Measuring customer loyalty
What is Net Promoter Score (NPS)?
"NPS" is an abbreviation for Net Promoter Score, which can literally be translated as "Net Promoter Index". The NPS methodology as a tool for measuring customer loyalty was proposed in 2003 by Fred Reicheld in the Harvard Business Review. With the goal of identifying which metrics are most associated with customer loyalty, Fred Reicheld analyzed massive amounts of data and came to the conclusion that the willingness to recommend a company to friends and acquaintances is most strongly correlated with actual loyalty. The NPS methodology he created is based precisely on the willingness to recommend a company as the only indicator of loyalty.
For several years of its existence, this technique has gained wide popularity in the world due to its simplicity and operational efficiency. Based on NPS measurements, accepted management decisions, branches open and close, bonuses are paid or not paid, etc.
How is the NPS index calculated?
The essence of the methodology for measuring customer loyalty in the NPS model is quite simple. It is built on the basis of two main questions asked by the company's customers (see the diagram above). Moreover, it is fundamentally important to ask current customers, and not former or potential ones. The first and main question is: “How likely is it that you will recommend company X to your friends/acquaintances”? The client rates on a scale from 0 to 10, where 10 means “definitely recommend”, and 0 means “definitely do not recommend”. Further, based on the answers, customers are divided into three groups:
- "Promoters" (in the original "promoters") - rated 9 and 10. According to Reicheld, these are customers who are highly loyal to the company and are very likely to recommend it to their friends.
- "Neutrals" (in the original "passive clients") - who gave ratings of 7 and 8. They are considered "passive" clients who are not only very ready to recommend the company, but not very dissatisfied with it either.
- "Criticists" (in the original "detractors") - who gave ratings from 0 to 6 - are dissatisfied customers who are more likely not to recommend the Company to their friends/acquaintances, and, moreover, may even "advise" to use its services.
Actually, the NPS index itself is calculated as the difference between the percentage of "promoters" and "critics" and shows the level of customer loyalty. The final value can vary from -100 (if 100% of the company's customers are "critics") to +100% (if all customers are "promoters").
In addition to the NPS index itself, the question is also asked about the reasons for the assessment in order to identify the main drivers and barriers to loyalty. This question can be either open or closed in the form of scale ratings on several parameters.
Any serious business is puzzled by the question of whether it is popular on consumer market his products. And if popularity is present, how stable is it?
Of course, the high popularity will be obvious, as it is read from quantitative indicators. Bulk sales and big profits are the perfect litmus test for the popularity of a company's product. But, not every business can boast of high sales.
That's why it's so relevant Feedback from consumers, clarifying what their attitude to the company's products is.
Measuring the level of loyalty according to the NPS method
There are a number of techniques for obtaining some form of feedback from customers, from direct questions about the quality of a product or service to tracking alternative consumer choices from a line of competitive offerings. Some methods are easier to use, while others are more difficult, but more informative.
Recently, there has been a lot of controversy around the methodology Net Promoter Score (NPS), which is aimed at measuring the level of customer loyalty. The Net Promoter Score methodology was developed by Fred Reichel e. In 2003, it was presented as a very simple and fast way identifying customer loyalty. Before talking about the pros and cons of the declared marketing tool, let us dwell on the very essence of the technique.
According to Reicheld, customer loyalty is directly related to their willingness to recommend certain company products in their environment.
Therefore, buyer attitude measurements using the Net Promoter Score methodology are based on on a single question:
This question is supposed to be asked to those real customers who have already used the product and were able to assess its strengths and weaknesses. Potential clients excluded from the sample of respondents.
The client is offered to answer the key question, focusing on a scale from 0 to 10, where an unconditionally positive answer corresponds to the maximum 10 points, and a categorical “I definitely will not recommend” means 0 points.
Further, based on the answers, all respondents are divided into three categories:
Loyal customers, whose answer is expressed by 9 and 10 points, are a group of promoters.
Undecided consumers who put 7 - 8 points - a group of passive customers.
Dissatisfied customers who rated their willingness to recommend this company or its products from 0 to 6 points are a group of critics.
The NPS methodology includes and sub-question, which reveals , “what justifies the assessment”.
This open-ended question aims to clarify issues that hinder the formation of brand loyalty, and also provides information about strengths products and companies.
However, the answers to the auxiliary question do not affect the quantitative measurements of loyalty, but are used only in the qualitative analysis.
Further quantitative analysis involves the simplest calculation of the NPS index - the loyalty index. For this, the severity of the group of promoters and the group of critics is determined as a percentage and the difference is determined by subtracting the second indicator from the first.
The result is limited by limits from +100 to -100. Obviously, the NPS index will be equal to + 100 only if absolutely all respondents turned out to be loyal customers, and there were no passive or critics in the sample. Similarly, the NPS index will take a maximum negative value of -100 if none of the customers is ready to recommend the company's products, and there were no ratings higher than 6 in the answers to the main question of the methodology.
What information does the NPS index provide?
An index with a plus sign indicates the prevalence of loyal customers over critics. Therefore, it is likely that new clients will contact the company based on recommendations. The higher the index, the greater the guarantee that there will be an influx of customers.
If the index is equal to 0 or takes a negative value, the situation becomes critical, since we expect not so much an influx as an outflow of customers based on possible negative reviews and the choice of competitive products.
