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by Sam Frampton on 4 Sep 2018

What You Need to Know about the Net Promoter System

The Ultimate Guide to NPS | Chattermill
The Ultimate Guide to NPS | Chattermill

Introduction

Do you know how Net Promoter Score can transform your business? A method of measuring customer loyalty by sorting them into detractors, passives and promoters. It has helped many companies remain in the top ranks of their industries. Loyal, passionate customers stay longer, spend more, contribute suggestions and sing the praises of your company to their friends.

Using the Net Promoter Score (NPS) to measure customer loyalty has become industry best practise. That’s why the team at Chattermill has put together a guide to help you get started with NPS.

In this guide, we will cover everything you need to know about NPS to get started and help your company grow.

What is Net Promoter Score? The Definition

Net Promoter Score (NPS) is a seemingly simple yet effective way for companies to track promoters and detractors to produce a clear measure of their performance through its customers eyes. NPS is built on the basis that every company can divide their customers into three distinct buckets - promoters, passives and detractors and customers are categorised based on their response to the standard NPS question - “How likely is it that you would recommend us to a friend?”.

Using data and a disciplined process, it has been proven that companies with higher NPS scores achieve long term growth and NPS leaders grow, on average, at double the pace of competitors.

To track the performance of company growth, take the percentage of customers who are promoters and subtract the percentage who are detractors.

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Net Promoter Score Calculation

Answers to the question are scored on an 11 point scale (0-10) and ranked on an index ranging from -100 to 100 to gauge customers overall satisfaction with a company’s product or service and customer loyalty.

Responses can be defined into three distinct clusters that represents different attitudes, sentiment and economic value.

Promoters (scored 9 - 10):

Promoters are your biggest fans. They actively advocate your product on your behalf, bringing in the majority of referrals, and are far more likely than any group to remain customers. Their Customer Lifetime Value (CLV) is far greater than any others.

Passives (scored 7-8):

Passives are satisfied for the time being, but can defect at any time. Their referral rate is as much as 50% lower than promoters, and those referrals are of far less quality. Their CLV is also usually less than half that of promoters.

Detractors (scored 0 - 6):

Detractors are unhappy customers and account for more than 80% of negative word-of-mouth opinion. They have the highest rates of churn and defection and harm your company’s reputation, putting off new customers.

The End Result

Your Net Promoter Score is the percentage of promoters minus the percentage of detractors.

The Net Promoter Score is a simple and straightforward metric that can be shared throughout the company with every function and team. You can also track by product, store, team, geography and more to focus on the goal of improving customer experience.

If you have more detractors than promoters the score will be negative and likewise positive for more promoters than detractors. Lower Net Promoter Scores can be indicators of harmful customer experiences leading to potential losses of revenue, whilst higher Net Promoter Scores suggest a stronger performing business.

The median NPS score is just 16 and typically remain quite low; depending on the industry.

Economics of NPS

Striking the balance of promoters and detractors through Net Promoter Scores is clear. Promoters will actively advocate your business on your behalf, repeatedly purchase and refer you to friends. They not only bring in the most revenue, but are also most likely cheaper to manage than detractors.

Detractors will cost you money both in terms of damaging your brand and also the resources required to deal with their complaints. They are also more than likely to not purchase repeatedly.

economics of nps

The Net Promoter Score accounts for between 20% and 60% of organic growth for companies and on average the industry leader’s NPS is twice that of its competitors.

It has also been found that promoters are more than 6x likely to forgive, are more than 5x as likely to repurchase and 2x more likely as detractors to recommend a company.

Calculating NPS is just the start

NPS is far more than a score. Also following up your NPS question asking customers for the reasons why they left their score with an unstructured and open-ended form allows you go beyond the score to identify the root causes driving promoters, passives and detractors experiences.

Scores will tell you what happened; feedback tells you why, allowing you to build feedback into part of their daily systems to amplify the factors improving customer experience and nullify the largest negative driver to create a fully closed loop customer experience process.

Throughout the guide we’ll walk you through everything you need to become an NPS pro, right the way through from collection, analysis and insights. Now we’ve discussed how to calculate NPS it’s time to move on to best practise when sending an NPS survey.

Net Promoter Score: Types of surveys

Once you’ve decided to survey your customers to find your NPS, you have a few different surveying options.

