Why implement NPS score. We measure the Net Promoter Index (NPS)

Measuring customer loyalty levels

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 technique as a tool for measuring customer loyalty was proposed in 2003 by Fred Reichheld in the Harvard Business Review. Setting out to identify which indicators are most strongly associated with customer loyalty, Fred Reichheld analyzed huge 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 the company as the only indicator of loyalty.

Over the course of several years of existence, this technique has gained wide popularity in the world due to its simplicity and functionality. Based on NPS measurements, management decisions are made, branches are opened and closed, bonuses are paid or not paid, etc.

How is NPS calculated?

The essence of the method for measuring customer loyalty in the NPS model is quite simple. It is built on the basis of two main questions asked to the company’s clients (see diagram above). Moreover, it is fundamentally important to ask current clients, and not former or potential ones. The first and main question: “How likely is it that you would recommend company X to your friends/acquaintances”? The client gives a rating on a scale from 0 to 10, where 10 means “I would definitely recommend”, and 0 means “I definitely would not recommend”. Further, based on the answers, clients are divided into three groups:

• “Promoters” (originally “promoters”) - those who gave ratings of 9 and 10. According to Reichheld, 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”) – those who gave ratings of 7 and 8. They are considered “passive” clients who are not very willing to recommend the company, but are not very dissatisfied with it either.
• “Critics” (in the original “detractors”) - those who gave ratings from 0 to 6 - are dissatisfied customers who would rather not recommend the Company to their friends/acquaintances, and, moreover, may even “advise” against using 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 clients are “critics”) to +100% (if all clients are “promoters”).

In addition to the NPS index itself, a question is also asked about the reasons for the score 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.

The NPS customer loyalty index shows the degree of satisfaction of your customers: how satisfied they are that they will recommend you to their surroundings. The calculation of the NPS index must be carried out constantly at some intervals in order to have an idea of ​​​​customer sentiment. We will examine this issue in more detail in our article.

NPS consumer loyalty index

This is an indicator that tells an entrepreneur how strongly his customers are committed to his product or his brand. More precisely, this indicator characterizes their willingness to make repeat purchases in your store (use your services again if you provide services).

Moreover, it shows not only how willingly customers will come to your store again, but how willingly they will recommend it to their surroundings - friends, relatives, colleagues, etc.

NPS loyalty index stands for “NetPromoterScore”. If translated from English literally, this means “Net Support Rate”, meaning, of course, customer support for your product or brand.

Adapted into Russian, this term is translated as “NPS Loyalty Index”.

Customers for life. How to build long-term relationships with buyers. Video

NPS index calculation

Calculating your customers' loyalty to you, your business or your product is quite simple. This is done in three stages.

1. First, you need to conduct a survey of customers, asking them one single question: “With what probability from 0 to 10 are they ready to recommend your company (product, mark, brand) to their environment?”

“From 0 to 10” is a ten-point scale, where extreme values ​​indicate:

• 10 – “I will definitely recommend your store (brand, brand) to all my friends, relatives, and colleagues!”;
• 0 – “I will never, under any circumstances, recommend you to my circle!”;
• From 0 to 10 – variations from “Never” to “Always, definitely”.

• Those who rated the likelihood that they would recommend your business to their surroundings at 9-10 points. In the terminology of the developers of the loyalty indicator, this category of clients is called “Promoters”, literally “Promoters”, that is, those who will definitely support and recommend your business to others;
• The second group are those who rated this probability at 7-8 points. These are the so-called neutral buyers;
• The third group is those who rated support for your brand with a probability of 0-6. In business terminology, this category of buyers is called “Detractors”. Literally translated from English, this term means “Slanderers” or “Those who distract”, that is, opponents of your brand, those who do not like what you sell.

When calculating the NPS index, you can not pay attention to the exact translation of the terms; the essence and importance of the loyalty indicator does not depend on them; they are given for general information.

3. The third stage is actually the calculation of the NPS index, which is the difference between those who will definitely support you and those who will not do this under any circumstances.

Calculation formula:

NPS Index = Share of supporters – Share of critics

Let's say you surveyed 100 customers.

Of these, 55 people (55%) answered that they would definitely recommend you to their circle.

Another 30 people (30%) said that everything is absolutely not important to them, they are not interested in anything, they are neutral about everything.

And the third group, 15 people (15%) are those who didn’t like you, who won’t recommend you, your opponents.

