Like it or not, recommendations and social proof are as important as ever. You need to know more than simply how satisfied your customers are - you need to know how they feel about their experience.
Enter: NPS (Net Promoter Score).
NPS is a benchmark that measures how likely your customers are to recommend your business. In effect, it measures loyalty to your brand instead of their experience with a particular product or interaction.
Why is NPS important?
One reason why NPS is so effective is it’s simplicity. If you ask no other question other than, “how likely are you to recommend us?” you’ll quickly know how satisfied your customers are.
It gives you a much better sense of what is happening with your customers. Are you losing customers (churning)? Are they cancelling their memberships or subscriptions? Are they purchasing once and not coming back?
Recommendations are incredibly valuable. It’s no secret that with social media, your customers can share recommendations and reviews with their entire network in seconds - and you want those posts to be positive. According to Nielsen, “the most credible form of advertising comes straight from the people we know and trust.”
How to calculate NPS
It’s very straight forward:
Ask you customers on a scale of 0 to 10, how likely they are to recommend your business to a friend?"
Categorize responses based on score: 0-6 are Detractors, 7-8 are Passives and 9-10 are Promoters.
Subtract the percentage of Detractors from the percentage of Promoters. The score can range from -100 to 100 and the higher the better.
Add up the responses in each category, subtracting detractors from promoters, to determine how likely a customer is to recommend your business to a friend. Passives aren’t counted because you can’t count on which way they would go.
For example, if you surveyed 100 customers, 40% were detractors and 50% were promoters, your NPS would be 10 (50% - 40% = 10).
Promoters are enthusiastic and loyal - they will tell their friends about your business and bring in new customers. Passives are indifferent about their experience with your business but could become promoters… or they could switch to a competitor. Detractors are unhappy. They could do damage to your company and brand by sharing their bad experience with other people.
The 2017 NPS Benchmarks show the Travel & Hospitality industry with an average NPS of 29. Hotels specifically had an NPS of 41.
Looking deeper at the data, Ritz Carlton had an NPS of 78 (up from 72 in 2016). Why is this relevant? Well, you shouldn’t compare your NPS against a totally different competitor in the same industry. If you’re operating a discount store and you compare your NPS against a luxury retailer, it’s not going to give you a good sense of how you’re doing because of the differences in customer expectations.
Instead of comparing overall industry benchmarks, you should use NPS to measure your company’s trend over time. What you’re looking for is a steady improvement over months or years. This will show that you’re doing a good job of converting detractors in to promoters. You should even take seasonality in to account when looking at the trend. Maybe summers are a low point but if you compare summer over summer, you’ll see the story unfold.
BUT… if you’re really interested, the graph below has more info on specific industries from 2017:
Want gain more insight from customers? Don’t just stop at NPS, make sure you add space for customers to comment and leave feedback about their experience.
Once you have all the data, you can put together an action plan to address pain points or bottlenecks in your customer experience and employee training plan.