Strengths and weaknesses of the NPS methodology
While the NPS methodology has been popular abroad for more than a decade, it has received a lot of criticism in the domestic business environment. Domestic marketing gurus emphasize the artificiality of the NPS index, since it is calculated on the basis of only two categories of respondents - promoters and critics, completely ignoring passive customers.
Another vulnerability is that companies with various shares critics and promoters can share the same NPS.
Let's illustrate this with an example. Company A has 30% loyal customers and 10% detractors. Based on the algorithms of the methodology, its loyalty index is 20. Now, suppose that company B has 20% of the adherents of its products and not a single critic. Obviously, her NPS index will also be 20.
Based on the numbers obtained, it should be assumed that companies A and B have similar prospects. But such a conclusion contradicts the NPS methodology itself, according to which the presence of critics increases the risk of anti-advertising, and therefore the likelihood of customer churn increases. In our example, this risk would be higher for Company A.
Therefore, the loyalty index cannot be considered as an independent characteristic. The NPS index can take on its own interpretations.
Domestic marketers also criticize the very wording of the main question of the methodology, emphasizing that people are generally not inclined to give recommendations, so the survey will fail.
As you can see, the critics make strong arguments weaknesses NPS methods. But is everything so clear? We will present our arguments not for the sake of arguing with venerable marketing specialists, but for the sake of benefiting from the methodology popular in the West.
What advantages do we see in using Net Promoter Score:
1. The wording of the question asked to clients.
The same question that is criticized has a positive psychological aspect. Namely, the words "What is the probability that you ..." removes unnecessary responsibility from the respondent. The client mentally weighs whether he could recommend this product to someone, and quite sincerely answers, because “could” is not the same as “I will recommend”. Therefore, the array of responses received using the NPS methodology is information that is very valuable for business.
2. The NPS index, with all its superficial calculations, shows a trend, which develops in the market for a particular product. A kind of thermometer that records the state. Yes, knowledge of the business loyalty index will not improve, just as determining the temperature will not cure the patient. This is just a diagnostic step that motivates the search for effective treatment. But without this step, treatment can be unforgivably late.
3. Ease of implementation of the NPS methodology.
You can search for the most effective tool to measure the same customer loyalty, or you can use the NPS technique, which is not ideal, but removes the cut certain parties business. As you know, the best can turn out to be the enemy of the good, because in the pursuit of the best, the chances of correcting the situation in a timely manner are often missed.
The listed pluses, whether other positive aspects are appreciated in this technique by foreign companies, however, the NPS index is actively used in various fields. For example, in the banking sector, +11 is considered the norm of the loyalty index. If we consider different markets, then the standard customer loyalty standard ranges from +5 to +15.
As an example to follow, Apple, whose loyalty index reaches +50.
Is it possible to automate the collection of customer feedback? Automation of collecting their opinions from customers (for NPS calculation) .
Analogue of NPS in domestic marketing
A similar technology for identifying customer loyalty is used by some domestic companies. This is most often observed in banks and the service sector. At customer service points, stacks of pictures are placed on the racks, which depict a cheerful or sad smiley. It is assumed that a satisfied customer will take a picture with a funny smiley face and put it in a special box. Well, the visitor dissatisfied with the service will act accordingly. This is nothing more than identifying loyal customers and critics.
Such a method could be useful to any company focused on services. By determining the difference between the number of satisfied and disappointed customers with a given frequency, a company can track customer attitudes towards its product and the dynamics of this relationship.
If there is a trend towards an increase in critics, the next step will be effective: invite customers to answer the question “What do you not like about the service?” or “What would you like to improve in the company?”. The responses received are the key to the direction in which the company should move in order to increase customer loyalty.
In conclusion, we note that the NPS methodology can be an effective basis for developing your own exclusive tool for measuring customer loyalty, as demonstrated by domestic banks. But in order to develop your own version, it makes sense to use the NPS standard, feel the good points of this technique and replace those that are unsuitable for your business.
I will also definitely add an important nuance - no matter what you use, the dynamics of the indicator and its connection with business results are important. Any loyalty program should be evaluated in this way - by the dynamics of indicators (for example, NPS) and the growth of sales, the flow of requests, and the change in the outflow of customers.
Tips for working with the NPS consumer loyalty index: how to sample users, what tools to use to conduct surveys, and how to analyze the results.
In my last year at LinkedIn, I became a true advocate for the use of the NPS customer loyalty index as a key performance indicator (KPI). NPS perfectly complemented our standard set acquisition, retention and monetization indices and has become a metric that helps improve the quality of a product and its value to consumers.
Who Invented NPS
The Net Promoter Score (NPS) consumer loyalty index was created in 2003 by Fred Reicheld of Bain & Company. I recommend anyone interested in this subject to read his article The One Number You Need to Grow, published in the Harvard Business Review.
Fred claimed that the NPS index performed just as well as long user satisfaction surveys. Firstly, NPS involves only one question, and secondly, it correlates well with the long-term growth of the company.
How NPS is calculated
You need to ask customers a simple question: "Do you enjoy recommending our company to friends or colleagues?". The answer is a number from 0 to 10. As a result, respondents are divided into supporters of your product (9-10 points), neutral consumers (7-8 points) and critics (0-6 points).
To get the NPS index, you need to subtract the percentage of detractors from the percentage of supporters. The number can range from -100 (if all polled users are critics) to +100 (all supporters). An NPS greater than zero is considered good, and a score of +50 indicates excellent loyalty.
Additional questions
In addition to the main question, you can ask clients open questions like: “Why did you give the company such a rating?”. This method makes NPS not only a metric for your success today, but also a basis for improving future performance.
