What is Net Promoter Score and How to Use NPS to Growth Hack Your Business and Sales
What makes your customers happy? Well, this is perhaps one of the simplest yet most important questions for your business. Believe it or not, this implies to you as much as anyone else. After all, every business owner is also a consumer of some sort, just like his/her own clients and customers.
NPS or Net Promoter Score is nothing but a numeric indicator of the answer to this crucial question. Of course, you cannot measure the happiness or sense of satisfaction, but, in terms of business, there sure is some metric to understand the trend.
But what is Net Promoter Score, and how it works? Since its inception back in 2003, it has been one of the most talked-about topics in the field of digital marketing. However, the NPS concept is still something you need to ponder upon, and that’s exactly what we are going to deal with in this blog post.
When it comes to business, growth is everything. So, read on this article, as here, we will be discussing how you can use the Net Promoter Score to growth hack your business.
Let’s get started.
What is NPS or Net Promoter Score?
Net Promoter Score is the number that indicates the loyalty of your customers towards your brand and the products/services you provide. NPS essentially shows how likely your customers will recommend and promote your brand to others they know.
However, before delving deeper into NPS, let’s look at its origin first.
Frederick Reichheld first coined it at Bain & Company in 2003. He was the person who introduced the NPS concept to the world, and through one of his articles, he advocated that Net Promoter Score is the one number every marketer needs to grow.
The article (titled “The One Number You Need to Grow“) is a seminal document that explains the concept in detail – and it is a must-read if you want to explore the depths of the NPS further.
According to Frederick, the Net Promoter Score is perhaps the most fitting alternative to tedious customer satisfaction surveys. Long-term customer happiness is directly related to the continuing growth of a company. And since the concept of NPS essentially indicates this, it naturally becomes a key factor to consider.
There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else. – Sam Walton
How to Calculate the Net Promoter Score?
The Net Promoter Score calculation process is quite straight-forward. All you need to do is start a customer survey campaign and ask them one very simple question: “What are the possibilities that you would recommend our brand/products/services to a friend, or a colleague, or relatives of yours?”
Based on how they respond, next, you have to classify them into Promoters, Passives, and lastly, the Detractors categories.
- Promoters (customers giving 9 to 10 score – very likely to recommend)
- Passives (customers giving 7 to 8 score – don’t know)
- Detractors (customers giving 0 to 6 score – won’t recommend)
Afterward, you simply have to subtract the detractors’ percentage from the percentage of promoters, and you will have the absolute Net Promoter Score value.
Net Promoter Score = Percentage of Promoters – Percentage of Detractors
For example, if you have 40 percent promoters, 45 percent passives, and 15 percent detractors, your Net Promoter Score is (40 – 15) = +25.
Another example where a company may incur a negative NPS could be something similar to this – 35 percent promoters, 25 percent passives, and 40 percent detractors – the Net Promoter Score is (35 – 40) = -5.
Remember, any positive NPS value (>0) is considered good, and if it is 50+, then it is excellent.
I am sure you won’t be surprised if I tell you that Amazon has one of the highest Net Promoter Scores in the industry, 67 out of 100, with 71 percent promoters, 25 percent passives, and 4 percent detractors.
Mindboggling! Isn’t it?
What Can We Consider as a Good NPS Value?
Just like we have mentioned in the last paragraph, calculating the NPS value is quite easy. You just have to subtract the percentage of detractors from the percentage of promoters.
But what is a good NPS value? Is there any benchmark?
According to the Net Promoter Score concept, any score below zero would mean there is still a long way to go. I bet you don’t need the NPS to figure that out – isn’t it? An NPS score of less than zero clearly indicates that your customers are quite far from being satisfied with your products or services.
On the other hand, if your score is more than +30, then that would indicate a really large percentage of customers satisfied with what you’ve got to offer. If the NPS reaches +75 or above, you surely, have a host of happy customers who will stay loyal to your services even in the long run. Needless to say, they not only love your brand, but they are very much likely to refer it to others as well.
Hence, an NPS value, as high as 75, indicates that your happy bunch of customers is very likely to increase, and their referrals have a higher chance of being converted into new customers, ensuring more revenue for your business.
It clearly shows that NPS serves as a realistic benchmark for you to compare your company’s performance against your competitors.
Though Net Promoter Score largely varies depending on the industry, you can still compare your company’s NPS with the average NPS of your industry, and check whether it is above or below it.