NPS indicator - calculation:

Index NPS = 55 – 15 = 40

The survey itself in order to identify loyalty of your customers can be done in the following ways:

• Survey directly on the sales floor, recording the answers;
• By offering the buyer a questionnaire, for example, at the checkout;
• By phone;
• Online on the company’s website (not only applies to online stores).

The latter method, by the way, is the most convenient for both the entrepreneur and the client, when you don’t have to waste time filling out forms and communicating with store employees; you can evaluate your attitude towards the company at any convenient time.

Advantages and disadvantages of the NPS index

The main advantage of measuring your customer loyalty index is that it is simple and accessible to any entrepreneur. The question asked of customers is extremely specific and does not require time to think, search for solutions and answer options.

Despite its simplicity, this method is quite informative. It shows quite accurately how your business satisfies your customers and clients.

The disadvantage of this method, according to experts in the field of marketing, is that it is still somewhat one-sided, so the assessment is made on the basis of two categories - those who support the brand and those who criticize it, when a large number of customers are neither the first nor the second. They do not consider themselves to be in the second category.

In addition, calculating the NPS index is one of the methods for assessing business performance. When developing important management decisions, experts and specialists recommend relying not only on this method, but also on the results of broader and more thorough research.

At the same time, it is necessary to calculate the loyalty indicator; this must be done constantly, with some frequency, in order to know how the attitude of customers towards your business is changing so that, if necessary, you can quickly make the right management decisions.

Increase customer loyalty with the Business.Ru CRM system. In the program you can save all information about communication with the client: telephone calls, correspondence, execution of contracts.

How to increase your NPS index

There are no recommended values ​​for this index; it all depends on the type of business and the current situation in it.

Some experts say that it should be no less than “50” and, if it is lower, it’s time to do something. For someone, more precisely, for some business and for some situation, the value “30” may be satisfactory.

General rule: the index should not be negative. In this case, it turns out that there will be more of those who are definitely in a bad mood towards you than those who are definitely in a positive mood.

In this case, it is urgent to take action. This means that it is necessary to come up with and implement one or another or several customer loyalty programs and loyalty increasing programs. There are many ways to do this:

1. Discount loyalty program. These are various discounts, discount cards, including those with the so-called CashBack, that is, cash back. This is when from each purchase a small part of its value, usually about 3-5%, is returned to the card holder (buyer);

The NPS index was created specifically to determine the degree of customer loyalty to your project.

What is NPS customer loyalty index?

NPS (Net Promoter Score) is a metric that companies use to determine how their customers feel about them.

See also Customer Loyalty Program: 6 Indicators to Measure Customer Loyalty

Companies with high NPS are more likely to grow and profit in the long term.

How likely would you be to recommend this company to a friend?

Answers are based on a scale of ten.

What formula is used to calculate the NPS index?

Depending on the responses of customers, they should first be divided into the following three groups: supporters, neutral consumers and critics.

• Supporters (customers with a score of 9-10). They can be described as brand ambassadors who are excited about the company.
• Neutral consumers (customers with a score of 7-8). People with a neutral attitude towards the company who would not spoil the brand’s reputation.
• Critics (customers with a score of 0-6). Unsatisfied customers who can damage a brand's reputation with bad reviews.

After dividing your customers into appropriate groups, you need to calculate the company's NPS index using the percentage of supporters and detractors. Neutral consumers do not participate in the calculation.

NPS Formula

Company NPS = (% of supporters - % of detractors) x 100.

For example, if a survey results in 70% rating it as 9 or 10 and 10% rating it as 1-6, the result would be (70% – 10%) x 100 = 60.

An NPS of 60 is a very good score since most customers are advocates.

What values ​​can the NPS index take?

NPS can range between -100 and 100, with -100 being the worst and 100 being the best. In general, an NPS above 30 is considered good, above 50 is excellent, and above 70 is excellent. A negative NPS is considered a bad result.

But before you set your sights on getting an NPS of at least 70, you need to take into account your niche, product offering, and pricing. Each company is unique, and there is no exact definition of what is considered a good indicator.

How can you tell if a company's NPS is good enough for its niche? Below are NPS scores for various industries based on the Net Promoter Score Benchmark.

Why is it important to calculate the NPS index?

The NPS customer loyalty score provides invaluable data about the overall sentiment of your customer base. Tracking your NPS score helps you effectively measure customer loyalty and satisfaction so companies can work on improvements. This is why many Fortune 500 companies regularly conduct surveys to determine NPS.

