Do you know how to identify your most important customers? Can you notice and address customer unhappiness as quickly as possible? And finally, do you have a way of tracking increases or decreases in customer satisfaction over time?
While customer happiness may seem like an abstract concept to measure quantitatively, there’s a powerful tool ecommerce businesses can use to do just that: the Net Promoter Score (NPS). Used by companies like Apple and Intuit, the Net Promoter Score helps companies understand and improve customer loyalty over time. We’ll provide an overview of NPS in this post so you can decide if it’s right for your ecommerce business, too.
What is the Net Promoter Score?
The Net Promoter Score is the percentage of people who “promote” your company (which may or may not involve actual promotion—“Promoters” are simply defined as people who would recommend your company to a friend) minus the percentage of “Detractors.” The score is unique in being one of the first reliable, measurable methods of understanding customer loyalty consistently.
To calculate a company's Net Promoter Score, customers are asked to rate themselves on a scale of 0 to 10 (with 10 being extremely likely) based on the following question: "How likely are you to recommend (company) to a friend or colleague?"
- Customers who answer 9 and 10 are categorized as Promoters. This level of customer loyalty is highly correlated with buying more often, spending more per transaction, referring more business, and costing less to serve than any other group of customers.
- Customers who answer 0 through 6 are categorized as Detractors, who typically inverse the Promoters in their behavior and spending habits.
- Finally, customers who answer 7 or 8 are categorized as Passives. These customers could go either way, and it’s your job to turn them into Promoters.
Once a company has identified which customers are Promoters and which are Detractors, they can begin crafting strategies to improve overall customer loyalty by studying the reasons why Promoters love the company, and why Detractors don’t.
The Benefits of NPS
In his book The Ultimate Question, Fred Reicheld, who developed the Net Promoter Score with Bain & Co. and Satmetrix, describes the need for NPS this way:
"Companies spend lots of time and money on complex tools to assess customer satisfaction. But they're measuring the wrong thing. The best predictor of top-line growth can usually be captured in a single survey question: would you recommend this company to a friend? This finding is based on two years of research in which a variety of survey questions were tested by linking the responses with actual customer behavior—purchasing patterns and referrals—and ultimately with company growth. Surprisingly, the most effective question wasn't about customer satisfaction or even loyalty per se. In most of the industries studied, the percentage of customers enthusiastic enough about a company to refer it to a friend or colleague directly correlated with growth rates among competitors."
In other words, Reicheld noticed that one question in particular—“Would you recommend this company to a friend?”—was more closely tied to customer loyalty and top-line growth than any other metric or question. The simplicity and reliability of the question allows companies to track customer loyalty on a consistent, ongoing basis.
Other benefits of NPS include:
- It’s an easy number to benchmark against competitors
- Companies can notice trends as early as possible and act accordingly
- It’s user-friendly and inexpensive to implement
- The central question is relevant for every customer (and employee, if you’re tracking employee happiness)
- Because of its universal relevance, it’s a great way to look at your company’s big picture or study your individual audience segments.
How to Get Started With NPS
Ecommerce business owners or stakeholders who would like to get started with the Net Promoter Score can do the following:
1. Design Your Survey
If you have a CRM system, find a survey platform that integrates with your CRM software if possible. If you don’t use a CRM system, you can find several free or low-cost survey tools online. Once you’ve found the software that’s right for you, design a survey that asks two questions:
- How likely are you to recommend (your company) to a friend or colleague? (scale from 0 to 10)
- What did we do to earn that rating? (open text box)
You can ask other questions too, but we don’t recommend it. You’ll be sending this survey out to customers regularly, and the more questions you ask, the more likely your customers are to grow fatigued and stop responding over time. What’s more, even if they do respond, they might skip the critical questions if there are too many options.
2. Distribute Your Survey
Email your customers directly with a link to the survey. While including a link to the survey in your email newsletter is an option, remember that people who are subscribed to your newsletter have already demonstrated customer loyalty by signing up, so you may not get a true reading from your detractors. It’s best to email your customers directly with a link to the survey.
You might also choose to follow up purchases, customer service conversations, and other interactions with a link to the survey. Make sure to set the expectation that the survey will take less than five minutes to complete, and that every response will be read.
3. Analyze Your Results
Analyze your results on a regular basis. What do Promoters like about you? What do Detractors dislike? Where are there opportunities to improve? If needed, contact select customers from each group to further discuss their feedback.
4. Make a Plan
Identify and prioritize three to five ways your business can create more Promoters and neutralize more Detractors. Commit to specific goals that are actionable, time-based, and measurable.
5. Communicate Your Progress
As you make improvements based on the feedback you received, communicate your progress to your employees and customers in your monthly newsletters. By showing your customers you’ve heard their feedback and are using it to make changes, you are building goodwill and loyalty.
Repeat this process at least once a quarter—many companies send out surveys even more frequently. Make this survey a regular part of how you do business, and set aside some time every quarter to analyze trends and create your plan.
Don’t let the ease of implementation or the simplicity of the questions fool you: the Net Promoter Score is a powerful framework that leads to actionable insights and results. With consistent improvements over time, you’ll be able to shrink your pool of detractors and expand your base of happy, loyal customers. Once you can accomplish that, it won’t just improve your bottom line—you’ll also remember why you love running your business in the first place.