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5 Best Reasons to Measure Net Promoter Score® (NPS)

83% of online respondents say they trust the recommendations of friends and family. This figure itself speaks volumes about the significance of the Net Promoter Score (NPS®). Measuring the NPS helps you to improve your business and ensure a level ahead of customer experience & satisfaction.

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What is Net Promoter Score (NPS)?

Net Promoter Score (NPS) is Customer Experience metric to measure the loyalty of the customers. It ranges from -100 to 100 and measures the willingness of customers to recommend a company, it's products or services to others. The Net Promoter Score enables you to benchmark the loyalty of your customers and predict their purchase and referral behavior. NPS measures customer perception and customer loyalty towards a business based on one simple question - On a scale of 0 to 10, how likely is it that you would recommend our organization to a friend or colleague? 

NPS Question

NPS Survey don’t just provide quantitative customer ratings to the business, unlike other survey methods, but also work as a full-fledged platform where businesses can quickly track the loyalty and satisfaction level of the customers. It brings out the voice of the customers.

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How NPS is Correlated to the Business Growth?

There were many studies conducted by Harvard Business Review, Satmetrix and Bain and Company that found out that there is a strong correlation between the Net Promoter Score and a business's revenue. Their research also shows that when companies adopt to implement the NPS system and use it as a key metric, it helps drive business growth as the company becomes more focused on improving the score.

nps calculatorAccording to the Profit Well, "there is a stronger correlation to having more expansion revenue with lower quartile NPS companies seeing a median of 9% monthly revenue coming from expansion, the midspread seeing 14% and the upper quartile 24%."

Why Net Promoter Score is Important?

  1. To measure Customer Loyalty
  2. To identify reasons for dissatisfaction & areas to improve
  3. To align Business Plans with Customer Expectations
  4. To reduce Customer Churn Rate
  5. To boost referral marketing
  1. To measure Customer Loyalty
    The number one reason to start using NPS Surveys is of course to measure Customer Loyalty. 59% of consumers are more than willing to refer brands they like to their friends and family and 36% are likely to spend more. 66% of US consumers admit to spending more on brands which they are loyal to. Customer Loyalty is a determining factor for customers continuing to do business with you and increasing their spending as well. However, NPS helps you to quantify your customer loyalty and improves business health and growth.

  2. To identify reasons for dissatisfaction & areas to improve
    The noticeable feature of the NPS Survey is that it measures both quantitative and qualitative data. It not only detects detractors, passives, and promoters but also gathers the reason for the score. By asking the NPS Follow-up or Open-Ended Questions, you can identify the score reasons along with issues to solve. This further improves your products and services and helps you to work towards closing the feedback loop. With Zonka Feedback's NPS Survey Software, you can use Text Analytics Reports to analyze the open-ended questions, identify words that are being repeated, and their corresponding Net Promoter Scores.

  3. To align Business Plans with Customer Expectations
    The NPS Survey helps in identifying what improvements and features customers are expecting from business. When you ask a follow-up NPS question, say - 'What is the one thing we can change to make your experience better?' This encourages your customers to share their suggestions. These suggestions will work as constructive criticism that enables you to track customer expectations and align your business plans accordingly.

  4. To reduce Customer Churn Rate
    NPS is one of the significant business growth catalysts. It enables you to keep a check on the outgoing and incoming of the customers, this what is called Customer Churn Rate. It refers to the number of customers who left the company in that specific period due to bad customer experience. It is 5%-25% more expensive to acquire a new customer than retaining an existing one and a 5% increase in customer retention can increase profits by 25% to 95%.

  5. To boost referral marketing
    NPS Survey quickly tracks your promoters. You can easily follow-up with them and encourage them to spread positive word of mouth for your business and brand. Whether your customers are detractors or promoters, they are likely to spread word of mouth for your business among their friends and relatives. 92% of consumers say they trust recommendations from friends and family above all other forms of advertisements. You can leverage your promoters by seeking testimonials, online recommendations, case studies, and referrals from them.
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3 Things to Keep in Mind while Adopting NPS for Your Business

Well measuring the NPS is as easy as it can get. But the trick lies in understanding what it means for your business. There are three things that every business manager must keep in mind when adopting the NPS:

  1. NPS is only an indicative measure of a customer’s loyalty, not their overall satisfaction with the company’s product or service. Hence, it must be accompanied with a full-fledged customer feedback survey to gauge their satisfaction level that can be analyzed in depth to ascertain the reason behind a company’s high or low NPS and take corrective actions.
  2. The NPS Survey is ideally a two-part survey, the first part is a rating question that is an NPS question itself (‘How likely are you to recommend us to your friends and family?’) and the second part usually being an open-ended question seeking reasoning for the score.
  3. It is imperative to close the feedback loop. If you take a customer's feedback, it is important to act on it and communicate with the customer. Implementing Net Promoter System must be hand-in-hand with the implementation of a system that enables businesses to capture Voice of Customer and Take Actions.

Learn more about the Net Promoter Score (NPS)



Written by Archit

Oct 06, 2020

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