How we can turn the Net Promoter Score (NPS) from an “ultimate question” into an “ultimate answer” for strategic decisions.
I love my old Alfa Romeo. It looks good, has that bit of non-conformism and yes, although produced by FIAT, it also did its main functional job — getting me and my family from A to B. After 13 years of good partnership, I now decided to get a new car (a Volvo — my wife told me “you can’t do wrong with a Volvo”) and felt kind of betraying my good old “partner in life”. So when a friend of mine asked me, if he could buy the car, my immediate response was “Sure! So it is in good hands!”. But just milliseconds afterwards I double-checked, if I can actually recommend him the car. Wasn’t there once this strange noise when we drove on the highway? I asked my friend to use it for a while, let it be checked thoroughly and offered him to reduce the price by all means necessary to make the car fit for the next years. Why did I do this? Because I felt I had to be 100% convinced that I recommend the right thing to my friend — in all aspects like pricing, quality and style.
It would be extremely embarrassing and could harm my reputation and relationship to my friend, if what I recommended didn’t match his expectations. This is, why the question “how likely is it from 0 to 10 that you recommend this … to your friends and family?” is so strong. It addresses the total of all value aspects in decision making and it asks for the highest level of commitment and trust (yes I can recommend this to my best friend).
Since 2003 the simplicity and strength of the NPS question made it one of the most important performance indicators for customers facing companies world-wide.
NPS as a strong indicator for future success
Most KPIs tell us how well we achieved our goals on performance, productivity, innovation strength and transformation speed. They are looking backward and hardly allow predictions into the future.
Take the USEEDS° Customer Experience consultancy for instance. USEEDS° is highly depended on customer recommendations. More than 90% of new clients approach USEEDS° due to recommendations of people who once worked with us, either as employees or on the client side. Great news for USEEDS°. But how can we be sure, that this will also happen in 2017? The former success in 2016 shown in figures around client base and sales growth does not indicate, if clients and employees who experienced USEEDS° in 2016 will recommend it in 2017.
The NPS helps us to fill this information gap. It gives you a hint on how loyal customers are. And loyal customers pay off. There are many studies proving the strong correlation between company success KPIs and the NPS, for instance, Bain & company discovered that “on average, an industry’s Net Promoter leader outgrew its competitors by a factor greater than two times“ in compound annual growth rate (CAGR) and as early as 2005, Dr. Paul Marsden, formerly working at the London School of Economics and today Chief Psychologist of our mother company, the SYZYGY AG even calculated the benefits in cash terms, stating “for the average business in our analysis, every 1 point increase in word of mouth advocacy (net-promoter score) correlated with an £8.82 million increase in sales.”
The ultimate answer: The USEEDS° NPS levers audit fuels strategies to improve the NPS
To prioritize and fuel strategies to improve customer loyalty (the NPS), you need to understand, which areas in the overall Customer experience are the strongest levers to influence the NPS. The USEEDS° NPS levers audit is an easy way to identify these levers for your company. In the audit, we ask your customers a set of questions asking for no longer than a minute of their time. As a result you have a NPS levers compass including all customer experience related qualities of your company. It gives you clear indications on which strategies you should invest in to most efficiently influence your overall customer loyalty (your relationship NPS).
The USEEDS° NPS levers audit is grouped in three parts:
1. The NPS
This helps us to position the customer with his current state of loyalty towards your company.
2. The levers
These questions help us to understand, what single most important quality made the customer rate the NPS and what might improve the rating. As a result we have strong indicators on how to keep promoters, how to derive more promoters and how to reduce the amount of detractors.
3. The customer lifetime value
The last set of questions varies depending on your industry and helps to put the results in the context of your customers’ lifetime value. It helps to focus on customer segments with a high impact on your business success.
As a result of the audit, you have a list of NPS drivers (usually around 30–40) and a clear and proven picture of where to focus on to generate the strongest impact in NPS improvement and therefore improvement of your company’s overall customer loyalty.
Let's discuss it!
I would love to hear your thoughts on customer loyalty and the impact of recommendations. Do you want to learn more about the NPS or customer loyalty in general or do you have any questions? Just get in touch: firstname.lastname@example.org
About the Author
Ron Hofer is the Founder and Managing Director of USEEDS° - a berlin based UX-Agency for user-centric development of interactive communication services and products. He has high competence and many years of experience in qualitative and quantitative UX research methods and a passion for old italian coffee machines.