NPS index. We track customer loyalty

Customer loyalty is calculated using various indicators. One of the main ones used by most companies is NPS (Net Promoter Score). Literally translated as “net support indicator”. In a business environment Russian business use the designation “loyalty index”. It allows you to identify the percentage or number of clients who trust the company and its services (products), and will also recommend the company to friends and acquaintances at any opportunity.

Who invented NPS

The technology for determining NPS appeared in 2003. It was developed by business strategist Fred Reichheld. The innovation of the development was to avoid lengthy and tedious surveys for the buyer about the quality of the product and service. He identified loyalty in hundreds of enterprises in various industries. After sending out a bunch of questionnaires, he realized that it was impossible to carry out analysis through questionnaires.

The researcher suggested asking only 1 question, which most accurately describes the client’s degree of trust (according to his personal assessment): “How pleased are you to recommend our company to your friends or colleagues?” The answer is given in points (0-10). Then the number of the most loyal customers who gave 9 or 10 points is calculated. And their share in the total number of respondents is estimated. Good loyalty is considered to be 50 percent or more.

Why is Net Promoter Score needed?

The loyalty index was created for the purpose of unification. According to the author, NPS can be applied to any industry. In addition, the index characterizes the projected sales volume. That is, in addition to his personal opinion about the company, the manager will receive data about the people who interest him most.
We continue to work with such clients in other areas.

Sometimes additional questions are asked regarding the client’s desires and preferences: “Why did you give the company such a rating?”, “What did you like most about the service?”, “What can the company do to become better?” Additional questions asked (no more than 2) help to more clearly interpret the answer in points.

Also, calculating the index serves as a form of customer care. Questionnaires are sent according to a certain algorithm, most often after purchase. Their forms are varied: an email questionnaire, a call, or a report with an online questionnaire.

The most important advantage of NPS is the ability to determine the relationship between the amount of customer loyalty and the company’s growth rate. The direct correlation according to Reichheld's research will be traced in all other industries that he has not yet studied. This hypothesis was accepted by many businessmen and consulting companies, but it did not receive a scientific explanation.

Customer loyalty index NPS formula

NPS Formula

NPS = (P-C)/N ×100%, where:

• P - number of promoters;
• C - number of critics;
• N is the total number of respondents.

Option 2 of the formula: NPS = share of promoters - share of critics (of the total number of respondents).

What values ​​can the NPS index take?

Depending on the company, the index takes a value from -100 to 100. If customers are absolutely not loyal, the index is -100, and vice versa. A good trend is considered to be a constant increase in NPS, starting from 50%.

How to determine customer loyalty index

The loyalty index is calculated based on the results of the questionnaire (1 main question). Its results are collected over a long period of time. The most practical option is considered to be 90 days. It is this period, according to statistics, that is necessary to identify those interested in purchasing. As a rule, within 3 months, disloyal clients deactivate applications and personal electronic accounts that are of no interest to them.

Questions are asked as you shop. Therefore, index calculation is most relevant at the end of the trimester.

During the collection of information, respondents are divided into groups according to the points assigned:

• Detractors or critics (0–6).
• Neutrals (7–8).
• Loyal customers or promoters (9–10).

Detractors are not considered as buyers with whom it is necessary to conduct an individual dialogue. They will go to a competitor in any case. Neutrals do not feel an emotional attachment to products. What motivates them when making a purchase is also unclear. Promoters are considered fans. Commercial proposals are being developed precisely for them.

After calculating the total number of people in each group, proceed to calculating the index using the formula described above.

Methods for collecting ratings

• Email survey.
• Call.
• Reminder.
• Pop-up window in the application.
• Interface hints when designing a product.
• Survey in the sales area.
• Handing over the form at the checkout.

These methods are only used for online sales. Such statistics are ineffective due to the lack of data (responses) for uninterested clients. They don't read newsletters or take surveys.

