Drew | Business Insights

Why using NPS? 9 reasons to know about its importance

Written by Drew's editorial team | Mar 28, 2022 4:45:50 PM

You hear a lot of NPS these days. Although there are several other metrics like CSAT, CES, etc. For measuring customer satisfaction and loyalty, NPS seems to have topped the charts! It has become so popular over the years that more and more companies have started adopting this metric to measure customer loyalty.

  • "What is all this fuss about NPS?"
  • "Is it just hype or is NPS a very good metric then?"
  • "Should we also adopt metrics?"
  • '"Why should we use NPS?"
  • "How important is NPS over other metrics?"

Yes, we would have a lot of questions about the desirability of NPS too. But before we delve into all that, let's first define NPS and get a clear idea of what exactly it is.

 

Why should we use NPS?

Is it worthy? Yes. Net Promoter Score is worth it and we suggest you adopt the metric. We are not assuming this because of the immense popularity of the metric, rather we are stating this because of some strong reasons that prove the importance of NPS. We assure you that all your doubts will disappear into thin air once you examine these 9 reasons to use NPS. And take care of it, you will start using NPS in your organization sooner than you think!

1. Simple implementation and easy to use

Unlike some counterparts, NPS surveys don't include a long list of incomprehensible questions. Essentially, there is one main question you ask the respondent: how likely they are to recommend the brand to their family, friend, or colleague. This question may be followed by one or two open questions. In general, NPS surveys are quick, simple, and easy to understand, which makes them very easy to use.

<<< 12 tips to create a perfect NPS email for your company >>>

By identifying promoters, detractors, and passives, the NPS system helps you classify your customers, which in turn allows you to offer them personalized services. Such a step can be a great help for your company to grow. Also, the overall Net Promoter Score calculation is not a strenuous task. All you have to do is subtract the percentage of promoters from the percentage of detractors.

NPS =% Promoters -% Detractors

You can track your NPS regularly and analyze to what extent your business has improved or even deteriorated. And with NPS software in place, it becomes even simpler and saves time. Whether it's calculating or automating the surveys or even sending it through multiple channels, these tools take care of just about everything, making it easier.

2. It gathers higher response rates

Time is an important element and the shorter your surveys, the better the chances of a higher completion rate. NPS surveys can be done and dusted off in a matter of seconds! There is only one direct question and customers find it easier to answer due to the fact that these surveys do not consume much of their valuable time.

Some NPS surveys may come with one or two questions in addition to the main one, but it would still take users no more than 5 minutes. When response rates are higher, you have solid, more reliable data.

3. It collects more comments

Having a good online reputation is very important for a business to prosper because most of your potential customers check online reviews before purchasing your product or service. NPS helps you manage your online reputation by helping you get more and more positive reviews. The biggest advantage of NPS is that it not only helps to collect more response rates but also allows you to identify your biggest followers, the promoters. 

Prompt promoters to leave a review soon after completing the NPS question by including an additional step just for them with a link to your profile on review platforms like Facebook, Google, etc. You better take the help of an NPS survey tool that offers conditional logic.

You can also offer incentives and rewards for submitting a review, but make sure it's not seen as a ploy to buy more reviews. It should look and sound more like a token of gratitude from you.

4. It analyzes and improves customer loyalty.

Customer loyalty can act as a magic potion and lift your brand to great heights. In fact, 57% of customers prefer to spend more on brands they are loyal to. Therefore, it is vital to monitor loyalty regularly and you can do it efficiently using NPS.

First of all, the main purpose of the metric is to measure customer loyalty. Therefore, when you ask about the probability of being referred to a customer allows you to have the opportunity to find out how happy your customers are and also to find the loyal ones. You can keep track of the score and analyze them after each survey by comparing the current score with the previous one to know if your business plans are working or not.

Otherwise, you can take decisive action to improve your services. This is how you close the feedback loop. You first listen to your customers by collecting the NPS score, analyze it, then act, and finally grow by increasing customer loyalty.

5. It increases customer retention and reduce rotation

Phil Schefter and Frederick Reichheld, claim that a mere 5% increase in customer retention rates can result in a 25% to 95% increase in profits. This is because your current customers tend to make more purchases from your business. Loyalty and retention rates are directly proportional. It is obvious that NPS helps you improve loyalty by gathering more response rates and positive reviews, so it helps reduce rotation and increase customer retention rates. It's as simple as that, as long as you close the feedback loop.

6. It increases CLV

Customer Lifetime Value (CLV) indicates the general benefit that a customer helps you acquire during his life as a customer. By finding the promoters, detractors, and passives using NPS, you can serve each group of customers accordingly. You can take the necessary actions based on the feedback from each group, resolve the issues, and then notify them.

When all of that is done you can easily impress them and convince them to continue using your services. Customers would feel valued and are likely to stay with your brand for a longer period. You can gradually turn them into loyal customers by paying attention to their feedback and acting on it. Therefore, you can increase the CLV.

7. Benchmark against the competition

NPS is one of those weapons that can help you overcome the intense competition and stand out from the crowd. Compare your NPS score to the average score in your industry and keep striving to meet and exceed it. Not only does it allow you to outperform the competition, but it also tells you whether you are on the right track or not.

When you don't compare your score to the industry average, chances are you can lose. You would still be surveying NPS and taking steps to improve it, but your peers might be improving at a faster rate at the same time. So when you track the average NPS for your industry, you also know at what rate you need to keep improving and take action accordingly.

8. Identify the right time to increase sales

Upselling is one of the best ways to increase revenue. No doubts. But like everything, there is a time to do it. So how do you know when and to whom you should sell more? NPS helps you there too.

Promoters are extremely happy customers. Identify your promoters using NPS to sell more. Make a list of promoters, contact them by mail or call, and explain the possibility of better serving them with complementary services or products from your company.

9. It helps you create a stronger product

One of the best and most obvious ways to grow your business is by creating first-class, superior-quality products. To deliver such a product, you need to keep upgrading it to meet industry standards. NPS surveys can also be used here. Therefore, every time you introduce a new feature to your product, you can send NPS surveys to your customers asking them to recommend the new feature to their friends or colleagues.

You can then decide to keep the feature based on the overall score. By following this ongoing process, you can create a stellar product that your customers love, thereby increasing loyalty and retention along with reducing churn!

 

Conclusion

These reasons are enough to show the power of a metric as simple as the Net Promoter Score. Everybody in the business community has accepted the importance of NPS and is implementing it to prosper successfully. Popular brands like Apple, Amazon, Tezla, etc. depend on their NPS score to grow steadily and it is proof of the fact that if you use it in the right way at the right time you can really make a difference.

Well, it's about time you started using NPS too. Take surveys at regular intervals of time, collect the scores, identify the promoters, detractors, and passives, find your overall score, take the necessary actions, close the feedback loop and make a difference.