Having clients is one thing, but knowing their true value is quite another. Of course, it is entirely possible to run a practice on a diet of “one-hit wonder” clients, but it’s a wasteful, time consuming and expensive way of generating business. It’s much better to win and keep clients by understanding their lifetime value through studying their loyalty to the practice. One way of doing this is to generate a “net promoter score”.
The net promoter score
A net promoter score (NPS) is a loyalty tool developed by Bain & Company and Satmetrix that was introduced in 2003. It is used to monitor and gauge the loyalty of a business relationship, irrespective of whether it is business to consumer or business to business. The key benefit of NPS is that it gives insights into elements of a relationship, such as customer satisfaction, effectiveness of communications and how well customer service is judged.
Ian Cass, Managing Director of the Forum of Private Business, believes it to be a very effective way of measuring customer experiences as “you can see if the customer would recommend you to others, with answers based on a 0 to 10 scoring method”. Ian says that the size or sector of the business concerned does not matter because it’s the understanding of the customer experience that is important – this “allows the business to keep improving”. He adds: “It is a great tool for driving a strategy for business performance; it can also improve a business model as it provides a metric measurement, which is important, especially from a purchaser’s point of view.”
Score calculations
From a business perspective, understanding how the score is calculated is essential: this drives communication with those individuals that form the customer base. Essentially, NPS asks a series of “why” and “would” questions which return scores between 0 and 10.
Ian illustrates how the process has worked for the Forum of Private Business. “We’ve asked many members for their opinions over the years, from looking at changes to government policy to business rates and budgets. And because we often have lots of questions that we want to ask our members, we look to condense what we ask into a 20 to 30 second questionnaire, which is great for our members to answer quickly.” Ian says that NPS has led to a greater level of response from members and as a result, has helped put research reports together that have been fed back to government.
Under an NPS scoring regime, a standard has been established. If a response scores:
9 to 10: clients are labelled as promoters. They are likely to come again and promote the practice to others as a recommendation. They are great advocates for the practice and they will be loyal clients in the future.
7 to 8: clients are labelled as passive. These people fall in the middle of being promoters or detractors. They are undecided and do not want to commit, so do not give active responses to the questions and try to remain impartial.
0 to 6: clients are labelled as detractors. Detractors can be detrimental to a practice. They can become negative and give comments that will influence others and they may not complete transactions.
The problem for businesses faced with detractors is that the web feeds the subconscious. As Ian remarks, “consumers today will look at comments made about the products and services of a business and this can have a negative or positive effect and may well influence their own buying decisions”.
Using NPS to best effect
It should go without saying that NPS needs to be used properly if the right result is to be achieved. For Ian, NPS should be important to any business wanting to know how well it is doing while helping to measure the customer experience of those that deal with it. He says: “Having a scoring for a product or service will give you the insight of a job well done or not. If the scoring is poor, a business can see the areas that need work and take proactive action to improve them. If a business is not asking for this kind of information, how do they know if they are doing a good or bad job?” Having positive reactions from clients and suppliers is the bedrock of success – it will help a business gain new customers while helping them grow as poor feedback should lead to work on areas of weakness.
NPS can be used generally or specifically, depending on the strategy being deployed. For example, after a client has visited a practice, a simple automated email can be sent to them asking for feedback. But Ian offers a note of caution here. He says that for NPS campaigns to work, a business-wide strategy needs to be implemented and it needs to take into consideration factors such as making all staff aware of what NPS is, how the measurements work and what they mean; not ignoring or failing to respond to negative comments; and actively seeking to engage with those classified as promoters.
Ian says: “Think about how you will communicate further with promoters. They have given you a good score but how will you continue to communicate positively with them now that you have their goodwill?” He says negative scorings should also create the same thought process and asks: “How will you work with those that give you a low scoring? Everyone needs to communicate effectively to customers and the key is to keep monitoring the scoring results and acting upon them.”
NPS as a predictor of growth
If NPS scores are high, it’s fair to hope this would be reflected with a healthy practice that is growing. Conversely, if the scores are low, it can be expected that the rate of growth for the practice will be poorer. But Ian says that this may not always be the case, and he cites an example well known to economists: “If a product is one that is in very high demand – say it’s the trendy thing to have at the moment – then it may well sell despite poor customer service and low NPS scores.” But clearly a business in this situation is not going to have a long life.
Getting an NPS
The actual calculation when measuring NPS is a function of the total number of respondents who replied, the total number of promoters and the total number of detractors. The percentage of detractors should be subtracted from the percentage of promoters. The closer the result to 100, the better it is and anything with a negative should be dealt with quickly.
It is important to remember that NPS is not the be-all and end-all of customer satisfaction. Any business owner or manager worth their salt should have an ear to the ground for customer feeling. NPS is just one useful tool for honing the detail.
NPS can be an effective method of seeking feedback with minimal input from clients. Used correctly, it can condense a number of issues effectively into an easy-to-answer questionnaire. It is important to note that scores can indicate a probable path of business growth but can equally illustrate areas of weakness that need work.
No matter the desire to seek answers, the process behind NPS requires that clients are continually monitored to note any deviations of their sentiment. But once those clients who are considered to be “promotors” have been identified, they should be considered – with consent – a marketing asset.
FURTHER INFORMATION
- Bain & Company: netpromotersystem.com/about/measuring-your-net-promoter-score.aspx
- NPS Calculator: npscalculator.com/en
- Reichheld, F. F. (2001) The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value. Harvard Business School Press, Boston.
- Satmetrix (co-developer of NPS): netpromoter.com/know/
- The Chartered Institute of Marketing: cim.co.uk