Sampling for NPS

Surveys are conducted selectively and not en masse. It is necessary to create a sample of clients that would have the same consumption characteristics. For example, buyers who did not buy anything during the last month when there were sales in the previous ones. That is, the time frame (period of using the product) and the degree of involvement (repeated purchases) should be the same. This allows you to determine customer loyalty most objectively, all other things being equal.

Often samples are compiled illogically and non-randomly. The surveys involve buyers who have made purchases recently or for a large amount, which does not characterize the overall dynamics of sales in the future. Therefore, surveys are often sent repeatedly or regularly.

Survey frequency

The frequency of requests depends on the scale of the customer base, the cycle of introducing a new product to the market and the time of collecting the responses themselves. So, if there are many buyers, you can form a small group of respondents. The rule of probability theory will apply here. Small businesses will have to approach sampling more responsibly and on a larger scale, which requires additional time.

It is advisable to conduct a repeated loyalty survey only after the product, service has been improved or the product has been refined (modification, substitute). This is the only way to assess the dynamics of changes in sentiment.

Analytics team

In addition to client surveys, they conduct surveys of employees who are directly related to product development: PR specialists, designers, marketers, technologists, managers. It is important to evaluate their opinion for satisfaction own work. And also clarify unresolved consumer problems (meetings, round table, monthly reports).

Comment analysis

Many companies, when researching consumer experience, insert a chat in the survey column for writing comments. The buyer gets the opportunity to express his opinion about the features of using the product. Analysis of comments allows you to identify the narrowest topics and focus on solving key problems, if any.

Behavior of supporters

It is also necessary to study positive consumer experiences. But analyzing the comments themselves does not help here. You must have information about the purchased product. This could be site statistics, the number of times a product is viewed by specific users, or their purchase history. Only through this knowledge can the relationship or correlation between the loyalty index and positive evaluation be identified.

Methodology

The research methodology must clearly describe the goal set for NPS. Additional questions are designed to learn more about the client's intentions. It also helps to orient the client in understanding the main issue. After all, each person can understand it differently and will be able to give a “yes/no” answer. But the score will not justify his true sentiments. He will prefer the answer “most likely yes” and give 6 points, being a regular customer who does not like to impose his opinion.

The following are considered as directions for forming the question:

• Consumer interest.
• His motives.
• Commitment to the product.
• The importance of the company to him.

There should be no leading questions or references to competitors in the questionnaire. The questionnaire is compiled as natural and understandable as possible for the reader.

Acceleration of data collection occurs through the use of both desktop and mobile versions of the site or application. The methodology must be developed independently or resort to ready-made solutions using the SurveyMonkey service. The most important thing is to use this methodology constantly without changes, since this affects the index itself. The sequence of questions also matters. The questionnaire should be composed intelligently and arranged in a logical sequence.

Seasonality

The loyalty index depends on the season. This correlation is typical for any type of business, both in the service sector and in the production of daily used goods. Measuring the loyalty index over an annual period allows you to obtain more accurate estimates of customer trust if the sample is correctly selected. NPS analysis is carried out for the short and long term. At the same time, temporary factors that influenced the estimates are identified.

NPS Limits

The NPS metric has 3 disadvantages:

• Not suitable for operational management. More accurate methods for identifying satisfaction (A/B tests) and constant stimulation of demand (customer retention and attracting new ones) are needed.
• The uncertainty of the metric depends on the sample. The fewer respondents are involved in the survey, the greater the error will be. The results of subsequent tests will vary.
• NPS analysis is not used to change strategy and corporate concept. NPS indicates the number of loyal customers.

An example of calculating the NPS loyalty index

For example, the company deals with private orders for the manufacture of pottery. The clients are 10 restaurants, 20 cafes, 10 souvenir shops and about 60 individual customers. During the survey, the following number of priority groups was established:

• 30 promoters;
• 65 neutrals;
• 5 critics.

NPS = (30-5)/100×100%;
NPS = 25%.

