In my previous articles, I’ve looked at how to analyze, measure, and understand what customer churn means for your business. The next step is to unpack how to get ahead of the curve and find out which of your customers are engaged with you and which aren’t—with the aim of helping prevent churn.
It’s easy for companies to fall into the trap of confirmation bias; if they rely on anecdotal evidence, you’ll always think you’re doing well, as you’re always talking to your happy customers. What you need is a single empirical measure to tell how your company is really performing. The mechanism we use for this is Net Promoter Score (NPS).
NPS forms the basis of our Voice of Customer programs, helping allow us to:
NPS was created by Fred Reicheld and Bain & Company in 2003; it’s based around the premise of asking your customers a simple question: On a scale of 0 to 10, what’s the likelihood you would recommend us to a friend or colleague, with 10 being highly likely and zero being highly unlikely?
Using this method, Reichheld was able to demonstrate a strong correlation between a company’s NPS and its growth compared to its competitors. Since then, companies have been increasingly using NPS both as a stand-alone metric and within broader customer satisfaction surveys to help determine how customers feel about their businesses.
Understanding how customers view your business is crucial, because unhappy buyers are quick to share their stories. If you can spot those unhappy customers by their low NPS rating, you can reach out to them to try and fix whatever issues they have before things get bad. Conversely, when customers champion your brand, they push it forward one of the most important ways.
The actual calculation is straightforward. When customers respond to your NPS survey, they are grouped into three categories: Promoters, Passives, and Detractors.
Promoters respond with a 9 or 10. Passives respond with a 7 or 8. Detractors respond anywhere from 0 to 6.
In order to calculate your overall NPS, subtract the percentage of Detractors from the percentage of Promoters. So, say 100 people responded to your NPS survey, and their responses are grouped as follows:
In this situation, your calculation would look like this: 70 – 10 = 60. This gives you a really good NPS score of 60. Your NPS will fall anywhere from -100 to 100, with a score above 50 considered excellent.
While your NPS is just a snapshot of customer sentiment, it’s the starting point for a more complex and deeper conversation about customer relationships. The truth is, your NPS means nothing unless you do something with it. Beyond the NPS score itself, you have to be able understand what is driving that score.
Every time we see a negative score, we use that as a reason to go back to the customer to talk to them about their issues and look to solve any problems we can, with a view to rescoring that account and ultimately turning them around. But it should never just be about one particular segment, we also look at the promoters to find out what it is that makes them promoters—or what is behind them giving you the nine or 10. We also need to look at the people in the middle, the Passives, and find out what it is that they are passive about.
The ultimate goal of studying NPS is twofold: to increase Promoters and decrease—and ultimately eliminate—Detractors.
Kevin Kirkpatrick is senior director, customer success, SolarWinds MSP.
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