and 40 Detractors (11.6%). Their NPS would be calculated as: NPS = 61.5% – 11.6% = 49.9%. We can easily see that the NPS is optimized when we have a large number of promoters and a low number of detractors. In this case, the NPS is nearly 50%. An NPS of less than 70% means that the company needs to try harder in improving service quality provided to customers. An NPS of above 70% proves that your company’s products/services are making a good impression on customers; the employee’s attitude and service are also making customers very satisfied. Regularly surveying customers for feedback, as well as ensuring that your product/service is talked about positively, will help a business limit the risks from bad experiences. Businesses can then adjust their strategies in the future.
Why is NPS crucially important to businesses?
According to an advertising report published by Nielsen, more than 80% of respondents say that they trust recommendations from family or friends more than any other form of advertising. This is especially true in Asian markets, where relatives, family, and friends still play a very important role in influencing consumer purchasing decisions. Therefore, making each customer experience unique is essential.
- To help businesses evaluate customer loyalty: NPS helps businesses survey the proportion of customer’s loyalty to the company’s products/services and willingness to recommend them to people. According to studies, the cost of retaining an old customer is less than that of finding a new one; profit from an old customer is much higher than that from a new one.
- To help businesses determine their position in the customer’s mind, thereby making new strategies or appropriate changes. NPS not only helps to determine the number of loyal customers, but also reflects the overall picture of consumer satisfaction, thus helping companies adjust their business and marketing strategies to meet customer needs. More than 80% of customers are ready to provide their recommendations or desires to help businesses grow better.
Types of NPS
The Net Promoter Score is based on short loyalty surveys designed to map the status of customer relations in general (rNPS) or in specific transactions (tNPS). It may also be used internally to get insights into employee relations (eNPS). These three types are used to benchmark customers’ or employees’ experiences to determine areas of improvement.
Relational NPS (rNPS)
Relational NPS is designed to measure customer loyalty by evaluating the strength of relationships between a business and customers. Relationship surveys are a good way to benchmark the customer experience and later improve it.
With rNPS, the company attempts to survey its customers on a regular basis, typically quarterly or annually. The goal is to measure the customer’s overall perception of a brand through the experience they have with the product/service.
- Facilitate comparisons with other players in a business’ activity sector: Relational NPS allows you to more easily compare yourself to competitors in the same sector.
- Establish a quick brand health tracking for your business: The NPS relational survey is a simple way to follow the evolution of your brand image over time. The score illustrates the propensity of customers in recommending your services and remaining loyal to your brand. It is a representation of your reputation.
rNPS surveys help in figuring out passive customers who can potentially be converted into promoters. Relational NPS should be measured continuously to boost customer loyalty, and in general, to have an appropriate view on overall brand health.
Transactional NPS (tNPS)
Transactional Net Promoter Score is designed to measure the customer’s satisfaction on a specific business event or transaction. This is the reason why the survey is often sent after a product order, product delivery/installation, post-purchase or after a customer service interaction. tNPS immediately gives customer insights about a specific experience in order to figure out what needs to be improved.
- Accurate, user-friendly, real time updating information: As the transactional NPS question is asked at each key moment in the customer’s journey, it is possible to precisely determine the strengths and weaknesses associated with each step. Related employees can thus improve their services by using precise, real time updating, and directly-related-to-the-employee data.
- Immediate identification of unsatisfied customers: The tNPS immediately points out unsatisfied customers. Because the customers are asked right after their experiences, they are more likely to respond to the satisfaction survey so that the company could take actions and make them re-loyal.
Based on the feedback in rNPS and tNPS surveys, we get important insight and can analyze what to change. Then, we can decide upon prioritized business improvement projects in order to enhance the customer experience.
Employee NPS (eNPS)
Employee NPS measures the employee satisfaction within the company. Like tNPS, eNPS varies over time because it is sensitive to irregular conflicts between employees and employer, especially line managers. Information from eNPS should be completely confidential and help HR staff, as well as top managers, identify the actions needed in order to make their employees more satisfied and more engaged to the company. Indeed, several recent studies demonstrate the link between employee satisfaction and the quality of the customer experience made by these employees. This type of NPS is widely used by HR department and middle managers.
eNPS survey helps to take actions on detractors who could impact the performance of other colleagues, and also points out company’s promoters who will recommend the company as a good place to work.
As you can see, the measurement of customer experience is very important to a company. A positive experience not only results in making a customer happy, but it can also lead to additional revenue. On the contrary, an unhappy client can easily damage your brand reputation with negative publicity. Reality has shown that customers tend to talk about bad experiences a lot more than good ones – they tend to talk about it 3 times more often when the experience is bad. That is why every company should try every solutions to make their customer experience as good as it can possibly be.
Syno International’s Customer Experience Solution
Syno International has a number of customer experience solutions for measuring NPS. For example, with SynoTool, you can seamlessly create an NPS workflow, from survey distribution and data collection to processing and reporting. Whether it’s a simple survey, or one with complex logic based on customer responses, Syno Tool can handle it all. Furthermore, it is possible to integrate customer data or purchase data into the results, allowing for in-depth analysis of your business’ performance.
Our NPS professionals work with clients to ensure successful NPS surveys. This includes:
- Designing the survey: after consulting with you, we will create a survey that matches your business’ industry and needs.
- Collecting the data: Data sources can vary by client, but generally can come from whatever touch point you have with your customers. This can include everything from QR codes on receipts to links sent via email. We can also conduct rNPS studies using online panels of consumers known to have used the clients services.
- Visualizing the data in real time through BI tools: Syno’s greatest strength lies in the high customizability and versatility of its BI tools. Specifically, we can pinpoint the data that the client wants to see and create customized dashboards from scratch. Whether you use our basic, pre-defined NPS dashboards or customized dashboards integrating external or internal data, you can rest assured that you have access to the insights you need.
Hearing and understanding your customers’ or employees’ voices directly, rather than depending on implicit opinions (such as complaints or feedback comments through call centers or your website’s member services page), is key to improving your services. By hearing the voices directly, you can get a much better idea on how to make improvements.
If you would like to learn more about how our Customer Experience solutions can work for you, please do not hesitate to contact us.