The indicator is considered insufficient for the development of the company. The fewer regular customers, the less income there will be in the future. But from the point of view of the specifics of the business (ceramics manufacturing), such a low percentage can be compensated by comparing competitors and their individual indices.

Reichel's research identified three types of companies. The first group included firms with NPS=5-10%. Customer churn was insignificant, but profit growth will not happen in the future. Companies with NPS=45% do not have leading positions in the market. But they are able to reach heights through investors and proper marketing/branding. Firms whose index was above 50% experienced accelerated growth rates and advanced positions.

Advantages and disadvantages of the NPS index

• It is easy to calculate without bothering the buyer.
• The indicator is informative: it shows the share of loyal customers who will not change their attitude towards the product.
• Ongoing analysis of focus groups.
• Possibility of comparison with competitors.
• Availability for any company (independent analysis or use of services, for example, surveymonkey, testograf).
• Setting the right goals and outperforming competitors.
• Feedback to the client and maintaining contact.
• Requires ensuring comparability of clients in the sample.
• Failure to take into account neutrals when calculating.
• Cannot be used as a core business metric.

What affects the NPS score

The primary value of the index is to determine the number of consumers loyal to the company. If you don’t evaluate NPS, your receipts will continue to decline, and new products will no longer be in demand due to a lack of understanding of customer desires and priorities. The pace of sales is slowing down and the company is on the verge of bankruptcy.

But the index in various industries does not indicate a similar state of affairs. For example, your small store is characterized positively by the majority of customers. After conducting a survey, you came to the conclusion that NPS = 90%. For comparison, Apple has an NPS = 72% with such a high level of sales.

Therefore, the main limiting factors in determining the index are the industry and the rating of the company within the industry. These are the 2 main pillars that people focus on when taking into account low or high NPS indicators. They also take into account the competitive environment and the tolerance of the customers themselves.

How to implement NPS

The introduction of technologies depends on the scale of the company's activities. In the banking and insurance sectors, there are already terminals that allow you to evaluate service and quality of services. Mid-level business structures use special software products that store information in databases. IN small companies use questionnaires and mathematical analysis.

Ecommerce allows you to directly use a survey to determine NPS. At the same time, the technique is limited by the desire of the client himself to answer this or that question.

The relevance of introducing such a system depends on the prestige of the company and the belief of clients that the company really cares about their opinion.

How to keep your NPS score high

The loyalty index does not change if there is a customer retention policy. All work with consumers must be promptly controlled by both the staff themselves and management. To do this, clear intra-company communications must be built, departments for handling complaints must be organized, as well as support services online or by telephone.

Since the customer retention policy does not only involve dealing with complaints, it is necessary to develop VIP offers for regular customers, who are encouraged through frequent or large purchases. In other cases, you need to choose a bonus or discount, not forgetting about gifts or sweepstakes.

How to increase your NPS index

• Improve the product in accordance with the claims, make a public report on them.
• Hone your communication skills with clients by providing consistent information when there is interest on the part of the buyer himself.
• Organize after-sales service, at a minimum, hotline, which you can call to solve the problem.
• Show human interest in the buyer. To do this, it is necessary to maintain databases/dossiers.
• Be honest with the buyer, do not promise unfulfillable things.
• Encourage staff to interact openly with customers in the event of disputes.

Why is NPS being implemented so slowly in RuNet?

Given the lack of free money among the Russian population, it is difficult to calculate the real NPS. Therefore, it is not justified by businessmen: regular clients want better service, and rare clients are not interested in building relationships.

Most Russian companies have never heard of the loyalty index. They are implemented only by state corporations or large pools. While the States have long calculated average indices for each enterprise in various industries (npsbenchmarks.com).

For those who decide to try out America's best practices, it's worth starting with free version for online stores - SatisMeter and Google Tag Manager, for example. For administration purposes, the analysis can be carried out independently through questionnaires, but with a preliminary sample of clients. This will allow small businesses to get an answer to the question - in which direction to develop.

