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What Is Net Promoter Score And How Does It Work In Sales: 5 Tips To Get Started

peers/colleagues influence purchase decisions 

A few weeks ago, I read the results from the latest survey on buyer behavior. What caught my attention was the role that peers/colleagues play during the research phase. According to the research, peers/colleagues (20%) are the second most popular source buyers turn to when they begin the buying journey, together with industry experts (21%) and web searches (17%). 

Is this behavior something you recognize?

Just think about your own experiences. Have you ever been contacted by peers who are in the process of seeking sales training or CRM solutions? Did they ask whether you were getting value from your current sales training or CRM vendor? As a customer, you are in good position to share your experience. After all, you know vendors better than non-customers. In the same way, before buying sales recruiting services, you probably reached out to peers for qualified opinions about the recruiting partners they work with.

These scenarios are becoming increasingly popular in the B2B environment as buyers value information from peers/colleagues as much (if not more than) as information available on the web. 

Make Loyal customers Want to refer You to their peers  

Now, what if your customers told their peers/colleagues about your company? Wouldn’t it be amazing if you could get loyal customers to send new business your way? Imagine being able to grow sales through customers. To do that, the first step is to identify which customers are willing to recommend your products and services. But, how to know which customers are willing to refer your business to their peers? The good news is that there is an effective tool: a metric known as Net Promoter Score (NPS). 

A metric to identify loyal customers: Net Promoter Score (NPS)

In this post, I will start by exploring the fundamentals of Net Promoter Score (NPS): its origins, what it is and how does it work. Then I will provide five tips to help you get started. Let’s begin by understanding its origins.

Background 

In the last years, there has been a general shift in organizational culture from product-centric (internal) to customer-centric (external). This is particularly the case in mature industries. One characteristic of customer-centric organizations is that they place customer loyalty at the core of their strategies. Another one is the practice of systematically gathering and incorporating customer’s feedback into business decisions. However, gaining access to customers’ feedback is generally not easy. Particularly if customers must answer long and complicated customer satisfaction surveys.

An alternative method to gather customer feedback in minutes was recognized as mission critical by practitioners and academic researchers. Fred Reichheld, began exploring how to improve traditional customer surveys. After a few years of research, Reichheld introduced the concept of Net Promoter Score (NPS) to the business world in an article published via HBR “The One Number You Need To Grow” in 2003. In a nutshell, the research revealed that long customer satisfaction surveys could be replaced by the following single question:  

How likely is it that you would recommend us to a friend or colleague?

Moreover, he advocates that the output of Net Promoter Score is all you need to manage customer loyalty. Contrary to customer satisfaction surveys, the NPS method is easier and faster to administer and its output is considered to be more actionable. Reichheld was able to show strong correlation between NPS and economic value: profitable growth.

In other words, Reichheld found that organizations with higher Net Promoter Scores were more likely to enjoy higher profits. But how does the Net Promoter Score work? And, in particular, how is it calculated?

How does NPS work?

Scale (0-10) 0-6 7-8 9-10
Type of customer Detractors Passive Promoters
Aggregate Net Promoter Score  = (% Promoters) – (% Detractors)

Table 1: Net Promoter Score

First, customers receive a single question survey in which they rate their willingness to recommend a business on a scale of 0 (not at all likely) to 10 (extremely likely). Second, customers are grouped in three categories according to their answers: “detractors” (0-6), “passive” (7-8) and “promoters” (9-10). Finally, the aggregate Net Promoter Score is calculated with a simple equation: subtracting the percentage of “detractors” from the percentage (%) of “promoters”. See Table 1 for a closer look at the equation.

Often businesses add one follow-up question to understand the reason behind low or high scores. For instance, if a key decision maker from a strategic account gives your company a rating of 1, you have the option to ask him/her to elaborate via an open ended question like: why did you give us a rating of 1? 

5 TIPS to get Started with Net promoter score

Now that you know the basics of NPS, its time to take a look at how to get started. Chad Keck, wrote a blog post, NPS For Newbies, in which he shared the following 5 tips to get the ball rolling in the right direction:    

1.  Ask your customers 

First of all, you can’t know what your customers think about your products/services unless you ask. So start by asking customers for their participation and feedback. The first step is to gather feedback directly from customers. 

2. Break down your customer base into smaller groups 

A common practice among organizations is to survey all its customers at once (once per year). The issue with this approach is that the outcome of your NPS is a snapshot of that moment in time. It’s better to break down your customer base into several groups and to survey each group independently over time. This gives you the opportunity to be proactive rather than reactive. After all, you can act upon the initial feedback (gathered from the first sample) and follow up afterwards.

3. Think about timing

Moreover, it is important to take into account the timing of the survey. If you want to understand customers’ loyalty for your product or service, sending the survey immediately after the purchase will not help. In that case, it is better to give customers time to experience your product/service. Again, choose the right time to gather feedback.

4. Survey more than once per year

Go beyond surveying customers on a yearly basis. Instead, consider scheduling surveys between shorter intervals. Why not gather customer feedback on a quarterly basis? Quarterly based surveys not only show customers that you care about them, but it allows you to track progress without missing important feedback. In addition, you can identify mood changes and track trends.  

5.  Follow up

Last but not least, remember to focus on the feedback, not on the score. Make sure you translate the feedback into concrete action plans. For instance, use customer feedback (positive or negative) to initiate dialogues, build relationships and encourage referrals. 

 

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