Every business wants to know how their customers really feel about their products and the quality of their customer service. Although there are many ways to measure the performance of a business, customer satisfaction is where you really want to focus your efforts and NPS is a great way to measure this. No matter how effectively the rest of your company operates, if your customers aren’t happy, you’re in trouble.
One popular way of measuring a company’s customer relationship is Net Promoter Score (NPS). Over two thirds of companies listed in the Fortune 100 use the NPS metric to assess customer loyalty and satisfaction. Also many SMBs use it as well, but it has its limitations. Used as part of a comprehensive customer feedback program, it’s proven itself to be a useful and valuable tool. The problem is that businesses count on NPS to do more than it can realistically do, to the detriment of other important metrics, especially Google reviews. This is a mistake, and we’ll take a look at why.
What Is NPS?
Despite the popularity of Net Promoter Score, a significant percentage of business owners have yet to hear about it. NPS is a tool to gauge customer satisfaction and loyalty using a simple and reliable method, asking customers about their satisfaction. It was conceived and developed back in 2003 by a collaboration between business guru and author Fred Reichheld, management consulting firm Bain & Company of Boston, and software company Satmetrix. The score is derived from customer responses to this question: “How likely is it that you would recommend our company to a friend or colleague?” Customers can rate a business on a scale of 0-10 within a feedback tool and are also encouraged to comment on why they rated it as they did.
How To Calculate NPS?
NPS is fairly easy to calculate, but first you need to understand what categories are represented in the NPS calculation. For the purposes of NPS, responses fall into three categories:
- Advocates – Also known as promoters, but are those that leave a rating of 9 or 10, considered to be loyal and satisfied customers who will continue to do business with you and give positive referrals to others.
- Passives – A rating of 7 or 8 indicates a customer who is generally satisfied but lukewarm and could be persuaded to go elsewhere.
- Detractors – A 0-6 rating means a customer who is slightly to seriously dissatisfied with your product or customer service.
The overall NPS score is calculated by subtracting the percentage of Detractors from the percentage of Advocates. NPS = Advocates % – Detractors %.
Some of the benefits of NPS include:
- It’s quick and easy for customers to use. It’s a simple and easy to understand question and it only takes a moment to leave a rating and a comment, nothing confusing or frustrating about it. Some surveys ask a customer to answer multiple questions, which can often be interpreted incorrectly, and could take several minutes to complete, which makes it much less likely a customer will respond.
- The findings are easy to understand. It gives you a straightforward percentage score that is readily comprehended, rather than a number rating.
- NPS is standardized and comparable. You can search for the NPS scores of other businesses in your industry and get a sense of where you stand in comparison with them. You can also compare your own results over a period of time.
What Is A Good NPS Score?
When measuring NPS it is important to aim for a particular score so you can have a good indication if you are underachieving or overachieving. Realistically anything above 0 is a great score because it shows that you have more loyalty than not amongst your customers. An average NPS score would be 0 which indicates your business customers have the same amount of loyal customers as disloyal customers. A % of 30 or greater is considered a good Net Promoter Score because it shows a large proportion of your customers are loyal and really like your business. An example of this score would be with customers that fall into the following groups of 50% Advocates, 30% Passives, and 20% Detractors. Of course every business would hope for a different benchmark score as determined by their type of business. No matter what percentage of loyal customers you aim to have, NPS is a great benchmark statistic to help determine the overall satisfaction levels related to your business.
NPS VS Google Reviews
As mentioned above, many businesses have a tendency to rely too much on NPS results, and as a result miss out on the benefits of Google reviews and other review sites. They do this because NPS is easy to use and understand, and because there’s a perception that managing customer review sites is too difficult and time consuming. This isn’t really true given the prevalence of review management software that can help with the review collation process.
NPS is just a number and maybe a comment, and it doesn’t give you the depth of insight that customer reviews provide. You learn that a certain percentage of your customers are happy, unhappy or indifferent, but you’re not really learning why.
And from the customer’s point of view, reviews are much more useful. Recent surveys have consistently shown:
- 97% of consumers have studied online reviews before making a purchasing decision
- 85% trust online reviews as much as they do feedback from family and friends
- 36% say that Google reviews and other review sites are the top factors in their buying decision
Google reviews are independent reviews posted by customers, for customers. They can be prompted on your website and other social channels, giving the customer more confidence in the business, while also supporting your other marketing initiatives.
Google reviews have a significant impact on your page rank, according to SEO software firm Moz. This helps with search rankings in Google and can further help increase your business’ exposure online.
AddMe Reviews – NPS System
AddMe Reviews uses the NPS score within the review management platform, as seen below. NPS can be a great way to measure the level of customer satisfaction for any particular business. Our platform makes this process easy to implement and NPS marketing can begin quickly to begin the process of improving your business.
The Bottom Line
NPS is a valuable indicator of the general health of a business, but it needs to be used in conjunction with other metrics and marketing tools. The benefits of Google reviews are too great to be neglected. Not using and managing the feedback from your customers can have a big impact on your business.