Most companies are overly focused on increasing the number of customers and increasing profits. However, it is very important to understand the fact that fishing is reminiscent of a leaky net. It seems that you managed to “catch” a lot of fish, but in the end you are left with nothing.

Customer retention is not the goal, but customer loyalty to the company is. The problem is that this indicator is very difficult to measure because it is not quantitative. Luckily, there is a framework that can help you meet your customers' needs and build long-lasting, fruitful relationships with them. Additionally, you will be able to predict their loyalty to your brand.

This article will discuss the basic concepts associated with such an indicator as the Net Promoter Score (NPS). You'll learn how a simple one-question survey can help you determine your customer satisfaction levels. You'll learn how to start using and continue to use this metric in your marketing campaigns.

Methodology for measuring loyalty

The founder of the NPS measurement method is Frederick Reichheld. His research was published in the Harvard Business Review in an article entitled "One Number You Need to Grow." In it, Reichheld criticized traditional surveys aimed at identifying customer satisfaction. He said that all of them do not allow you to “keep your finger on the pulse” and assess how happy customers are.

As a result, Reichheld and his colleagues developed a simplified framework that made it possible to link consumer responses and behavior.

The basis for measuring the consumer loyalty index is the belief that loyalty is nothing more than a person’s willingness to contact a company again and, more importantly, to recommend a product or company to their friends. This indicator is determined very simply. We will tell you about this now.

How to conduct a survey

So, NPS is an index that measures a consumer's willingness to recommend your company's products or services to their friends. To calculate it, you need to ask clients two questions:

1. On a scale from 1 to 10, how likely are you to recommend our company's product (service) to your friends or colleagues?
2. What exactly influenced your answer?

Next, you need to create a survey and send it to your customers. Typically, such questionnaires are sent by email, via SMS, offered in the form or asked by phone. Ideally, the survey should be completed in less than 24 hours.

Once your clients answer both questions, you will need to categorize them into the following categories based on their rating:

• 9-10: Brand supporters (Promoters). They value your company's products and tend to recommend them to their friends and acquaintances. They also make repeat purchases frequently. Such clients represent the greatest value.
• 7-8: Neutral consumers (Passives). They do not spread negative reviews about your company, but if someone makes them a better offer, they will refuse your services. Such clients do not often recommend you to their friends.
• 0-6: Detractors. They are dissatisfied with the quality of your company's products or services and want to ruin your reputation by spreading negative reviews.

How to calculate NPS?

Based on audience segmentation data (see previous section), the customer loyalty index can be calculated using a simple formula:

NPS = (% Brand Adherents) - (% Critics)

The value you get will range from -100 to 100. If your Net Promoter Score is 100, it means that absolutely all of your customers are fans of your brand (best-case scenario). If this indicator is -100, then on the contrary, all your clients criticize you (worst case scenario).

Why is it worth tracking your customer loyalty index?

Periodic monitoring of the consumer loyalty index is necessary, since this indicator:

• easy to understand - this system is very easy to understand and adapt for your company;
• easy to calculate - the survey is very short, and your clients will be able to quickly and easily answer the questions asked;
• provides feedback that has practical value;
• helps to identify the target audience segment (if you combine the information received with);
• will allow you to develop a plan to improve products or services;
• will help build a “cult of the consumer” in your company - each department will be aimed at building long and fruitful relationships with clients;
• gives you a competitive advantage - conclusions drawn from NPS analysis will allow you to make decisions quickly, while your competitors will have to spend several months on this;
• available to any business - conducting such surveys will not greatly affect the budget, and you will be able to “keep your finger on the pulse” of consumer sentiment.