It can also be helpful to ask customers how willing they are to recommend similar or alternative competitor products. This will allow you to correlate your NPS with indexes from other manufacturers. Just keep in mind that these results will not be objective enough: instead of polling a random sample of potential consumers (including those who choose competitors), you are considering already established own users.
You should think carefully before asking clients additional questions about the reasons for their ratings: of course, this will help you better understand the situation, but at the same time, it will significantly reduce the speed of responses. Either way, you'll have to compromise.
Grade Collection Methods
For online evaluation products, NTS typically either conduct email surveys or introduce reminder prompts into the product acquisition process. To increase your response rate, it's important to cover both desktop and mobile versions of your product. You can create your own survey tool, but I usually recommend using one of the pre-built solutions that support collecting and analyzing responses from all channels and interfaces, such as SurveyMonkey .
One of the problems with these surveys is the obvious bias towards more engaged customers, as those who are dissatisfied with the product are likely not to respond to emails either. Below we will talk about how to deal with this.
Sampling for NPS
It is very important that each NPS survey be conducted on a random representative sample of consumers. We often encountered the fact that the respondents were not really random. For example, there is a strong correlation between NPS results and engagement, or the length of time a customer uses a product. Try to ensure that the sample reflects exactly the degree of involvement and period of use of the product that is typical for the entire user base.
Poll frequency
First, the size of your user base matters a lot. The smaller it is, the larger the sample you will have to interview and the longer you will have to wait until you get enough answers. This imposes restrictions on when the next poll starts.
Second, the frequency of surveys can be related to the product development cycle. It is product improvements that drive NPS growth, so the frequency of surveys should depend on how quickly you are running each iteration.
NTS is a lagging indicator. Once you've implemented changes to the user experience, it takes some time for customers to feel them and then reflect them in their ratings.
We at LinkedIn have found that the best frequency to conduct surveys is quarterly, which is in line with our quarterly product planning cycle. This allowed us to get the most up-to-date estimates before starting the next quarterly planning. We were able to quickly respond to the results of our surveys when compiling the next roadmap.
Analytical team
If you are using NPS to improve user experience, it makes sense to share survey data with everyone involved in product development.
At LinkedIn, we included in the core NPS team not only product managers, but also those involved in product marketing, marketing research and business operations. Every quarter, we shared our discoveries with the entire R&D team. Of course, a lot depends on how you organize product development, but it is still important that the right stakeholders are involved in this process from the very beginning.
Comment analysis
Exploring user comments and responses to open questions is the most useful part of NPS analysis. Once a quarter, after each survey, we read the responses of clients and divided into thematic categories all the pros and cons that they met.
Based on this categorization, we made suggestions on how to improve user experience and eliminate pain points. Having to read every comment can seem intimidating, but there is no substitute for this procedure: so you can listen to the voice of each client and find out how they articulate their experience with the product.
Behavior of supporters
We spend quite a bit of time investigating negative feedback and addressing the issues associated with it, but we've found it just as helpful to understand the characteristics of a positive user experience.
Comparing NPS results with customer behavior strategy (when registering, searching, viewing profile), we saw a significant correlation between certain product actions and higher NPS. So we highlighted the moments when customers really liked using the product. And then we focused on product optimization to bring as many users from our base as possible to this point.
The easiest way to achieve this is to research each major action with your product and see if there are clear correlations with NPS scores.
Methodology
We found that NPS is sensitive to methodological changes. Therefore, it is important to be very consistent in survey methodology. The order of the questions and the list of competitors you ask about matters. The sampling approach itself also matters. Change methodology as little as possible.
seasonality
The NPS results are influenced by the seasonal factor. We've seen this for ourselves and heard it's true for other businesses as well. To minimize the effect of seasonality, it makes sense to compare annual rather than quarterly changes. At the very least, you should be aware of how it can affect your grades.
NPS limits
NPS is an effective metric for understanding user loyalty and developing an action plan to increase it, but this method has limitations that you should be aware of.
1. The relatively low frequency of NPS results makes it a weak operational metric for tracking your daily activities. So keep using your current acquisition, retention, and monetization tools to track regular performance, A/B testing, and other optimizations.
2. The margin of error of the NPS results depends on the size of your sample. It is important to be aware of this and not worry about small discrepancies in the results of two consecutive tests. Classical tools like engagement metrics don't have big sample requirements and their margin of error is much smaller.
3. NPS analysis is by no means a substitute for your product strategy. This tool only gives an understanding of how customers perceive the product and what exactly to optimize in order to better implement an existing strategy.
The customer loyalty index (NPS - Net Promoter Scope) has been successfully used by companies for more than 15 years. This is a fairly simple way to assess customer loyalty to the company.
NPS or Consumer Loyalty Index is a relatively young research method. The concept was pioneered by Frederick Reicheld, who published it in 2003 in the Harvard Business Review, calling the study One Number You Need to 'Grow'. In his study, the author insisted that in order to find out about the attitude of customers to the company, it is enough to ask just one question: “How likely are you to recommend the company/product/brand to your friends/colleagues?” After collecting and analyzing the answers, you can calculate the index, which consists of several steps:
1. Consumers are asked to rate on a scale of 1 to 10 the likelihood that they would recommend a company/product/brand to their friends/colleagues;
2. Based on the ratings received, all consumers are divided into three groups: Those who gave nine and ten points - "promoters", seven and eight points - "neutrals", six points and below - "critics";
3. The NPS index is calculated as the percentage difference between the number of "supporters" and "critics". The score range is -100 to +100, where NPS 100 is best script, in which all your customers are “supporters” of the brand, and NPS -100, respectively, is the worst.
