Using Net Promoter Score (NPS) in Advocate Marketing
Net Promoter Score (NPS) is a simple management/survey tool used to quantify customer satisfaction/loyalty as an alternative to the tradition customer satisfaction surveys (like C-SAT), which suffer from a number of problems:
- They are complex to devise, distribute, correlate and analyse results
- Achieve low response rates
- Surveys change over time, preventing like-for-like analysis of performance
Net Promoter Score is a easy to understand, easy to measure metric that has been proven to indicate customer satisfaction in a way which can be easily linked to revenue.
Why Net Promoter Score?
The objective is to create more promoters (those that are likely to advocates your products) and fewer detractors by measuring satisfaction and taking strategic and operational action to improve satisfaction over time. Choosing to ignore customer loyalty has always been strategically dangerous – and is even more so in the age of social media (where customers are able to voice their opinions to friends, family, colleagues and peers at the click of a button). If you’re not measuring customer loyalty, then you’re ignoring it. By measuring your Net Promoter Score, your organization becomes accountable for how they treat customers – so it becomes second nature to plan company strategy from a more customer-centric perspective which will have a positive impact on the long-term growth of the organization. Customer loyalty is clearly linked to:
- Driving repeat business
- Up-selling into the customer base
- Customer recommendations
- Supporting marketing
- Shortening sales cycles
- Maintaining and increasing market share
- Driving higher revenue
- Lowering marketing costs
Google Trends show that interest in Net Promoter Score started to spike in 2008 and achieved mainstream acceptance as a valuable customer satisfaction metric in 2009. It appears that popularity of traditional customer satisfaction surveys (like C-SAT) has started to diminish, vindicating NPS as a more practical and reliable way of measuring satisfaction.
Calculating Net Promoter Score (NPS)
Net Promoter Score uses a calculation based on a very simple 0-10 answer (with 0 being negative and 10 being positive) to the question:
“How likely is it that you would recommend the company to a friend or colleague?”
Respondents are divided into three categories which indicate their classification as Promoters, Passives and Detractors.
- Score 0 to 6 – ‘Detractors’ are unhappy with your company and will actively spread negative opinions on your products/services.
- Score 7 or 8 – ‘Passives’ are satisfied with your products/services but their loyalty is weak and they won’t actively promote or detract your company.
- Score 9 or 10 – ‘Promoters’ are highly satisfied, loyal customers who will repeat-buy and actively refer your products/services to friends, family, colleagues and peers.
The Net Promoter Score is calculated by subtracting the total number of Detractors from the total number of Promoters. The Passives are discounted and only the vocal customers at each end of the scale are taken into account – meaning NPS indicates the outward impact that your customers influence will have on your reputation in the market. If you only looked at the number of advocates, you would be focusing too much on the positives and miss the full view of customer sentiment. To use an example, if you have 1000 customers and 100 of those customers are active brand advocates, this might seam like a healthy score. But if the remaining 900 customers are actively disapproving your products, then your customers are generally unhappy, will be damaging your market reputation, and working against your sales and marketing effort.
NPS = [Total # Promoters] – [Total # Detractors]
While NPS is the main metric indicating the health of your customer community, there are three important sub-metrics:
- Percentage of customers which are Detractors
- Percentage of customers which are Passives
- Percentage of customers which are Promoters
Collectively, these three sub-metrics give a better view of the number of customers in each group, with each one being relevant to different areas of the business. The objective of your business should be to push as many customers up into the Promoters end of the customer satisfaction scale, turning unhappy detractors into vocal brand advocates.
- One primary metric to represent customer satisfaction/loyalty
- Easy to measure
- Quick for customers to respond to – delivering a more complete and accurate measurement of satisfaction
- Easy to calculate
- Easy to communicate and understand
- Easy to track and report NPS growth over time (simple line graph)
- Graph NPS against a revenue to demonstrate the link between customer satisfaction and growth.
NPS and Advocate Marketing
Net Promoter Score is relevant to Advocate Marketing in two fundamental ways:
- Identifying advocates – The Net Promoter Score survey method is a valuable tool for growing your brand advocate community. Invite Promoters (scoring 9 or 10) into your customer advocate program. Although Promoters need little or no incentive to advocate your products/services, inviting Passives (scoring 7 or 8 ) into an incentivised customer advocacy program will help convert them to active Promoters – which will be reflected in the NPS metric.
- Measuring success – If your customer advocacy program is working, the percentage of Promoters should grow, as should the average NPS.