Using the NPS indicator for company development

1. Sustainable growth and customer retention

• Extensive research has shown that NPS is one of the main indicators of growth. If it is higher than your competitors, it means that your company has a larger market share.
• According to Gartner research, 65% of start-up companies already have a ready-made customer base. Attracting new customers costs 5 times more than retaining old ones. Customer Loyalty Score provides an accessible framework for measuring customer satisfaction and retention.
• The NPS score can be used as a growth metric to turn a company's current growth into sustainable growth.

2. Product sales management

• The Customer Satisfaction Index can be used to make decisions regarding the company's product itself.
• NPS allows you to set priorities correctly, based on . They can very quickly receive feedback and make changes to the product sales process.

3. Marketing

• Verizon research shows that 85% of new customers come to small companies thanks to . Keeping your NPS score high will help you attract more customers without spending money on advertising and marketing campaigns.
• Net Promoter Score helps marketers measure customer sentiment and opinions and then provide feedback to all team members. In this way, all departments of the company will be able to work more harmoniously to achieve one common goal - meeting customer needs.
• NPS, combined with analytics tools, can help you predict consumer behavior and create what are called behavioral patterns.

4. Managing employee potential

• Customer loyalty score can help you determine the level of satisfaction of your employees. This is especially important for companies operating in the service sector.
• NPS can also be used to select a new vector corporate culture. In addition, using this indicator, you can find out the opinion of your employees about the new corporate policy.

5. General KPIs and reporting

• You can use NPS as your only customer satisfaction metric. To do this, the indicator must be measured on an ongoing basis and quarterly reports made. This will help you gain meaningful insights and build long term plan company development.
• If you link NPS with financial reports, you can draw a conclusion about the general state of development of the company. For example, if profits are growing and NPS is declining, then this is a worrying sign regarding long-term development prospects

6. Advantages of the consumer loyalty index

• Increased profit per customer: Brand loyalists tend to spend more on company products and services than the average customer.
• Reduced ongoing costs: Brand loyalists are tolerant and tolerant of problems that arise in the company, so they are less likely to complain. This helps reduce maintenance costs. In addition, loyal customers reduce , as they spread positive reviews.
• Reduce Churn: By reducing the number of neutral consumers and critics, you can reduce customer churn.
• Motivation for employees: all departments of the company will work harmoniously to achieve a common goal.

Increasing customer lifetime value

Only 14% of customers stop using a company's services because they are not satisfied with the quality of service or the product itself. 69% of consumers stop using a company because they feel forgotten about them.

Most dissatisfied customers will never come to complain directly. They will simply leave silently and then start leaving negative reviews online. This is why it is so important to constantly stay in touch with your customers.

Constantly measuring NPS will allow you to identify those customers who:

• are going to refuse the company’s services;
• ready to act as “lawyers” of the brand;
• see any shortcomings in your product or services, but do not talk about them.

By receiving this valuable information, you can prevent.

When to conduct a survey?

Often, the effectiveness of an NPS campaign depends not on how you ask questions, but on when you ask them. Below are a few “right things”:

1. After potential client I took advantage of the free trial period (Post Free Trial). If the trial period has expired and the customer does not want to purchase the paid version, then this is an indicator that he is interested, but not yet sufficiently involved in the purchase process. Why not ask him to give you feedback to find out what went wrong.

2. Before the client finally refuses the company’s services (Exit Survey). Price is a repulsive factor for a person only when he does not see the value of the product. If a customer decides to end their relationship with a company after using its services for a while, it means you are doing something wrong. Instead of just letting him go, you can re-engage him by asking him to take a survey. Even if that customer still leaves, you can learn valuable insights.

Criteria for assessing the consumer loyalty index

You can't draw objective conclusions just by looking at your customer loyalty score. It is necessary to take into account the position of the company in the chosen field of business. For example, the NPS of a large store may be 30, but, nevertheless, it will be the worst in the market. At the same time, the NPS of the telecommunications company will be 32, and it will be a leader among its competitors.