It should be noted that in the West, loyalty studies are carried out with enviable regularity, unlike in Russia. For example, the global retail leader Amazon has an NPS of 61%, while electronics manufacturer Apple has an NPS of 89%*. Unfortunately, the consolidated data on NPS indicators Russian companies are absent, and the study is not carried out often. In the summer of 2017, UBS Evidence Lab published figures for Russian retailers: of the 14 largest players, five have positive values. The highest NPS was received by "Lenta" - 7% and "Okay" - 3%. In the banking sector, Sberbank's loyalty reaches 59%, in telecommunications Tele2 has 35%, Megafon has 17%, and Beeline has 25%.
Nevertheless, despite the fact that the method has quite a few followers, NPS has 5 main problems, which we will consider in this article, and we will also offer solutions, knowing which and successfully applying in practice, you will be able to manage customer focus and service level .
Problem #1:NPSdoes not answer the question "Why?"
The first problem is that most companies stop at the stage of collecting NPS data. Suppose a company with a wide regional network of divisions has an NPS of 38%. When they get this data, they can say, “How wonderful, in the past year our score has increased from 32 to 38.” But at the same time, they will not find out the reasons why the index is moving (it should be noted that the movement can be in the opposite direction).
Therefore, the first thing to find out is why the company received this particular assessment, why the changes took place. Ask a series of questions, for example,
- Why did you give us this rating?
- Why did you choose 5?
Find out the reasons, and then dig even deeper, for example, using the philosophy of "Kaizen" (continuous improvement and improvement in business).
Issue 2: Be aware of the differences between regions and segments
Very often, when calculating the NPS index, regional values, customer segmentation are skipped, and the ranges can sometimes be very wide. For example, you can compare the NPS of customers who buy from you a lot and often with the NPS of new customers or those customers who had problems interacting with your company. Find out what the difference is in their NPS, because if you have a higher NPS with less important clients or your more difficult clients, that's a problem because they won't influence other people's opinions.
You should also pay attention to regional differences, because sometimes the difference between NPS indicators in different locations can reach tens of percentage points.
Problem 3: Inconspicuous middle
As we noted above, in order to calculate the index, the highest indicators (those who put 9 and 10 points) and the lowest (from 0 to 6 points) are taken. At the same time, when measuring, those respondents who put 7 and 8 points, the so-called middle of the rating, are ignored.
Mathematics and, as a result, analysts miss these clients, but you must understand that they are very important. Clients in these ranges can become both "promoters" and "critics". What can motivate them to move up and what can keep them from moving down the rankings is up to you to find out.
Problem 4:NPSnot measured widely and often
The problem is that NPS (like any category of surveys) are conducted more often than once or twice a year. Given the high pace of today's life, price changes and the dynamics of competition, this is too little. NPS should be a constant review of your work for you, and not just a check from time to time.
Problem 5: Always use the same communication channel
When interviewing customers, always try to use the same communication channel to evaluate NPS. For example, if you are conducting a telephone survey to compile an index, continue to use this channel for future surveys. By using different data collection methods, you run the risk of getting very disparate data. As practice shows, the results obtained through different communication channels can differ by tens of percent.
For the first time, twelve years ago, customer loyalty index(NPS, Net Promoter Score) described by Frederic Reichheld in the Harvard Business Review.
The method itself is simple - the company asks customers to answer just one question: "What is the probability that you will recommend us to friends and colleagues?" on a 10-point scale. The answer "0" means "in no case", "10 points" - "definitely recommend". Based on the ratings received, consumers are divided into three groups: 9-10 points are supporters, 7-8 points are those who do not care, and 0-6 points are critics. All shares are calculated as a percentage.
The customer loyalty index is the difference between the shares of supporters and critics. Sometimes NPS can even be negative. In the West, they are used to measuring NPS. Whoever has more is better at satisfying customers. Those who have less clearly do not want to work on themselves.
- Customer Loyalty Program: Examples and Tips for Business
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Zappos, an online clothing, footwear and accessories retailer that was bought by Amazon six years ago, knows how to listen to the consumer like no other. One day, an employee of his was answering questions from a client for five hours straight. He could not decide whether the shoes fit him or not, or whether it is better to take moccasins, although sneakers look prettier. In any Russian store The phone will be hung up after 10 minutes of such doubts. But at Zappos, every customer is valued, even if they're boring, and they never record the average call time.
In Microsoft - the same story: everything for the client. In the company, a whole department is engaged in feedback with the audience. More than 300 specialists in different representative offices around the world are interested in consumers: are they ready to recommend product line to their acquaintances, and then, based on the answers, they calculate the customer loyalty index - NPS. In the West, this indicator is like a barometer: it determines the KPI of the entire corporation and the salary of employees depends on NPS.
Advantages and disadvantages of calculating the customer loyalty index
The main advantage of the customer loyalty index is simplicity and accessibility for any company. All questions asked to clients are precise and specific. To answer them, buyers do not need much time. But, despite its simplicity, this method is very informative, because it allows you to find out exactly whether customers are satisfied with your work.
Marketing experts believe that the method has a drawback. It lies in one-sidedness, since in the course of the study information is obtained from supporters and critics. At the same time, the vast majority of buyers are not included in either the first or the second group.