This way, you can clearly see whether you are on the right track or you need to adjust your modus operandi.
What are the Benefits of Net Promoter Score?
Now, much like everything else, the concept of NPS also comes with several benefits. Below, I have listed the three most significant ones for you to consider.
1. It Instils a Customer-Centric Approach in Your Business
The first thing you need to always bear in mind is, without customer satisfaction, your brand will not win the cutthroat competition. So despite having high-quality products or services, your sales graph won’t hit the pinnacle unless something significant is done in terms of customer satisfaction.
This is exactly where the NPS comes into the picture and serves some key roles in your business’s growth.
First and foremost, it promotes and encourages businesses to use customer satisfaction as a key performance indicator of their growth. After all, it’s not very hard to understand, instead quite a simple process – if you promptly address the problems and concerns of your customers, they will incline to yours, and most likely, they will continue to do so in the long run.
Suffice it to say; you won’t be seeing the inflow of profit unless you make your customers feel satisfied and experience happiness with your products/services. Address their needs aptly, and they will increase your sales as a return of gratitude.
2. Want to Run a Customer Loyalty Program? Well, NPS is Here!
Recurring customers is perhaps the most important factor behind the perpetual growth of a brand. Businesses should encash the sales opportunities they receive from good referrals – they always work as a boon and warm bonus.
Your loyal customers have their ways of promoting your brand. Word of mouth is perhaps the most commonly used method, followed by writing excellent online reviews. But apart from that, happy customers have the immense caliber to create new potential customers for you directly.
Thanks to the NPS concept, you can easily spot your batch of loyal customers and quickly run campaigns like loyalty programs. These loyalty campaigns promise to reward them every time they bring new potential business leads to you. Suffice it to say that you can acquire many new leads pouring into your sales funnel within a very short period.
However, to make it function properly and profitably, you need to fix the customer referral value. Ensure that the reward you are giving out for bringing new referrals does not exceed the total amount you get out of one such lead.
3. It Successfully Promotes Customer Engagement
How would you know that your brand is doing great in the market? Well, just providing excellent products and services is not enough – you need to, at the same time, receive proper feedback from your customers.
Without that, it will be difficult for you to gauge the influence your brand has in the market and whether it can address customers’ needs appropriately or not.
But with the NPS metric, you can connect with a larger part of your paying customers, and get a general sense of what they are feeling about your products and services.
Honestly, you should not get demotivated if you get many detractors or passive ratings. In fact, they are the ones who will help you understand the shortcomings of your products/services and how to work upon them. They will serve as important and helpful insights to improve your services and convert detractors and passive raters into promoters.
Growth Hacking Using the Net Promoter Score
Now, let’s look at how you can improve the growth of your business using the NPS.
1. Use the NPS for Better Marketing Outcome
As we have already discussed, NPS gives you excellent opportunities to improve your marketing strategies by focusing more on customer satisfaction. It helps you point out the portions you need to work on and the parts most loved by your customers.
Now, with these valuable insights, your marketing team can surely develop a better and more engaging campaign – this will help you attract the attention of new potential clients and customers quickly.
Suppose you are offering an digital marketing tool, and through your NPS, you get the idea that most of your customers prefer it to be a WordPress plugin. So, next time, your product development and marketing team can focus more on this factor.
This can be hugely beneficial if you have a strict budget and the objective of highlighting the key elements to drive the sales graph high. It’s not only about having a direct channel between you and your customers, but NPS also gives you insights that improve the relationship with your customers.
2. Using the NPS to Improve Your Sales
You need to harness the power of the open-ended questions used in NPS. These questions will tell you everything about your customers’ preferences related to your products and services. By examining these points meticulously, your team can quickly prepare a killer sales pitch.
Now, to acquire the best possible return from the sales pitch, you need to build a strong and firm relationship with the customers. Trust me, it’s imperative as most veteran business owners believe, 20% of the current customers will take the baton forward for 80% of the future customers. That’s the sheer power of customer retention!
Don’t think these are just mere speculations, as there is substantial data to back up the concept. According to the creator of the NPS framework, Frederick Reichheld, even only 5 percent of customer retention can lead to a total increase of 25 percent to 90 percent in profits.
Lastly, the more happy and satisfied customers you have, the better chances they create for getting good referrals. As they rightly say, your happy customers are your biggest brand ambassadors.