What factors influence the NPS evaluation criteria? How do you know if your customer loyalty score is good? First of all, there are three factors that influence the criteria for evaluating the consumer loyalty index:

1. Level of competition

If you're in a highly competitive industry like insurance, banking, or healthcare, a normal NPS score would be average. But if your company only occupies a small segment of the market (for example, electric cars or wireless headphones), then you need to make sure that your NPS score is high enough. This will be an indicator that your offering is unique and your customers have a positive perception of your brand.

Optimal NPS indicators for different business areas: banking (0), auto insurance (22), health and life insurance (27), airlines (36), tourism (38), hotels (43), online stores (45), Internet -services (48).

2. Tolerance

Customer tolerance is another key factor, which defines the NPS evaluation criteria. This is due to the fact that people are categorical about the quality of the product or service that they use regularly.

To clearly imagine how this factor affects NPS, it is necessary to give an example. Verizon's Net Promoter Score is 38, which may seem average, but it is one of the leading companies in the market. For comparison, their competitors (AT&T and MediaCom) have indicators of 15 and 22. This low indicator is not due to the fact that the company provides insufficient quality services. This means that these companies operate in a highly competitive environment, where clients are absolutely not ready to tolerate even minor “errors” in the quality of service.

3. Obstacles

Typically, a person cannot afford to improve (“upgrade”) the purchased product or start using the services of another company without certain financial losses. Thus, in order to appear consistent in their decisions, the customer prefers to remain loyal to the same brand.

SaaS companies face this problem all the time. To become a client of one of these companies, you need to deposit a certain amount, so it is very difficult for a business to retain its customers and maintain their loyalty. In this regard, the NPS indicator of SaaS companies remains at “below average” levels.

What is considered a good NPS indicator?

So, there is no quantitative indicator that can be called good as this value varies depending on what kind of business you are in. But there are several questions that you can ask yourself to help you understand how high your customer loyalty index is:

1. Is my NPS higher than my direct competitors? If yes, then this is a good indicator. However, this is not enough to consider your business successful.
2. Is my NPS going up? If after 3-6 months the consumer loyalty index has increased, then this is a good indicator.
3. Is my NPS above zero? If your NPS is -50, and this is higher than that of your competitors, then you should not rush to conclusions. This low NPS is a sign that your customers are not satisfied.

It must be remembered that the customer loyalty index should not be assessed literally. Most companies are simply obsessed with growth indicators and do everything possible and impossible to make their performance indicators grow. NPS is not a quantitative metric. This is more of a qualitative indicator that gives you food for thought.

Overall, although NPS claims to be the new standard for measuring customer satisfaction and loyalty, it has come under constant criticism due to its simplicity. Some experts claim that the index gives an inaccurate picture of how satisfied a company's customers are. For example, they highlight the fact that companies with the same NPS may have different percentages of adopters, neutrals, and detractors. Therefore, entrepreneurs need to focus not on the indicator itself, but on what these numbers tell them.

What to do after measuring NPS

This section will summarize the objectives of measuring your loyalty score and will also close the loop on obtaining customer feedback. This inclusive strategy will ensure your continued growth and keep your customers at bay.

1. Critics: Make a Personal Contact

According to a study by Lee Resources, 70% of clients are ready to use the company’s services again if an unpleasant situation is resolved in their favor. Your goal here is to show your customers that you care.

Most companies believe that a category of customers called “critics” cannot be convinced. However, this is not at all true. In fact, those customers who want to end their relationship with the company and spread negative reviews are the future loyalists of your brand. They just want you to pay attention to them and solve their problem.

Perhaps emails with questions about possible problems and ways to solve them will help you get back lost clients, for example:

• What would you like to do with our product, but you can't?
• Could you formulate an ideal solution to your problem that would completely satisfy you?
• If you had a magic wand, what changes would you make to the product?

Once you receive feedback, you can take the following actions to retain your customers:

• provide them with instructions (if your product has the required function);
• extend the trial period and give access to premium features;
• suggest some third-party service that would help solve their problem.

