A bad experience weighs more than a good one, or in other words, we’re hardwired for negativity. Back in 2001, Paul Rozin and Edward B. Royzman, professors of psychology, coined the term negativity bias and defined it as the innate and general predisposition humans have to receive a negative experience more quickly, but also respond to it more consistently.
That is why word-of-mouth is, and will always be, one of the most powerful marketing channels. Companies noticed this a long time ago and started measuring their customers’ loyalty. There are many ways to do so, one of the most common ones is the Net Promoter Score or NPS. And if you work in marketing, you should prioritise customer centricity by listening to your buyers needs.
What is NPS and how it’s measured
NPS is a metric designed to measure how likely it is that your customers would recommend your brand, product, service or company to a friend or colleague. Simply put, it asses if your customers are more willing to speak good or ill about you.
And that is done with a single question:
How likely is it that you would recommend X to a friend or colleague?
With this question, you can gauge the likability of your customer recommending your brand based on their rating. On a scale of 1-10, where 0 is not at all likely and 10 is extremely likely, this system will categorise your customers as promoters, passives, or detractors.
Your most loyal customers, those you want to have at all costs, are called promoters. And to qualify as such, they need to answer with a 9 or 10. They will continue buying from you and recommend others to do the same.
This is the category for those who responded with a score of 7 or 8. Some argue that cultural factors have an influence on the tendency of many customers to score as passive instead of a promoter. They are satisfied but not enthusiastic customers and they could easily slip away to another competitor for a better offer.
Here you will find anyone who rated you from 0 to 6. As the amplest group, it includes those who are unlikely to buy from you again and those who are not having it and can even tarnish your brand reputation.
How do you calculate your NPS?
Once you got your results, you can easily calculate the final NPS score – just organise the detractors, passives and promoters in percentages and subtract the percentage of detractors from the percentage of promoters.
Promoters% - Detractors% = NPS
That way, if your detractors represent 15%, your passives 20% and your promoters 65%, your final score is 50. Not too bad, not too good.
This tells you that you need to keep an eye on those passives and understand how to change the mind of those detractors.
What are relational NPS and transactional NPS?
When we properly survey and measure the result, the NPS will assess our customers’ general feelings about our brand rather than focus on a specific purchase. That’s the objective of the transactional NPS or rNPS.
The difference between relational NPS and transactional NPS (tNPS) is quite simple: the first one is sent out periodically (quarterly or annually) while the latter will survey your customers after they interact with your company.
The importance of NPS in marketing
It will help you understand how customers respond to your brand and identify your target market. The more loyal to your brand, the more likely is that they become ambassadors of your brand through word-of-mouth.
As a marketer, it’s important to delimit who will recommend you and who won’t as a new way of segmenting your customers. Using NPS scores as segments can help you identify common characteristics and use that information to improve your campaigns.
And remember, Net Promoter Score surveys come with a section at the end so the customers can add more information on their score. This is gold for you if you work in marketing.
Use NPS to identify problems with marketing
It’s well a known fact that a good marketer needs to research what the customers say about your brand in relation to your marketing. Do the same with your NPS. If there are problems such as inflated promises or misleading advertising claims, your customers will let you know.
You can try to apply the nature versus nature approach for detractors, but the reality is that when companies failed at measuring up to expectations, detractors multiply. By digging into the qualitative feedback, you can understand what marketing messages stand by themselves and what others need to be tweaked.
Reduce churn and increase retention
If you start finding patterns when you analyse the NPS, you can also draft predictions. This way, it’s easier to see how long you will be able to retain your customers.
Whenever you see dramatic changes in your NPS you can swift your priorities accordingly. So, if you see an increase in the number of passives or detractors, it’s imperative to focus on retention because you are likely to lose some customers.
However, use this information when you reach greener pastures too because you try some upselling or cross-selling on your promoters. They’re more likely to upgrade or try new products.
Use NPS to measure the profitability of your campaigns
Unfortunately, unlike diamonds, customers aren’t forever. So, when you’re able to predict for how long your detractors, passives, and promoters stay before they leave your company, you can put a figure on their customer lifetime value (CLV). This is how much profit you make from one customer over their lifespan.
Once you understand the CLV of each segment, you can use it to calculate the profitability of past and future campaigns. So when you measure your campaigns over time, you can monitor what worked in terms of turning customers into promoters and retaining them.
Discover new USPs in your promoters’ answers
We have focused on what to avoid or what to improve, however, you can find what makes your brand so special by deep diving into the qualitative feedback. Look for those nuggets that express singular benefits.
Another acronym to add to your list is USP. A unique selling point or USP is that statement that differentiates your brand or product from your competitor’s. When reading through the feedback, try to find that common denominator that you can articulate in your next campaign.
Measure your ability to earn customers organically
Word-of-mouth has been the backbone of this article, and so is it for many businesses too. Good rep tends to equal good referrals.
In this line of thought, you can correlate a good NPS with a good referral potential. So, as a marketer, you must put metrics in place to measure referrals coming from your promoters.
You can come up with refer-a-friend programmes or shareable discount codes offered to promoters. That way, you can measure how well they speak about you and whether it pays off.
Use promoters in your brand marketing activities
Although this might seem in line with earning customers organically, this goes far beyond. It’s about your brand and who’s best to speak about it than your dearly beloved customers who score 9 or 10 in your NPS?
You know, how difficult is to get good reviews for your app. Why don’t you ask your promoters? The same goes for testimonials or customer interviews. It’s more likely they agree to be featured in an article, write a nice review in Trustpilot, or be in that carousel of testimonials on your website.
This is called proof-based marketing and it really increases the perception of your brand and sometimes be the key factor for a customer to choose you over your competitors.
As you can see, the NPS will contain useful data for everyone in a company. And if you work in marketing, this is a metric to take pay attention to.
Because when it comes to NPS you need to be able to do three things. The first one is to fight the negativity bias, the second one is to move the needle of your customer loyalty, and the last one is to harness the power of positive opinions.