NPS 101: A (very) quick intro
Struggling to get your head around NPS and how to use it to really grow your business? Have you heard others raving about it and wonder what all the fuss is about? We asked Aaron to give us a quick intro for the busy executive: There’s too many acronyms already right? NASA. NSFW. OPEC. OMGLOLS. When did we get so lazy time-poor we couldn’t write whole words?
Dilbert on business acronyms - http://dilbert.com/strip/2010-04-05
Now there’s NPS.
It turns out, NPS (or “Net Promoter Score” if we’re talking in human) is the go-to framework for businesses to measure how happy their customers are. You know those squillion dollar tech businesses you read about like AirBnB, Slack and Uber? They all do it.
Big corporates (airlines, telcos, hotels) have been doing it for years - this Harvard Business Review article kicked it off back in 2003.People like Jason Lemkin have been telling startup businesses that NPS is a core metric that’s critical if they want to avoid growth hitting a wall.
Don't know what your NPS is? That's a shame. https://t.co/G7HRN7Ht7y
— Jason M. Lemkin 🦄 (@jasonlk) September 22, 2015
Here’s why it’s so important.
NPS measures if customers are happy and helps you get better at making customers happy. And we know happy customers are more likely to:
- Continue to buy from you
- Increase their spend over time
- Recommend you to others
I know that sounds like common sense but just think about it for a minute. If more new customers are coming through word of mouth referrals, then you’re spending less on acquisition costs. And, if customers are staying longer and spending more, then the lifetime value is much higher.
So, if you can increase your NPS, you’ll grow faster, spend less to achieve that growth and earn more from every customer. It’s an incredibly practical strategy for growth.
Our whole team at AskNicely is dedicated to building out the tactics to use NPS to drive growth but Bill Macaitis from Slack summed up the value of NPS pretty well when he said: “It's a pretty simple playbook: Stop doing the things that are pissing them off, and do more of the things they like. And you're gonna get more word of mouth."
Amazing! …. How does NPS work?
It’s actually quite simple. First, ask your customers to rate your brand on a scale of zero to ten with one simple question (email is usually the best approach). “How likely are you to recommend [brand/product name] to a friend or colleague?”
Then, collect a comment on why they chose that score (super important):
Now, divide customer responses into three groups based on their rating.
- Promoters: 9 and 10 (will continue use your Thing, spend more and tell others to use it too)
- Passives: 7 and 8 (will not tell people to use your Thing)
- Detractors: 0 to 6 or under (will tell people not to use your Thing, cost lots to serve and likely to switch providers)
Subtract the percentage of detractors from the percentage of promoters, and that’s your Net Promoter Score.Calculating NPS isn’t difficult. The hard bit is making it go it up!That’s where a real time customer feedback platform (like AskNicely) helps take NPS to a new level by:
- Collecting customer ratings and feedback on a daily basis
- Identifying problem areas by segmenting NPS results by segment, region, channel etc.
- Analyzing customer comments for common themes
- Sharing NPS results and feedback across all your teams
- Using real time results to focus your front line teams
- Following up at-risk customers to put things right
- Creating improvement plans to fix issues
- Engaging your happy customers to drive referrals
For more detail, check out our Black Belt NPS email series which walks through the steps to implement a world class NPS program.