By offering solutions to problems, you can turn critics into advocates for your brand.

2. Passive consumers: engage before they leave

Passive consumers are a very interesting category of customers: they don't love your product, but they don't hate it either. They seem to be simply waiting for something good or bad to happen before they can make a concrete decision.

However, passive consumers are not inclined to answer open-ended questions and provide feedback to business owners. For example, Zendesk specialists found that only 37% of representatives of this category of clients answer the survey questions. While 50% of critics and 55% of company supporters are happy to share their opinions about the company’s services.

It seems like passive consumers can't ruin your brand's reputation. But they, like critics, are more likely to refuse your services. Below are steps you can take to retain such customers:

• By offering discounts or upgrades, you can re-engage passive consumers in the buying cycle.
• Send them user orientation guides: They may not be engaged in the purchasing process because of a bad first impression that causes them to never return to the site. You can periodically send them various brochures telling them about the latest innovations or new features of your product.

3. Brand loyalists: show your gratitude

Brand loyalists are, without a doubt, the ideal customers for any company. But most companies needlessly take them for granted. They make no attempt to reward or thank those customers who generate the most revenue for them.

Undoubtedly, gratitude will help strengthen your relationship with this category of buyers, and will also contribute to the development of the company.
Here's what you can do to achieve this:

According to statistics, the average percentage of people responding to an NPS survey is 60%. Thus, each company will have at least 40% of those customers who did not answer the questionnaire. Surprisingly, according to several studies, this category of customers is more likely than others to abandon your company's services in the future.

In fact, you have a better chance of re-engaging a critic than you do of convincing a customer who didn't respond to the survey. If no action is taken, typically 40-70% of these people will stop using the company within the next 6 months.

The only way to interest them is the methods described above. The same tactics will work for them as for critics and indifferent consumers.

Conclusion

Gathering information about how customers feel about your brand is integral to long-term growth. Of course, the customer loyalty index has its drawbacks, but they can be overcome through the active implementation of effective metrics.

I saw NPS questionnaires on the websites of large banks and online stores, and received SMS with surveys from operators mobile communications. The first reaction is to go to a marketer and set the task of implementing a customer loyalty index counter on your website. I'm sure that's exactly what many people do.

The purpose of this article is to warn about a dangerous mistake in marketing: thoughtless and incorrect implementation of the NPS questionnaire.

Why is Net Promoter Score needed?

Consulting agency employee Fred Reichheld analyzed customer loyalty to the most different companies in the USA: passenger air transportation, insurance, car rental. Hundreds of corporations, work schemes and thousands of different questionnaires. As a result, there is zero opportunity to compare customer loyalty of several companies in the same area.

As an alternative, Fred suggested making a questionnaire with a single question: “How likely is it that you would recommend our company/product/service to a friend or colleague?”, and a ten-point scale.

The advantage of just such a questionnaire over standard set answers - versatility. With one rating, a client can express what he thinks about your company/product.

Another question is to interpret what this estimate means. After filling out the questionnaire, a feedback procedure with the respondent comes into play to answer the question: why you can (or cannot) recommend our service. In some cases, they also offer a third question about what the company can do to improve.

There is no single algorithm here. Sometimes they ask you to fill out the appropriate form immediately after the first step, sometimes they catch up with you by letter or call.

If players adopted this metric, Fred believed, every company in a competitive industry would find it easier to fix customer problems, increase profits, and instantly measure the effectiveness of innovations.

According to Reichheld, in most industries there is a relationship between the level of growth of a company and the number of promoters among its clients (those who chose 9-10):

I don’t know whether working for one of the reputable US consulting agencies (Bain & Company) helped the researcher, but almost everyone agreed with Reichheld’s proposal. Including Fortune 500 companies.

The consumer loyalty index hypothesis has been criticized for its selectivity of areas in which a correlation between survey scores and company performance has been observed. If your topic is not included in popular studies like the Net Promoter Score Benchmark Study from Temkin Group, it’s worth considering.