Determining the customer loyalty index allows you to objectively evaluate business performance. According to experts, when developing a marketing campaign and making important decisions in the management of a company, one should rely not only on this method, but also on the results of larger-scale and in-depth studies.
At the same time, loyalty indicators should be calculated regularly, with a certain frequency. This allows you to learn about changes in the attitude of customers towards the brand and, if necessary, urgently make the right management decisions.
Which companies regularly use the customer loyalty index
Companies around the world use the NPS (Net Promoter Score) index. These are both small start-ups and transnational corporations. The reasons for such widespread use of NPS are simple - simple calculations, rapid collection of information, direct correlation with income and comparability with competitors in the field of activity. All this makes the technique easy to use. Based on the calculations, it is convenient to conclude in which direction the company is moving, make important management decisions, calculate KPIs, open or close entire areas, pay or cut bonuses to employees.
Almost everyone uses NPS in their work large companies: Amazon, Apple, Microsoft, Zappos, Dell, Walmart, Procter & Gamble, Sony, Costco and more. In some ways, the NPS has become a kind of "de facto standard". Amazon's NPS is approximately 70, Apple's is 72, Costco's is 77, and USAA's little-known financial and investment company in Russia is 87.
Russian companies operating in the retail, insurance, telecommunications, banking services, restaurant and hotel business, air and railway transportation, also actively use the index. Among them are MTS, MegaFon, Beeline, Ingosstrakh, Rosgosstrakh, Alfa-Bank, Aeroflot, etc.
What exactly will give you a customer loyalty index
1. Stable development and customer retention
The results of extensive research have shown that NPS is one of the main indicators of growth. If this indicator outperforms competitors, then your company owns the most significant market share.
Research by Gartmer has shown that 65% of startups already have an established customer base. It costs five times more to acquire new customers than it does to retain old ones. Thanks to the loyalty index, it is possible to objectively assess how satisfied customers are with the work of the company and how many customers remain with it after the first interaction.
The Loyalty Index score can be used as a development method to turn a company's current growth into sustainable growth.
2. Sales management
Based on the NPS indicator, decisions can be made regarding the company's products themselves.
The Loyalty Index allows you to set the right priorities based on customer needs. It is easier to receive feedback, thanks to which the order of sales of goods is quickly changed.
3. Marketing
Based on Verizon research, 85% of new customers discover a brand through word of mouth. If your NPS is high, you won't have to spend a lot on advertising and marketing campaigns. Clients will come by themselves.
With the help of NPS, marketers can measure the mood and opinions of customers, and then give feedback to the entire staff of the company. This ensures the coordinated work of all departments of the company in achieving a common goal - meeting the needs of customers.
If you use the customer loyalty index together with analytical tools, you can predict how customers will behave, that is, create so-called behavioral patterns.
4. Personnel capacity management
NPS allows you to measure how satisfied your employees are with their work. This is especially true for businesses operating in the service sector.
The customer loyalty index can be used to choose a new vector corporate culture. This indicator also allows you to find out what the staff thinks about the new corporate policy.
5. General KPIs and reporting
NPS scores can be used as the only customer satisfaction metric. To do this, you need to regularly calculate the loyalty index and keep quarterly reports. This will allow you to get meaningful insights and build long-term business development plans.
If we correlate NPS with financial reporting, you can evaluate how the company develops. For example, with an increase in profits and a decrease in NPS, it is worth worrying about the long-term development prospects.
How to survey customers to calculate NPS
Many companies install tablets in service offices and points of sale so that customers can evaluate the quality of work. At the same time, companies receive NPS (customer loyalty index). Calculation examples are different. For surveys, special applications are often used that show answer options on the screen of a mobile device and store information on customer ratings. A tablet with a running application is installed on special stands with a holder that protects the device from theft.
Banks and Insurance companies put cards with multi-colored “smilies” on the customer service counters. If the client is completely satisfied with the service, then he takes a green card. The yellow color of the emoticon means a neutral attitude towards the service, the red one means dissatisfaction with the quality of work. At the exit, customers are offered to put their cards in a special box.
To obtain a loyalty index, online stores use special plugins if the resource engine is some common “boxed” CMS, or if the company’s full-time specialists are refining it. Some resort to the services of third-party web services that offer to install an NPS counter on the company's website. Thanks to this counter, it is convenient to conduct surveys and receive reports on their results.
Self-collection of reviews has certain disadvantages. With this way of obtaining information, it is possible to design the survey form incorrectly and implement it as an intrusive pop-under banner that pops up when entering the site. Such tools annoy users, and many mistake them for advertising. That is why they unconsciously try to brush off unnecessary information, often without even delving into the essence.
You can collect customer opinions through phone calls, e-mail newsletters and SMS if you have a contact database. Customers are usually called by call center operators some time after the sale of a product or the provision of a service. They also use systems of pre-recorded IVR (Interactive Voice Response) voice messages that communicate with customers without the participation of an operator. Such methods are often used by large online stores and operators. cellular communication, which have the contact information of their customers.
The disadvantage of receiving information through phone calls or e-mails is that a negatively minded client can simply refuse to participate in the survey after receiving the questionnaire on email or hang up the call because it is bad for the brand. As a result, he will not express his opinion and will not become a respondent. At the same time, even if we are talking about a supporter of the brand, he can also ignore the information if the letter accidentally ends up in the spam folder in his mail. That is, the results of the survey are largely affected by technical problems and incorrect information.