Relational surveys

A relational survey can be sent at any time, and it’s a good way to get a finger on the pulse of the relationship between your customers and your business. Relational surveys should be sent out often — a quarterly schedule is ideal.

However, while regular surveying keeps you up-to-date on customer feedback and loyalty, surveying your customers on such a regular schedule risks “survey fatigue,” which can lower your overall response rate. It’s important to make sure your customers know you value their survey responses — some options are sending thank you emails or offering perks or discounts for customers who complete relational NPS surveys. It’s also important to only survey as often as you have time to analyze the feedback, respond to your customers and create an action plan based on their surveys (we’ll cover this in more detail in a later chapter).

Transactional surveys

A transactional survey is sent after an event, such as soon after a new customer purchases your product or service, or after the resolution of a support ticket. The timing is a little easier with transactional surveys than with relational surveys — just make sure to send the survey before too much time has passed after the event that triggered it. Some good guidelines are:

  • 0-24 hours after a support ticket is resolved
  • 0-3 days after a product is purchased, if the product can be used right away
  • 7-10 days after a product is purchased, if the product needs to be shipped.

While transactional surveys aren’t as likely to cause “survey fatigue,” they also give a narrower picture of your NPS, since they relate to specific events and not your business as a whole.

Irrespective of the type of survey you choose, if you can pass any additional data you have for your customers into your survey emails, such as the product they ordered, location and length of time as a customer, you can then begin to piece together the opinions of different segments of your customers to understand their similarities and differences too.

segmentation-illustration

Surveying the right number of customers

To get a clear picture of your NPS, you need a good sample of responses that represents your entire customer population. This can be tricky to get, but the bottom line is that the more responses you can get, the better your data will be.

It takes some complex math to get the exact number of responses will be representative of your business’ customer base (if you’re really into statistics, you can check that out here), but a good rule of thumb is to assume that only 15 percent of the customers you send surveys to will actually respond, which means you need to send out a minimum of 1,700 surveys to get 250 responses, what’s generally considered a good sample for calculating NPS.

Nailing your survey format

You want to maximize your response rate, so first and foremost, respect your customers’ time by keeping surveys short and sweet. Ask the standard NPS question (“How likely is it that you would recommend us to a friend?”) and then ask why. That’s it!

You should also aim to send out surveys, particularly B2B, during the work week. Avoid Fridays and weekends, since most attention is being paid to email Monday through Thursday.

Lastly, the most important thing you can do to maximize survey response is to make sure your customers feel heard. Respond to their feedback. Use it to build an action plan.

What’s next?

In the next section of the guide, we’ll talk about what to do once you actually receive that feedback you’re looking for, and how to optimize your response for every type of customer: promoter, detractor or passive.

Theme vs. Sentiment: Organizing your analytics

The first tool you can use to organize your NPS survey information for analysis is tagging, and two ways you can tag your feedback is by tracking themes and sentiments.

Themes

A theme is simply feedback around a recurring topic; for example, shipping times, support tickets or prices. You may already have an idea of some themes just from reading through feedback you’ve already received. Or, as you begin to tag your feedback, you’ll likely start to see themes naturally emerging. One potential difficulty with tracking themes is how many different ways there are to give feedback around one theme; for example, if your theme is “shipping times,” you may see feedback like “fast shipping,” “lightning quick” and “arrived on time.” There are so many different ways for people to refer to the same theme, which can make theme tagging labor intensive.

Sentiment

Another way to organize analytics is by the sentiment of the customer. Sentiment is more closely related to NPS because, broadly, it means assigning a metric to a piece of feedback that details how positive or negative that feedback is.

Approaches to text analytics

There are a number of ways to analyze your customers’ feedback, each with pros and cons.

Rule-based approaches

Rule-based analytics rely on sets of rules to determine which keywords found in customer feedback are positive and which are negative, and then determine a cumulative score for the feedback based on how many positive and negative words were found. Since rule-based analytics can function only within the boundaries of their existing rules, they work well when the scope of what they’re analyzing is narrow.

Excel Macro approaches

It’s possible to use Excel macros to collect rule-based analytics. Keywords can have values attached that denote how positive or negative they are, and then Excel will assign an average value to each piece of feedback depending on the number of positive and negative keywords found. This method is limited because keywords must be manually entered and assigned value.

AI approaches

AI, or machine learning approaches, are data driven and use existing rules to assign sentiments to feedback, but also to predict outcomes and create new rules. As long as the AI has a sizeable input from which to draw its predictions, this approach tends to result in extremely accurate feedback analysis at scale.