Apart from getting feedback from customers, NPS also helps reduce customer churn (when a customer ends their relationship with a company). According to Bain and Company research, “supporters” tend to have longer, more rewarding relationships with companies. Knowing all this, a company can focus on converting “neutral consumers” and “critics” into “supporters” by providing them with better quality products and services.

NPS Score Caution

Many companies, large and small, make the mistake of focusing on NPS scores. While this is a very useful metric to track, customers should not be treated like numbers. Regardless of the metric, when a customer takes the time to provide feedback, it's a great opportunity to deepen your connection with them.

Loyalty cannot be earned through numbers. Both before and after the survey, it is necessary to build relationships with clients.
Business challenge: measure NPS, seize the opportunity to engage in open dialogue with customers, grow your business, products and services, and ultimately see your satisfaction rate increase.

conclusions

Many companies use NPS as a solution to measure customer loyalty and satisfaction. However, this data has value if and when a company acts on it. You need to not only find out the NPS indicator, but also understand what exactly led to this result.

Also, don't focus on convincing critics; stimulating discussions with supporters are also helpful. NPS is not just a number. When used correctly, it can solve user problems, improve processes, and fuel innovation.

NPS customer loyalty index - what it is and calculation formula with examples

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Based on materials: , 10/12/2017

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The Net Promoter Scope (NPS) has been successfully used by companies for more than 15 years. This is a fairly simple way to assess customer loyalty to a company.

NPS or Consumer Loyalty Index is a relatively new research method. The founder of the concept is Frederick Reichheld, who published it in the Harvard Business Review in 2003, calling the study “The One Number You Need to Grow.” In his study, the author insisted that in order to find out about customers' attitudes towards a company, it is enough to ask just one question: “What is the likelihood that you will recommend the company/product/brand to your friends/colleagues?” Having collected and analyzed the answers, you can calculate the index, which consists of several steps:

1. Consumers are asked to rate on a ten-point scale the likelihood that they will recommend the 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 are “promoters”, seven and eight points are “neutrals”, six points and below are “critics”;

3. The NPS index is calculated as the percentage difference between the number of “supporters” and “critics”. The rating range is from -100 to +100, where NPS 100 is the best scenario, in which all your customers are “supporters” of the brand, and NPS -100, accordingly, is the worst.

It is worth noting 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%, and the electronics manufacturer Apple has an NPS of 89%*. Unfortunately, there are no consolidated data on NPS indicators of Russian companies, and research is not conducted often. In the summer of 2017, UBS Evidence Lab published figures for Russian retailers: of the 14 largest players, five had 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 - 35%, Megafon - 17%, Beeline - 25%.

However, despite the fact that the method has quite a lot of followers, NPS has 5 main problems, which we will consider in this article, and also offer solutions, knowing which and successfully applying them 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 NPS data collection stage. Let's say a company with a wide regional network of divisions has an NPS of 38%. Having received this data, they can say: “How wonderful, over the past year our indicator has increased from 32 to 38.” But at the same time, they will not find out the reasons why the index has moved (it is worth noting that the movement can also be in the opposite direction).

Therefore, the first thing you need to find out is why the company received this particular rating, why the changes occurred. Ask a series of questions, e.g.

• 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).

Problem 2: Be aware of differences between regions and segments

Very often, when calculating the NPS index, regional values ​​and customer segmentation are missed, and the ranges can sometimes be very wide. For example, you can compare the NPS scores of customers who buy from you a lot and often with the NPS of new customers or those customers who have 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.

It is also worth paying attention to regional differences, because sometimes the difference between NPS indicators in different locations can reach tens of percentage points.

Problem 3: Invisible middle

As we noted above, in order to calculate the index, the highest indicators (those who gave 9 and 10 points) and the lowest (from 0 to 6 points) are taken. At the same time, when measuring, those respondents who gave 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 - this is what you must find out.

Problem 4:NPSnot measured widely or frequently

The problem is that NPS (like any category of surveys) are most often conducted once or twice a year. Considering the high pace of today's life, price changes and competitive dynamics, this is too little. NPS should become a constant analysis of your work for you, and not just a check from time to time.

Problem 5: Always use one communication channel

When surveying clients, always try to use the same communication channel to evaluate NPS. For example, if you conduct a telephone survey to compile an index, continue to use this channel in future studies. By using different methods of data collection, you risk getting very fragmented data. As practice shows, the results obtained through different communication channels can differ by tens of percent.