3. Need a Growth Metric? Well, Use NPS
In order to keep track of your growth, you need to have a growth metric. It will enable you to make the necessary predictions about the future modus operandi of your products and marketing.
If you don’t have such a metric, then fret not, as the NPS framework can help you with that. Since it indicates the aspect of customer satisfaction, you can very easily deduce how many customers can make a purchase.
A number of large companies around the world are using this as a growth metric. For them, it is the perfect indicator of future growth possibilities.
Also, if a decent percentage of customers give you high scores like 9 or 10 for the NPS questions, they will not just use or purchase, but you can be sure that they are very likely to promote the brand as well.
Apart from that, by the number of promoters, you can even predict the growth of your business in the days to come. If you somehow reward the promoters for referring your brand to others or mention it on social media, then the overall growth can increase even more!
4. Use Detractors to Your Benefit
In all honesty, you don’t need to feel afraid of the detractors. Instead, you can use them to improve your brand image and services. Maybe they indicate the lost or dissatisfied customers, but they also show the sectors that you need to improve.
To put it simply, you can track the customers giving you poor NPS value and ask them – what are the things they don’t like about your products/services. An introspection of your failure!
Just maintain a friendly demeanor and inquire about the facets that you can improve with respect to your brand and services.
This will not just help you figure out the need-to-improve aspects, but also it will create a positive image of your brand in front of them. This impression may very well change their view and convert the detractors into a passive rater or even a promoter.
5. Want to Reinforce the Positivity in Your Marketing? Venerate the Promoters
The customers who are giving you a high score for your NPS questions will certainly recommend your brand to others. But that should not make you abandon them.
Instead, your goal should always be to retain them and make the most of their positive experience with your brand. For that, you need to venerate them and make them feel more valuable. This way, they will not only refer your brand through word of mouth but also promote it on more effective channels like social media.
When customers act as references, they do more than indicate they’ve received good economic value from a company; they put their own reputations on the line. And they will risk their reputations only if they feel intense loyalty. – Frederick F Reichheld
Loyalty programs for such customers can do wonders for you. This will establish a sense of positivity in them, which will ensure their retention and brand advocacy in the long run.
6. Instead of Feedback, Value Customers’ Experience
Customer feedback is vital for any brand. But when you are using the NPS framework, you should focus more on the customer experience instead of mere feedback.
Frankly, the rating that they might give in the form of a promoter, or detractor, or passive indicates their feedback in general.
But you need to delve deeper in order to get the more valuable insights.
Be it positive or negative; you can track the customer and ask them to share the true experience they might have with your brand. This will tell you about aspects that can never be surfaced using any feedback acquiring system.
Focus on their expectations as well, not just mere opinion. The moment they start using your products/services, what are the things that attract them and what repels them. Only with these insights available to you, you can make the overall experience of your customers better than before and in return, increase the sales.
7. A Sense of Internal Advocacy
Internal advocacy can play a significant role in making a sales proposition. But how do you know what might work best for your customers or to attract them?
The NPS system can point out both the virtues and drawbacks of your products/services. With this data in hand, your internal team can devise the perfect strategy by focusing on the plus-points and eradicating the shortcomings. And accordingly, you can adjust your promotions and marketing campaigns to attract and acquire the best potential customers possible.
Final Thoughts on Net Promoter Score, and Growth Hacking Using NPS
As I have mentioned earlier as well, growth is everything for a business. But at the same time, growth is not good enough, if it’s not long-lasting. That’s why most people are pondering day and night to discover new growth hacks to get it shot through the roof.
To ensure a promising future of your business, the Net Promoter Score gives you the necessary insights and improves your overall growth. Also, not just for a short period, but NPS can help you with ways to retain the growth in the long run.
So, there you have it, our take on Net Promoter Score to improve the growth of your company. Now, tell us yours, what’s your view on this? Have you had any prior experience using NPS to growth hack your business? Or is it something you’re yet to try?
Share your experience with us in the comment section below, and keep this discussion going. Also, do you think we missed out on an important aspect of the Net Promoter Score? Kindly tell us more about that as well. Your views will surely enrich our readers and all the digital marketing aspirants out there.
Till then, best of luck!
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Mentored by Mr. Soumya Roy, the Founder, CEO of PromozSEO Web Marketing Academy.
Being an entrepreneur and digital marketer, he loves to share his knowledge and experience in topics related to internet marketing, SEO, SEM, social media, content marketing, branding, entrepreneurship, and many more.
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