In a subscription economy, the barriers to customer churn are low. It has become increasingly important to nurture the customer relationship to ensure maximum mutual benefit.
Customer success managers need to actively oversee customer relationships to reduce turnover, increase existing revenue and influence new sales. One important customer success metric is the Net Promoter Score (NPS).
Let's take a quick look at what Net Promoter Score is:
What is Net Promoter Score
NPS is a relationship survey that helps you understand whether your customers would recommend you to others and is an index ranging from -100 to 100. It is used to measure the customer's overall satisfaction with a company's product or service and the customer's loyalty to the brand.
Customers are surveyed on one single question. They are asked to rate on an 11-point scale the likelihood of recommending the company or brand to a friend or colleague.
"On a scale of 0 to 10, how likely are you to recommend this company's product or service to a friend or a colleague?"
Based on their rating, customers are then classified in 3 categories: detractors, passives and promoters.
- 'Detractors' gave a score lower or equal to 6.
- They are not particularly thrilled by the product or the service.
- They, with all likelihood, won't purchase again from the company, could potentially damage the company's reputation through negative word of mouth.
- 'Passives' gave a score of 7 or 8.
- They are somewhat satisfied but could easily switch to a competitor’s offering if given the opportunity.
- They probably wouldn’t spread any negative word-of-mouth, but are not enthusiastic enough about your products or services to actually promote them.
- 'Promoters' answered 9 or 10.
- They love the company’s products and services.
- They are the repeat buyers, are the enthusiastic evangelist who recommends the company products and services to other potential buyers.
The Net Promoter Score (NPS) is determined by subtracting the percentage of customers who are detractors from the percentage who are promoters. What is generated is a score between -100 and 100 called the Net Promoter Score. At one end of the spectrum, if when surveyed, all of the customers gave a score lower or equal to 6, this would lead to a NPS of -100. On the other end of the spectrum, if all of the customers were answering the question with a 9 or 10, then the total Net Promoter Score would be 100.
What is a good Net Promoter Score
So, you’ve got a 35 percent response rate, calculated your NPS, and achieved a score of 40. What do you do with this information? How does one determine an optimal Net Promoter Score?
While it’s not always easy to determine a strong NPS, there are some global standards:
- An NPS anywhere around -100 should raise red flags. This means your business should spend a considerable amount of time focusing on ways to increase customer satisfaction.
- An NPS just below 0 is considered average. An NPS at 0 or slightly above it is considered “good” and is an optimal starting point for most businesses.
- An NPS at-or-above 50 is extremely good. This means your business hits most key factors that contribute to customer satisfaction.
- Finally, an NPS at-or-above 70 is considered “world class.” Very few businesses achieve an NPS of this calibre. Essentially, this means nearly every customer would advocate for that product.
Why is Net Promoter Score a good Customer Success Metric
Firstly, it should be noted that NPS is not the only customer success metric that you should keep an eye on but it is an important one.
In the case of NPS specifically, research shows that it correlates very strongly to the growth of your business. There are four main reasons for that:
- Promoters renew
- Promoters expand
- Promoters forgive
- Promoters… promote
Gathering feedback and measuring loyalty is only one step within the entire system of NPS. It’s important to build in ways for Customer Success to close the loop and act on the feedback you’re receiving. After all, there’s no worse customer experience than feeling like your feedback is being shouted into a black hole, with no indication of being heard.
Your customers will be delighted to know that their feedback is taken seriously.
Seeing the follow-up actions your company takes from NPS will result in higher loyalty and advocacy in your customers.
About AppsForOps Timeline
AppsForOps Timeline is a game changing Customer Success software platform.
Customer Success - powered by being in the know.
It provides next level visibility on customer activity spanning your organisation's people, processes and systems.
It allows you to easily see the whole picture and act on what matters most.
View a timeline of all customer activity right in your inbox.
Activity could include emails, calls, tasks, notes and data flowing in from any of your existing systems: your sales, marketing, customer support systems and more.
It's never been easier to see everything you may need on a customer to make the right decisions and act on as needed.