Many organizations use not only the methods listed above, but also further expand the functionality of their CRM systems in order to successfully solve tasks such as collecting information and calculating the customer loyalty index. But here it is worth emphasizing that not all “boxed” CRM systems can be finalized in this way without the help of third-party key developers.
How to interpret the customer loyalty index
The NPS indicator shows how customers relate to the company, what kind of reputation it has in the eyes of the audience. When calculating the loyalty index, firms want to know if everything is in order, what needs to be worked on. The NPS methodology has general rule, according to which the exponent should not be negative.
If the result of the calculations is positive, then there are still more supporters than critics. Accordingly, expanding the audience, companies should work primarily on loyalty so that satisfied customers bring new people with them.
If the result is zero or negative, then there are more critics than supporters. Consequently, there are no prerequisites for expanding the audience, and an outflow of buyers due to the company's low rating is not ruled out.
How to understand that your NPS (customer loyalty criterion) is satisfactory
It is impossible to objectively assess the position of a business on the basis of indicators alone. It is necessary to consider what place the company occupies in its field. For example, a large store may have a customer loyalty index of 30, while occupying the lowest line in the rating among competitors. However, a telecommunications company can have an index of 32 and be the industry leader.
What determines the criteria for assessing the customer loyalty index? How do you know if you have a positive NPS? Let's consider three factors influencing the criteria for assessing the customer loyalty index.
Level of competition
The main factor is the number of competitors in the business and the uniqueness of your selling proposition. If you are in the banking, insurance or medical care, the average can be considered the norm. However, if there are not so many competitors in your segment (for example, you produce wireless headphones or electric cars), the index should be quite high. This will indicate the uniqueness of your offer and the positive perception of the brand by consumers.
From the figure below, you can learn about the optimal NPS indicators for various business industries.
Tolerance
Another factor on which the NPS evaluation criteria depend is customer tolerance. This is due to the fact that consumers are very categorical about the quality of works or services that they regularly use.
Let's give an example that will allow you to more accurately understand how customer tolerance affects NPS. The Vid company has an indicator of 38. At first glance, the figure is average. At the same time, the company is one of the market leaders. The indicators of its competitors, firms A and B, are 15 and 22. The low index of the Vid company is not due to the low quality of work. This means that it operates in a highly competitive industry, where customers are open to even minor gaps in service.
barriers
As a rule, in order to improve an already purchased product or switch to the services of another company, the client must incur certain financial costs. In order to appear consistent in decisions, the consumer often stays loyal to the same brand.
SaaS companies encounter these kinds of problems on a regular basis. According to the conditions, a person must first deposit a certain amount and only then become a full-fledged client. Because of this, it is difficult for organizations working in this field to retain customers and maintain their loyalty. That is why the customer loyalty index of SaaS enterprises is below average.
What is a good NPS score?
It is impossible to give an exact number. It all depends on the area of your activity. However, the questions below can give you an idea of how high your score is.
- Does my NPS outperform my direct competitors? If so, the company is doing well. But, to talk about the success of the business, this is not enough.
- Is my NPS increasing? If after 3-6 months NPS increases, this is a good trend.
- Is my NPS above zero? If it is -40 and exceeds the rate of competitors, you should not jump to conclusions. Such a figure directly indicates the dissatisfaction of your customers.
It should be understood that NPS is not measured literally. Many companies are overly concerned with growth performance and try to improve it in every possible way. At the same time, the customer loyalty index is not a quantitative metric. Rather, it is a qualitative indicator that allows you to objectively assess the state of the business.
NPS aims to be the new standard for measuring customer loyalty, but its simplicity is constantly criticized. According to some experts, NPS cannot give a clear picture of the degree of customer satisfaction. Experts believe that firms with the same NPS may have a different number of supporters, clients with a neutral position, and critics. In this regard, businessmen should pay attention not to the numbers, but to what the indicator indicates.
How to increase customer loyalty index
How to Reach Out to Critics
About 70% of consumers will again agree to cooperate with the company if it resolves the controversial situation in their favor and eliminates the unpleasant aftertaste. FROM dissatisfied customers you need to maintain feedback, that is, establish trusting relationships and demonstrate your interest in cooperation. Many companies make the mistake of thinking that critics can't turn into customers.
Here are some ways to solve consumer problems:
- Providing a free manual on the use of products - for this, a download button is installed on the site.
- Extend your free trial and unlock additional features.
- An offer to use the services of third-party companies that can provide support to your customers (even if these companies are not associated with your products).
If you actively try to solve people's problems, it is likely that critics will turn into supporters who will gladly talk about the actions you have taken to increase their loyalty (for example, if you have changed the products in some way).
How to reach neutrals
Brand-neutral customers are quite an interesting group. They don't like your product, but they don't feel negative about it either. It may seem that they are waiting for something good or bad in order to finally decide. Clients of the neutral group, as a rule, do not give any feedback and do not get in touch. That is why it is quite difficult to work with them. It was possible to determine that only 37% of consumers from the neutral segment are ready for feedback.
At first glance, neutrals cannot harm the company's reputation. But this opinion is wrong. There are almost as many clients of this segment as critics and supporters. At the same time, critics act decisively, and neutrals are in search of the best opportunities for themselves. They are able to stay near the brand for a long time, but if they are not involved, their number will increase.
Here are some steps you can take to get feedback from neutrals:
- Offer them discounts or improve the quality of service. Neutrals can be re-engaged provided they receive exclusive discounts and improve the quality of service.
