Reasons to Calculate NPS

Did you know that Tesla's Net Promoter Score (NPS) is an incredible 96 points! NPS measures a customer’s willingness to recommend your company’s products or services to friends and colleagues. 96 points means that almost every Tesla customer will recommend the company to everyone he knows.

We have prepared several good reasons why you need to calculate NPS for your business:

1. Simple feedback

Let me remind you that the NPS question is built according to the following scheme:

How likely is it that you will recommend [GOODS or SERVICES] to your friends or colleagues?

There is nothing complicated in this matter. As an answer, you give the client a simple scale from 1 to 10. The key aspect is “How likely is it that the client will recommend.” The results of this indicator can be tracked by week, month, year, etc. In addition, you can perform predictive analysis to keep abreast of alleged changes in customer attitudes towards your brand. Most feedback mechanisms can be difficult for the average user when NPS asks a simple question, the answer to which is even simpler.

John Waldmann, founder and CEO of Homebase (employee scheduling software) early adopted the NPS to track customer feedback. He used it as a communication channel between the company and its users. He even integrated NPS polls into his software. Feedback from customers is transmitted to their team weekly. So they can take care of the problems at the time they occur. This makes the product team behave more collectively and coherently.

2. Retention rate

Having regular customers is a hallmark of any successful brand. Measuring your customer loyalty is what NPS does. Obviously, how your customers perceive your brand is very important for you when making management decisions. In addition to evaluating NPS, the comments you receive from customers should help you work on your product.

In the latest Satmetrix Customer Net Promoter Benchmark report in the "software and applications" segment, the NPS score is quite low. This means that companies focus only on attracting customers, not caring for the retention of existing ones. Of course, this is not necessary.

3. Helps to know when to raise the price

Obviously, raising the price increases your business revenue. This is what all businesses should do on a regular basis. It is also obvious that this entails resentment from your customers, but is there a good time for this? Yes.

“When customers overwhelmingly answer 9 or 10 (Promoters), this means that they are more likely to recommend your product to their friends and colleagues - this is exactly the moment when you can safely raise the price.”

Entelo, an analytics software company, uses NPS and closes the feedback loop, helping them reduce customer churn by surprising quick responses. The happiest customers are the most likely candidates for cross-selling. NPS helps you determine which of your customers will be interested in more of your offers.

4. Predictive analysis

In the first paragraph, I briefly touched on this feature of NPS, but it is quite worthy to be put out in a separate paragraph.

Are you not sure why the business of your company is not going uphill? Do you see how a number of customers stop their interaction with you and move on to your competitors? Your NPS score is an indicator of how well you are performing as expected by your customers. If your NPS is decreasing, expect this to affect your revenue, sales, and increased customer churn. Find ways to do predictive analysis, and whenever you see a less desirable NPS score, start working on your business with a vengeance.

The rapid growth of Slack as a billion-dollar company during the first year is due to the use of NPS. They tried to use feedback for each parameter of their business.

5. Helps turn customers into brand advocates

The presence of brand advocates is a clear sign of an extremely successful company. If your NPS is 50, then you have at least half of your customers who are willing to recommend you to their friends and colleagues.

Finally, a couple of tips:

  • Continue to regularly evaluate your NPS to see if the rate is growing or not.
  • Contact each client who did not give you 9 or 10 and ask them how you can make them happy. Try to turn everyone who gives you a rating of less than 9 into brand advocates.
  • Check out the solutions that AZN Research offers

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