Why analyze your NPS feedback?

As you can see, implementing a system to analyze you NPS feedback isn’t easy or quick. But going beyond your NPS score gives you the opportunity to make changes that address the specific themes that impact your NPS, which means a direct path toward improving your NPS overall.

When and how to survey

You already know that it’s important to keep a constant finger on the pulse of your NPS, because it gives you a constant baseline idea of whether more of your customers are happy with your product or service than not. That means surveying your customers frequently to keep an eye out for changes and trends.

Best practices say you should be sending out relational surveys — general NPS surveys that can be conducted at any time — to your customers on, ideally, a quarterly schedule. Additionally, transactional surveys — surveys sent out after and related to an event, like a product purchase or the resolution of a support ticket — should be sent out within hours to days after the event that triggered them.

That’s a lot to keep track of.

Sending out all those surveys at the right times could be a full time job, or even more. But instead of manually sending them to your customers, you can automate your survey process to handle all the sending for you. It’s an easy way to make sure NPS surveys are going out when they should, and always on time. That way, you know you’re never missing any opportunity to gauge how your customers are feeling about their experiences, and your NPS data is always up to date.

Sharing your results

But there’s more to streamlining your NPS analytics process than just automating your surveys. In order to get the most out of your NPS and analytics, they need to be seen by the right eyes within your company. That’s why you need a system for sharing your results with all the stakeholders in your company.

And that doesn’t just mean C-level executives. That means people across departments and at different levels. For the entire company to move cohesively toward an effective and shared CX strategy, everyone needs to be on the same page, which means everyone needs to have access to shared NPS data, preferably in real time.

Achieving that means selecting a platform that not only automates your NPS surveying, but also collects, sorts and stores the data in a format that’s accessible for your entire team. Once you have the right platform in place, this is a job that gets done automatically, meaning more company time and effort can be put toward using that data to make your CX stand out.

Time to Monetize

You’ve surveyed your customers, analyzed their feedback, and determined a customer-centric path forward. But what’s the next step? Why have you put all this work into making changes based on your customers’ feedback?

Well, because good CX can increase your bottom line. We’re in a new era, where customers expect stellar experiences when they interact with businesses. And businesses are using that change to monetize more than just customer transactions — they’re monetizing customer relationships. Here’s how.

Learn, iterate and improve by putting data into action

One of the easiest ways you can monetize your customer relationships is by building brand loyalty amongst your users. According to Amy Gallo, in an article for the Harvard Business Review, acquiring a new customer is anywhere from five to 25 times more expensive than keeping an existing one. Creating loyalty can reduce your churn rate and make sure you keep those existing customers. But creating the kind of loyalty that will keep your costs low means providing truly excellent CX. Your customer feedback is your most important tool in creating the CX your customers want. It’s also important to understand the key drivers of loyalty, and then use that knowledge to improve your CX.

But retaining loyal customers is only one piece of the monetisation puzzle. Even though it’s more expensive to acquire new customers, you have to for your business to grow. The key is to keep your existing customers and acquire new ones, and you can do that through happy, engaged customers who act as brand ambassadors. Getting high quality insights from your CX feedback will reveal patterns over time that can be fed right back into your product development roadmap. Giving the people both the products and the experiences they want will make them NPS promoters for your product. They’ll spread it through their social circles, driving more revenue. On the other hand, though, negative feedback should be a wakeup call telling you it’s time to change your product or CX to keep customers happy and build those positive relationships.

Finally, take a good, hard look at your customer onboarding process. This is a pivotal moment in the CX, and a great customer onboarding experience can be the difference between a user churning, or becoming a loyal, active user of your brand, product or service. The feedback you get from customers should direct you to any pain points that exist in the onboarding process, especially if you’re sending out transactional NPS surveys immediately following onboarding (and if you’re not doing this, start now). It may also be helpful to reverse engineer your onboarding process, especially if you have a truly great product. Offer a free trial or some other way for users to get inside your product before completing their signup. Once they realize the product is a must-have, they’ll be more than happy to complete onboarding.

Monetising your customer feedback is the fastest way to see quantifiable results from the work you’ve put into designing a stellar CX. Finally, all that hard work has paid off.


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    Sam Frampton

    Growth Marketing at Chattermill - A.I for better customer experience