Satisfaction & Growth Potential

A little common sense, good data points and a solid plan can lead to lasting growth because your customers are happy.  Let's break down Net Promoter Score (or NPS) and how it can help gage and track your business' growth potential. 

• Reducing customer churn by 5% can increase profits by 25–95% (Harvard Business Review).
• A 7-point increase in NPS correlates with a 1% increase in revenue (London School of Economics study).
• Referred customers have 37% higher retention rates and are 4x more likely to refer others (Deloitte). 
• Promoters are 5x more likely to refer others than detractors (Satmetrix). This makes NPS a key metric in predicting organic growth through word-of-mouth.
• Companies with the highest NPS scores grow at more than twice the rate of their competitors (Bain & Company, the creators of NPS).

It’s not rocket science: If your customer is satisfied, they are more likely to stick with you. If they aren’t happy with the product or service you provided it’s likely you won’t see them as often or they will move on all together. (Unless they have no other choice, like standing in line at the post office…) How you measure satisfaction and what you do with that information can be a little more complex.

Obviously, the first step is asking your customers how their experience was. Proactively asking for feedback is way better than realizing you have a problem when your sales drop because your customers start disappearing or you have a pile of complaints coming in.

Net Promoter Score (NPS) was created in 2003 by Fred Reichheld, a partner at Bain & Company. He developed it as a metric to measure customer loyalty and predict future business. NPS is still around because it works.

If you've shopped any major retail in the past ten years you’ve probably been asked to complete a NPS survey. It’s one simple question: “How likely are you to recommend our product (or service) to a friend?” Then, an easy scale from one to ten to answer: 1 = never (my experience was so horrible I wouldn’t tell my enemies about you, and I’m going to share with my friends that they should avoid you too) to 10 = yes! (I love everything about my experience, and I can’t wait to tell anyone who asks about it!)

You can Google how it works, but here’s the summary version. A survey response of one to six are “detractors,” seven and eight are “passive,” nine and ten are “promoters.” Reichheld figured out that anyone that gives a score of six and below is likely to hurt your business. Seven and eight don’t care enough to make a difference. Nine and ten are your biggest fans who are telling anyone who asks how great you are; they are 4–5x more likely to repurchase, refer new customers, and forgive occasional service issues compared to detractors.

Collect the results, do some math and get a score. The higher the score the better. Once you have a score you have a data point to do something with. Don’t just send it once, figure out a cadence that makes sense for your business. Start tracking your score, it’s a pretty good indication of the true health of your business. Your customers are your most asset, figuring out how to increase the number of promoters can set your business up to grow.  

If you aren’t sure how to get NPS going, or your swamped with running your business and want a trusted partner to help, contact Loopology.