Customer loyalty is one of the key success factors for any business. Loyal customers not only buy goods or services of the company themselves, but also recommend them to their friends, acquaintances and colleagues. Thus, they become free promoters of the brand and contribute to its growth and development.
But how do you measure customer loyalty? How to understand how satisfied they are with the company and are ready to support it? For this, there is a special metric – the consumer loyalty index NPS (Net Promoter Score).
What is NPS and how is it calculated
The NPS index is an indicator that reflects the degree of customer loyalty to a company or product. It is based on answers to one simple question: “What is the probability that you will recommend our company/product/service to your friends or colleagues?”
Clients are asked to rate this probability on a scale of 1 to 10, where 0 means “I would not recommend under any circumstances” and 10 means “I would definitely recommend”. Depending on the assessment received, customers are divided into three groups:
– Promoters – those who put 9 or 10 points. These are the most loyal and satisfied customers who actively recommend the company to others and repurchase its products or services.
– Neutrals (Passives) – those who put 7 or 8 points. These are customers who are generally satisfied with the company, but not so much as to become its promoters. They can switch to competitors if they have a better offer or a better service.
– Detractors (Detractors) – those who put from 0 to 6 points. These are dissatisfied and disappointed customers who do not recommend the company to other people and may even negatively affect its reputation.
The NPS index is calculated by the formula:
NPS = % promoters – % detractors
The NPS value can range from -100 (all clients are detractors) to +100 (all clients are promoters). The higher the NPS value, the higher the customer loyalty and the better for the business.
Why NPS is needed and how to use it
The NPS index has a number of advantages over other methods of measuring customer loyalty. First, it is simple and understandable for both the company and customers. Secondly, it is universal and suitable for different industries and market segments. Thirdly, it allows you to compare results between different companies or departments within the same company.
NPS can be used for different purposes:
– Assess the level of customer satisfaction and loyalty in general or for individual products, services, communication channels, etc.
– Identify the strengths and weaknesses of the company from the customers’ point of view and identify priority areas for improvement
– Segment the customer base by the degree of loyalty and develop individual strategies for interacting with each group
– Motivate employees to improve the quality of service and strengthen relationships with customers
– Predict the company’s future earnings and growth based on the quantity and quality of recommendations
In order for NPS to be an effective business management tool, it is necessary not only to measure it regularly, but also to analyze the received data and implement appropriate changes. To do this, you can ask clients additional questions about the reasons for their evaluation, as well as collect feedback through various channels (website, social networks, email, calls, etc.). It is also important to share NPS results with company employees and encourage them to improve the level of service.
How to increase NPS
Increasing NPS is not only the task of marketers or account managers, but of the entire company as a whole. To do this, you need to work on improving all aspects of customer interaction: from the quality of the product or service to the speed and friendliness of the service.
Recommendations for increasing NPS:
- Monitor the quality of the product or service and eliminate possible shortcomings or errors;
- Provide customers with complete and honest information about your offer;
- Consider the needs and expectations of your target audience;
- Be open to feedback and resolve issues promptly
- Offer customers additional value in the form of bonuses, discounts, gifts or useful content;
- Create an emotional connection with customers through personalized communication;
- Build long-term relationships with clients based on trust and respect;
- Encourage clients to share their experience with others through different channels;
- Reward loyal customers for referrals.