- Make an e-mail newsletter, pointing to updates in the assortment. Probably, the clients of the neutral group were not interested in the product, since the first impression was negative. They had no desire to visit your site again and get acquainted with the new products. Regular mailing of notifications about innovations and new features will increase the loyalty of neutrals.
How to thank the "promoters"»
"Promoters" is the segment that generates the most revenue. However, many businesses do wrong when they ignore their presence, taking it for granted. That is, the companies do not express gratitude enough or not at all to supporters. At the same time, they do not seek to find out the opinion of "promoters" about the quality of service, what exactly they like about the brand, and rely on this information in further development. Companies that pay due attention to supporters and thank them for their feedback set the stage for further cooperation and increase their income.
You can get feedback from "promoters" if:
How to reach unanswered
Let's omit the three categories of clients - "promoters", neutrals and critics, and consider another segment, the most numerous. These are the people who did not take part in the survey. Considering that 60% of respondents participate in the customer loyalty survey, it can be estimated that at least 40% of customers will not respond. That is, those who ignored the survey, even more than the critics and neutrals.
In practice, it is easier to re-engage a critic than a client who has not responded. There is the only way to attract such a consumer - to contact him. The NPS score is independent of people who didn't complete the survey. However, they can negatively affect the further development and income of the enterprise.
Why is the customer loyalty index negative?
Companies with high NPS:
- produce reliable products;
- offer a decent level of service;
- provide unique offers.
But now we will consider the "leaders" in terms of customer churn. It will be interesting to compare the mistakes of companies and understand why customers turn away from them.
Complex billing
At the forefront advertising campaigns Apple is a brand. Perhaps that is why the company became the leader in the loyalty rating in 2013. Apple's score is 65 for the iPad, 70 for the iPhone and 76 for the laptop line. The outsider was McAfee with an NPS of 2 points. Other antivirus programs, such as Kaspersky Lab, had a fairly high customer loyalty index.
Based on the McAfee result, you can judge the quality of customer service, and not the overall picture. User complaints about McAfee are identical to complaints about brands with a low level of loyalty. For the past six years, customers have been complaining about automatic deductions from bank cards. It's not certain that McAfee is doing the same, but often companies with a low customer loyalty index engage in covert billing and aggressive sales.
Brands with low NPS often practice "cancellation billing" - automatic cancellation of a subscription before the fact of refusal. After the conclusion of the contract to the consumer in automatic mode bills come up until he himself refuses the product or service.
"Rejection billing" is not such a bad move. Well-known world companies resort to it. For example, Netflix with a high customer loyalty index offers a free demo version, which automatically converts to a paid subscription. But, as a rule, brands with good loyalty indicators do not create additional inconvenience for users. In the case of them, it is clear at what time and in what order the invoice is issued. Brands with a low rating, on the contrary, do not conduct a direct dialogue with the client. Their billing is incomprehensible and opaque.
If recurring charges, such as a monthly subscription, are one of the conditions for the existence of your business, take care of transparency of payments. If billing is confusing and aggressive, customers will leave you.
Weak customer support
Companies with low NPS don't serve their customers well enough. In Temkin Group's 2015 NPS Benchmark, Comcast TV received the lowest score. The company's customer loyalty index was -17. In the US Senate, where plans to improve the brand's image were discussed, Comcast TV's poor support was said. This is not to say that the company has poor service. But it can certainly be called disrespectful. The staff was aimed at support as cold sales. Buyers wanted to get support and help, but did not receive. The company still retained some of its customers, but earned a bad reputation. Many users left and never returned.
Consumer sentiment
In 2007, most consumers were satisfied with their banks. The average financial brand loyalty score was 30 points, which is not bad. But because of the global financial crisis, everything has changed, and people have changed their views dramatically. Initially, the customer loyalty index was 40, but within two years it dropped to 22. The NPS of credit card providers fell to 11 from 27.
Changes in industries did not occur so abruptly. However, due to general market trends, people's mood and attitudes have changed. Of course, a poor-quality product and poor service reduce the customer loyalty index. However, public opinion in the formation of NPS plays an important role. If low-quality service is combined with market trends, the further outcome of the business is obvious, and it is almost impossible to influence this process.
After the crisis passed, customers again became satisfied with banking products. However, banking organizations involved in scandals failed to restore their positions. HSBC's NPS was -24 this year. Record-breaking poor service has caused many scandals, and it is because of this that the company was not able to regain its lost reputation.
User experience above all else
To successfully overcome market trends, it is enough to produce a good product and offer a quality service. A bad customer experience in a dubious market is a direct path to a low loyalty index.
It is not enough to offer the consumer what he wants and what he needs. A superior customer experience must be taken care of. In this respect, the McDonald's brand is not always successful. Despite his worldwide fame, his NPS in the US is only -8. You can compare the brand with its direct competitor - KFC. His loyalty index is also far from ideal, but still positive. And consumer-favorite American fast food chain Pizza Hut has an index of 78.
Brand Awareness
A good customer loyalty index is something that all companies should strive for. But if loyalty is not related to efficiency, it does not matter. Uber and Lyft are examples here. The functions of the brands are almost the same, and drivers often work for both firms. However, with obvious general parameters, the customer loyalty index for Uber is 37 points, and for Lyft - only 9. The reason is the geography of the companies. Uber gets more press coverage and covers a wider area than Lyft, which only operates in the US. The level of brand awareness among customers also affects loyalty.
