What is NPS and why a business cannot survive without promoters

Are you sure your product is the best? Wonderful! Belief in your business is the driving force behind its growth. But in business there is another party whose opinion influences success - this is the customer. Their mood and level of satisfaction with your product is an important indicator that needs to be tracked, analyzed and grown. In this article we will tell you how to measure and interpret the customer loyalty index in order to best meet customer needs.

What is NPS

In 2003, the Harvard Business Review published an article entitled "The One Number You Need to Grow". The author of the article argued that with one question asked of customers, a business can determine their mood and use this data to grow. Thus the business world first started talking about the Net Promoter Score.

The Net Promoter Score is a metric that helps you understand how satisfied customers are with you. The metric is applicable to all types of business - from digital solutions to goods and services.

How to measure NPS

NPS is essentially a choice of score on a scale of 0 to 10 in response to the question "How likely are you to recommend our product to your friends and colleagues?"

The research can be supplemented with the question "Why did you give this rating?" Next, depending on the assessment, it is reasonable to ask "What did we do well?" and/or "What could we do better?" This will help you collect high-quality feedback and learn more about what is liked and what is disliked about your product.

Based on the answers to the first question, 3 groups of customers are formed:

Promoters - they are satisfied and loyal customers who are ready to recommend your product to others.

Passives - generally satisfied with your product, but not quite enthusiastic. Such customers easily leave for competitors at a lower price.

Detractors - those who are dissatisfied with your product and do not plan to keep silent about it. Their negative feedback can damage your company's image seriously.

The basic idea behind NPS is that a passive is not going to speak as highly of a company as a promoter would. Passives are not loyal to the company. So the challenge for business is to turn all its customers into promoters.

So that when a product is mentioned, a promoter would fiercely defend it and even ignore possible shortcomings. In other words, the NPS is an indicator of "word-of-mouth" about a product.

How to calculate NPS

To calculate NPS, you need to find the difference between the share of promoters and the share of detractors.

Let's take an example. A small family business has 500 active customers. As a result of the NPS research, the following results were obtained:

• 250 respondents rated 9 or 10 (50%)
• 250 respondents rated 7 or 8 (40%)
• 50 respondents gave one of the scores from 0 to 6 (10%)

The difference between the share of promoters and the share of detractors is 40%. The maximum limits range from -100% (when all respondents were detractors) to 100% (when all respondents were promoters).

How to interpret NPS survey results

When evaluating the results of surveys, do not focus solely on numbers. Judge for yourself: when calculating the loyalty index, scores of 0 and 6 have the same weight. How is this possible? For example, when the same customer gives your product 6 points in the first month of use and 0 in the second. The NPS will not show changes in numerical terms, but the decrease in loyalty is obvious — this customer is unlikely to return to you again.

Or imagine that 100 out of 100 customers gave the product rates of 7 and 8. Thus, the NPS will be equal to 0. But 8 is a high score? isn’t it? However, the NPS in this case will not even be positive.

That is why, when conducting surveys, it is critically important to get not only a number, but also a comment on why the client gave exactly such a score. In addition, it is important to analyze the NPS indicator in dynamics.

There are different ways to evaluate your NPS survey results:

1. measure the loyalty index regularly and monitor the dynamics;
2. look at industry average NPS values and compare with your company.

If you want to compare your NPS to the industry, conduct loyalty assessments regularly. Say, every three to six months or selectively - before and after significant changes to the product or website.

How to run an NPS survey through JivoChat

NPS surveys can be conducted with the help of chat-bots, e-mails and other available marketing tools. However, it is most convenient to use the ready-made forms from the Jivo Marketing block: so you can specify conditions for the pop-up window (for example, visit a specific page, number of visits, click on an element, etc.), experiment with survey text and block placement.

To run an NPS survey using JivoChat:

1. open the Marketing section in the JivoChat app
2. go to upper right corner, click Create → Pop-up window
3. select a channel, specify the segment parameters
4. select the NPS Survey in the template gallery

Test the Jivo Marketing features including NPS surveys for free for 2 weeks.

5 examples of how NPS measurement helps business

Troubleshooting

The correct question and clarification of what exactly the user likes or dislikes in the product can give:

• useful insights
• a more accurate NPS value
• tracking the dynamics and causes of changes in the indicator.

For example, Netflix asked its subscribers: "In the last 6 weeks, have you recommended us to a friend or colleague?"

At the same time, new subscribers were asked an additional question: "Has a friend or colleague recommended us to you?"

When users answered "Yes" to both questions, Netflix saw a steady increase in new subscribers. As positive responses decreased, the number of new subscriptions decreased and the number of cancellations increased.

These issues were related to the company's growth directly. At the same time, they concerned actual behavior in the past, and not some kind of prediction of behavior in the future.

Brand loyalty

Loyal customers are ready to recommend your product to friends, this helps increase brand awareness and attract new customers. A positive experience with a company most often becomes the reason for customers returning and making repeat purchases.

Acquiring new customers

The conversion into payment for customers who came on the promoter’s recommendation is higher than for those who came from other advertising sources.

Promoters can reduce the cost of acquiring new customers to zero

Customer retention

It is extremely important to not only attract loyal customers but also to retain them. NPS helps to determine which aspects of a business need to be strengthened and which are strengths that can be used as USP (Unique Selling Proposition). This helps to maintain and develop positive relationships with different types of customers.

Increase in profits

Bain&Company research shows that increasing customer loyalty by just 5% can increase company profits by 25-95%. That’s why it’s so important to work on increasing the number of promoters and also improve work with detractors. 93% of users read product reviews before making a purchase decision.

Why is it important to measure NPS

NPS measuring requires minimal costs - just conduct a survey on your website or in the app using a special service. At the same time, the results of such a simple study can be of great benefit: they are an indicator of customer loyalty, help to reveal the strengths and weaknesses of the product, and also determine the development strategy of your business.