Speak to anyone about customer feedback or engagement, and the words “Net Promoter Score” or “NPS” will no doubt feature. Over the past few years, NPS has truly become a pillar of customer feedback, overshadowing traditional customer satisfaction surveys – and it’s one of the measures we use regularly.
As New Zealand continues its journey of becoming more customer-centric and understanding the role of customer feedback better, our options for capturing and measuring this feedback will naturally increase. It’s important to understand these different measures, and know which ones will best help you deliver on your business strategy. So what are we talking about here?
How Net Promoter Score Works
Designed by Fred Reichheld of Bain & Company, NPS is a globally recognised approach to measuring customer feedback. In essence, customers are asked to rank how likely they are to recommend a company to friends or family, on a scale of 0-10. These responses are then categorised into detractors (1-6), passives (7-8) or promoters (9-10). The detractor responses are subtracted from the promoter ones, to give an overall NPS figure — for example, if a company receives 60% promoter responses, 25% passive and 15% detractor, their overall NPS will be 45.
% Promoters - % Detractors = NPS
What Exactly is a Customer Satisfaction Survey?
The bread and butter of customer feedback for a long time, customer satisfaction surveys look more at details. Typically they are 5-10 questions in length, and ask customers how they felt about a recent service, product, interaction etc. Answers are usually qualitative, such as “very satisfied” or “disappointed”, as opposed to a quantitative 1-5 number rating.
Which Measure is Best?
Both of these measures produce information which can be used to improve your organisation. However, two key factors split the measures: customer loyalty, and predictive power. Customer satisfaction surveys take a more passive approach to feedback, looking at satisfaction in a range of areas, whereas NPS sits on a bigger picture level, engaging a customer to think about whether they would put their reputation on the line and recommend a company.
It’s About Your Reputation
In this day and age, satisfied customers are not enough. Genuine customer loyalty comes from having raving fans – and raving fans give you a strong reputation. With NPS, it’s incredibly transparent where your customer base as a whole sits on this, making it a far more effective measure. Having clear insight into customer loyalty levels allows businesses to act accordingly and enables you to benchmark your progress continuously.
The beauty of NPS is that it has been designed and proven to have a direct correlation with business growth. Improve your NPS score, and you improve your business. Customer satisfaction surveys can give you clear ways to improve the business but ultimately don’t show this same correlation. The difference is that, ultimately, generally satisfied customers don’t behave too differently to generally unsatisfied customers, but raving fans bring growth to your business.
Discover Your Raving Fans
Besides these two core differences, NPS is also very easy to report on and communicate across the business, enabling you to empower your people and continuously benchmark your progress. The simplicity of NPS has been criticised by some, arguing that it reduces customers’ feedback down to such a narrow measure. However, it’s exactly this simplification that enables NPS to be so actionable. Customer satisfaction surveys often produce paralysis by analysis, and the results are put in the too hard basket. But with NPS and other simple feedback measures, it’s easy to rally your organisation around a goal of increasing the score by five points over a quarter, and clear whether or not the target was achieved.
If continuous improvement and genuine customer engagement is of any interest to your organisation, then consider utilising NPS as a way of discovering just how much your fans are raving about you.
Discover how to turn your customers into raving fans in our e-book - download it here.
