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How Net Promoter Score software improves customer retention

Posted by Perceptive Customer Insights Team - 12 May, 2015

How net promoter score software improves customer retentionYou may have heard of the Net Promoter Score (NPS) mentioned in relation to measuring customer retention and customer loyalty levels. It’s a metric often used in alongside referral rates and word-of-mouth.

If you’re not familiar with NPS, here's a brief rundown of what it is and why it's so valuable for retaining customers.

 


 

Understanding the NPS score

NPS is a survey emailed to your customers asking them how likely they are to recommend your business to someone else. Customers rank their answer on a scale of 0 (highly unlikely) to 10 (highly likely). Based on their answers, customers are categorised into one of three groups:

  • Promoters (9 to 10).
  • Passives (7 to 8).
  • Detractors (0 to 6).

In addition to this, most businesses choose include a few follow up questions to help them understand why customers gave them the rating they did.

The formula to get your overall NPS score is the percentage of your customers who are detractors, subtracted from the percentage that are promoters. This provides an overall score between -100 and 100.

Learn more: What is a good NPS score?

NPS is not just a simple number. It's a comprehensive system that can massively impact your retention levels and business growth. However, to do this, it needs to be implemented in the right way.

 


 

Watch the magic happen

Research from Bain & Co has found that companies with the top NPS in their market grow two times faster than their competitors.

NPS is an ideal way to monitor your retention levels to develop a long-term relationship with your customers that is authentic and real. In particular, it is how you leverage the information gathered in your follow up questions that provides particularly valuable and actionable insights.

In short, NPS provides knowledge, and that is one of the best assets in business.

 


 

How NPS helps retention

The Net Promoter Score methodology gives businesses critical insights into what customers think of their brand.

It’s powerful knowledge to have and with the right NPS software you can, among other things, contact those customers who are most likely to stop using your products or services to understand why they are unhappy. You may even save them from leave if you resolve their issue quickly.

Often, NPS is a reality check for companies, as it exposes how their business is performing. It’s also an indicator of future growth as you are in effect measuring your customer satisfaction levels (the potential for repeat business and word-of-mouth through referrals).

If you feel that you’re missing something when it comes to your customer loyalty, NPS might be just for you.

 


 

Manage each customer segment differently

NPS will segment your customers into three categories: detractors, passives and promoters. Each segment requires a different approach to manage.

 

1) Detractors

Detractors are the customers who gave you low scores (between 0 and 6). These people are not happy with your product or service. Moreover, their perception can damage to your brand in the market, particularly through negative word of mouth. However, it’s not all bad news.

There is a lot you can learn from this group. They present an ideal opportunity to understand what has gone wrong in their experience. Don’t be afraid to hear what they have to say. Instead, welcome their feedback and use it to improve your business.

Tip! Ask your detractors what the one thing you could do to change their score to a 9 or 10 next time. Now you know what you need to do to change your business around.

 

2) Passives

When passives score you a 7 or an 8, they're on the fence. They can become promoters, but just as easily, they can become detractors, so it's critical you take care of them.

The key to managing this group is to really get to know them. Understand their situation, their issues, what’s important to them and what gets under their skin. This is where the insights from NPS really proves its worth.

To win passives over, go above and beyond what's required. Show them you can add that value to them and use your insights to personalise their experience as best you can. Consider offering free upgrades or collateral. If you’re a B2B, why not provide recent market information or trend predictions for the upcoming year? This is the kind of thing that can turn passives around.

Tip! Remember, whatever you give away must be of real value and relevant to your customers.

 

3) Promoters

Promoters are your most satisfied customers. Moreover, they’re willing to recommend you to others. Many actively do so, however, some are more reserved. We call them “passive” promoters.

Passive promoters present a great opportunity to grow your word-of-mouth and brand awareness. Ask them for a testimonial or prompt them to share your business on social media. If you can do this automatically with your customer loyalty software, even better.

 


 

Summary

One of the major strengths of NPS is its ability to generate the insights you need to grow relationships with your customers, and thereby retain them longer. It also allows you to identify the customer pain points that are damaging their brand experience and actively resolve them.

Moreover, NPS helps to identify your most loyal customers and brand advocates—and create more of them. When you know exactly what turns customers into raving fans, you know what to do to get more of them talking about you, more often.

 

If you want to learn more about customer retention strategies, check out our free eBook below: 

 

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Topics: Customer Experience


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