Ah, the Net Promoter Score (NPS)! It’s like a blockbuster film that sparks loads of opinions! Some love it, some hate it!
In case you’re wondering what this NPS is, let’s pull back the curtain a bit. At its simplest, NPS asks customers: “On a scale of 0-10, how likely are you to recommend our product/service to a friend or colleague?” Does that sound familiar? I bet you’ve come across this question after using a product or service at some point.
Now, in this blog, I’m going to delve deeper into NPS. I’ll explore what it is in more detail, how companies usually use it, and how I’ve used it to get loads of customer referrals.
I must say, I like NPS. I’ve used it to get business-to-business (B2B) customer referrals over the years. I see it as an amazing tool, but my use of it might be a tad bit different from the norm. I believe in action – actions that can make a genuine difference. While this blog will focus on actions leading to more referrals, remember, NPS can be used as a guide to reducing customer churn and uncovering cross-sell and upsell opportunities too.
The NPS Question
How can just one question can reveal so much? Well, this is the power of the NPS question. It’s a tool that asks customers: “How likely are you to recommend our company/product/service to a friend or colleague on a scale of 0-10?”.
Then, based on their responses, customers are grouped into 3 groups:
- The Promoters, who score us a 9 or 10.
- The Passives, those who give us a 7 or 8.
- And the Detractors, those who rate us anywhere from 0 to 6.
Now, once these responses are in, you calculate your overall NPS score for your product or service. And here’s how that’s done.
How NPS Is Calculated
The overall NPS score is calculated by subtracting the percentage of Detractors from the percentage of Promoters. Passives, while they do contribute to the overall response rate, don’t directly impact the score.
For example, let’s say you’ve surveyed 100 customers and received the following responses: 60 Promoters, 20 Passives, and 20 Detractors. To calculate your NPS:
- First, you’d determine the percentage of Promoters: 60 out of 100 equals 60%.
- Next, you’d find the percentage of Detractors: 20 out of 100 equals 20%.
- Then you subtract the percentage of Detractors from the percentage of Promoters: 60% – 20% equals an NPS of 40!
Keep in mind, that NPS can range from -100 (everyone is a Detractor) to +100 (everyone is a Promoter). A positive score indicates that you have more Promoters than Detractors. Whilst a negative is… well, I’m sure you can work it out… that’s where you don’t want to be!
What is NPS Typically Used For?
How do businesses usually use this NPS tool? Many companies use it as their main technique to gain insights into their customer base – it’s their key metric to gauge how well their product or service is resonating with their customers.
Now, that’s not a bad thing. But for me, using NPS as just a ‘high-level’ measure is missing an opportunity. In my view, using it in the 3 most common ways (which I’ll detail below) can miss the real potential of NPS. I believe B2B companies are letting an incredible opportunity slip right through their fingers by treating NPS as a mere data metric rather than a goldmine of actionable insights.
But let’s not get ahead of ourselves. I’ll get into that in the next section. For now, let’s explore the 3 most common ways businesses use NPS:
- Customer Loyalty: Businesses use NPS data to track trends in customer loyalty over time. Is it going up? Down? Staying steady?
- Spotlighting Areas for Improvement: Here, the NPS score serves as a compass, pointing out areas of the business, product, or service that need a little TLC. To do this, the question might be tweaked slightly. For instance, “On a scale of 0-10, how likely are you to recommend [insert feature name] to a friend or colleague?” or “Based on your experience with our support team, how likely are you to recommend our [insert product or service name] to a friend or colleague?”
- Benchmarking Performance: Businesses often use NPS to measure their performance against their competitors. Companies such as Survey Monkey and Zendesk collate NPS scores by market, so businesses can benchmark themselves.
These are the three most typical uses of NPS. It’s mostly used to calculate that high-level NPS score (refer to ‘How NPS Is Calculated’ above) and track how the business is faring.
But here’s where I take a different path. For me, NPS isn’t just about asking a question. It’s about really listening to the answers, understanding what they mean, and using that knowledge to take action with individual customers to create a more meaningful impact. And that’s what we’ll dig into next.
How To Use NPS To Get More Customer Referrals
Alright, so here comes the most powerful part of this blog. The real power of NPS lies in the information you get from that initial question. Ready?
Remember the three groups: Promoters, Passives, and Detractors? What I do is quite simple – I sort customers into these three categories. I don’t even proceed to the next calculation stage. In my eyes, that calculation is more like a vanity metric. Maybe that’s a bit harsh, it can be interesting to track over time, but the real treasure within NPS lies in those three groups.
And here’s what you should do:
Next, gather all your Passives in another list. Ask them: “What would we need to do to earn a 9 or 10 from you next time?” When they respond, express your thanks and then ask them for a referral too. Pro tip: collect all these responses and collaborate with your Product and Development teams to see if you can implement the most common suggestions. You can easily attach a monetary value to implementing this change (X extra referrals means Y extra sales!).
And lastly, get all your Detractors together. Now, you wouldn’t want to ask these people for referrals, but you absolutely need to act. These are customers who are likely to churn. Therefore, team up with your Customer Success, Customer Support, Product, and Marketing teams to strategise re-engagement activities. Your goal? Get these customers back to being fans of your product or service. Next time you ask the NPS question, they could be in the list to get a referral from.
And there you have it. If you’re considering using NPS for the first time, I say, go for it!
It provides you with some interesting data and incredibly valuable information. But remember, the information is the star of the show! Don’t just use NPS to gather summary data, use it as a springboard to take action.
That’s how you can create a real impact on your business, particularly when it comes to customer referrals!
How To Get More Referrals
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