Insurance in the USA is a developed industry. The country is highly competitive, and companies are seriously fighting for customers. Customer satisfaction with the quality of goods and services is a guarantee of high earnings for the company in the future. Companies that have relied on short term, sank in the NPS ranking. This is what happened to CIGNA, a life insurance brand. The customer loyalty index of this company today is 1. The company got involved in a scandal when it refused to recognize the disability of a client, and since 2009 it has been under state supervision.
Let's compare GIGNA with their competitor GoMedigap. The customer loyalty index of this enterprise is 93 points. Obviously, the problem is not in the area (as it was in the earlier example with banks), but in the fact that the brand refused to provide a previously advertised and even sold service.
Closing the Feedback Loop
United was named the worst carrier in the United States in 2014. The customer loyalty index was 10 points. In comparison with competitors, this situation can be called catastrophic. Southwest's NPS is 62, JetBlue's is 56, and Virgin America's is 48.
Over the years, passengers have complained about United's operations, including flight cancellations and delays, poor food quality, luggage delivery, and the condition of the planes. In 2012, the company accounted for 43% of complaints. The remaining 57% - on other US carriers. At the same time, United monitors NPS, like competitors. But why is the difference so significant?
Despite tracking the customer loyalty index, United ignores feedback or takes insufficient action in response. Effective feedback is very important. If a company interacts with customers, responds to comments and eliminates them, it has every chance to improve NPS and take a leadership position in the market.
8 Mistakes When Calculating the Customer Loyalty Index
The main mistake companies make when they do not measure the level of customer loyalty and satisfaction. In any case, it is necessary to determine how satisfied the audience is with the product and service, even if the company is small and has just started, it has a small audience, there is a verification ahead (tender, exhibition), and there is no time for NPS yet, and even if it has never heard of customer loyalty index. If you have extensive experience in customer service and you've already conducted surveys more than once, you still need to improve your skills and knowledge in order to quickly identify and fix problems. If you are just about to start NPS calculations, the information below will prevent you from making common mistakes.
Conducting a survey by employees working with clientsand
Do not entrust the survey to those employees whose material remuneration and motivation depend on the results of the survey. At first glance, everything is clear. However, companies often neglect this rule. As a result, the figures are distorted and the organization does not receive food for thought, does not know what to work on, how to improve cooperation with customers.
Why is this happening? Not all buyers are brave enough to express or write a true opinion. Agree, you have repeatedly answered the waiter that you liked the dish, although in reality everything was different. In addition, many employees put pressure on respondents and directly ask for a high score.
Do not segment the customer base for the survey
- Why did they stop working with the brand.
- Why do they continue to make purchases / use the services of the company.
- Why didn't they use the mobile app?
- Why did you place an order once and never contacted the service again?
- Will they shop in the future.
Even if you're asking the same questions to current customers, do an NPS analysis by product and manager.
Interrogate all clients in a row
If feedback and receiving reviews are conducted regularly and after each purchase you send short e-mail messages to customers asking them to evaluate the quality of the service, then you are doing everything right. If you want to fully interview customers by phone, carefully select your respondents. The group of respondents should include, first of all, the most valuable respondents for you.
Do not call clients to get feedback
The number of respondents should not be less than 65%. Only this guarantees the reliability of the survey and an objective index of customer loyalty. Traditionally, the largest number of responses can be obtained by calling.
Choosing a phone as a survey medium is also worth making because it connects with brand critics. Often this segment of buyers does not get in touch with the company through other channels, does not follow links in e-mail messages.
Use a non-standard scale for evaluation or change it periodically
Remember, the rating scale should not change under any circumstances. The standard is from 0 to 10. In it, 0 means “I definitely won’t recommend”, and 10 means “I will recommend with a high degree of probability.” This is the scale used by most organizations. Other options, such as 1 to 10, 10 to 0, do not allow you to compare your results with other brands or know the exact NPS. The consumer may simply not understand what this or that assessment means.
Wrong wording of the main question
The correct wording of questions is very important so that consumers correctly understand them and give objective assessments.
Mistake in B2B: to get the opinion of one employee in the organization
If you provide services legal entities, then, most likely, the issue of further cooperation is decided by several people in the organization. Dmitry Turusin, co-author of the book Do Something New, expressed his thoughts very well regarding the NPS survey for a PR agency. In his opinion, the positive attitude of the manager and marketing director is not yet a guarantee that the contract will be extended with you. You need to look, first of all, at the opinion of the LPR. You need to talk about the problems with loyal customer representatives and try to solve them.
Do not follow the indicator in dynamics
So, you have calculated your customer loyalty index. But don't stop there. Compare the scores first of all with your previous results. NPS in dynamics helps to predict at what pace the company will develop. In addition, you need to compare your result with the average NPS in the world.
The best option is to compare your customer loyalty index with the results of companies in your industry. This allows you to track the dynamics of changes in NPS, correct the situation in time by taking certain actions, and remember that the company's financial position can be seriously shaken if the index lags behind competitors.
Another recommendation is to use the customer loyalty index for its intended purpose. Do not draw graphs and reports that will be stored among unnecessary documents. Based on the index, create an action plan to retain a neutral category of users and critics in order to turn them into brand advocates. This is where it's very helpful to ask yourself, "What can be done to exceed customer expectations and address the issues that prevented them from giving us a high score?"
Frederick Reicheld is Director Emeritus of Bain & Company, based in Boston, Massachusetts, USA, and founder of the Loyalty Study Method.