Customer Loyalty Index - NPS Formula

Everything would be too simple if it were limited to uploading the average indicators of the questionnaire for a monthly report.

Firstly, the entire pool of respondents is divided into three parts, depending on the ratings given:

• 1-6 - detractors. In other words, brand critics. Among them are the most zealous authors negative reviews and future clients of your competitors;
• 7-8 - neutrals. Such clients are less likely to generate negativity, but there is no guarantee that they will remain your clients in the future. Any breath of wind and they will leave;
• 9-10 - promoters. Brand fans, long-time customers who actively promote the company’s products and generate positive reviews. They are usually most willing to communicate with managers.

For lovers of mathematics, a more complex calculation involving calculation of the variance of the study.

The NPS index is sometimes written without the percent sign - 60 instead of 60%.

When you install the questionnaire and take the first measurement, you will get a result from -100 to 100.

Question: when to take measurements? There is no consensus - there are too many differences between companies and customer needs in different areas.

Promoter.io CEO Chad Keck advises asking another question: how often should you show the questionnaire to the client?

If this is a user mobile application, the frequency can be like this:

• 7-15 days after installation;
• 30-90 days after the first survey;
• 90 days after the second survey.

The 90-day cycle was chosen because, according to feedback from most Promoter.io customers, the company has a 90-day window before the detractor removes the application.

In other areas, this window may not exist at all - the questionnaire is sent after some key action has been completed. In online stores, for example, it is recommended to send an NPS questionnaire to the client after receiving the goods, since then both the work of the staff and logistics are assessed.

It's no secret that the long-term success of almost any company directly depends on the loyalty of its customers. A good consumer attitude consists of many factors: whether they like the company’s products or services, whether they are satisfied with the level of service, whether they consider the organization reliable, etc. Today, companies measure consumer attitudes on an ongoing basis. An indicator comes to their aid in this NPS – consumer loyalty index. What “signals” does this indicator give? various areas business? How does it help individual companies? And what are the pros and cons of this method? Let's look at examples from different market segments.

Just a little theory J. Let us remind you that the loyalty index NPS (Net Promoter Score) determines consumer commitment to a product or company. The indicator, even by marketing standards, is quite young: it was first introduced in 2003 by American business strategist Frederick Reichheld. Net Promoter Score is very easy to measure. To do this, consumers are asked to indicate on the scale from 0 to 10, how likely they are to recommend the company/product/service. Based on the results, all respondents are divided into three groups:

• "Promoters"(9-10 points) – loyal customers, ready to recommend;
• "Passive"(7-8) – passive clients, generally satisfied, but do not want to recommend;
• "Dissatisfied"(0-6) – not satisfied and will not recommend.

• 5-10% NPS– companies with average levels of consumer loyalty. Such organizations are not characterized by either consumer churn or significant growth in the foreseeable future.
• 50-80% NPS– the most successful companies, leaders of their market. With high customer loyalty, they guarantee themselves high growth rates in all areas.
• 45% NPS– such companies are not leaders in their market, but they are not losers either. They have high growth potential and are very attractive to investors.

Today, the Net Promote Score index is regularly calculated by many Russian companies, as well as research and analytical agencies, to understand the level of loyalty not only for a specific brand, product or service, but also for the industry as a whole.

Telecom: how Beeline overcame the catastrophic gap between critics and promoters

« In the fourth quarter of 2013, unfortunately, we recorded a historical anti-record of balance between those who recommend us and those who categorically do not recommend us. The gap with our competitors was simply catastrophic. Now we can already talk about it - then we modestly kept silent about it. The gap that we had more than a year ago, this simply cannot be allowed in the industry. And this, in fact, was reflected in the outflow of our key client base. In 2014, we invested in getting clients to trust us again and stopped running from us like hell from incense. And over the past four quarters, we have been consistently improving this indicator, for the first time in the history of VimpelCom over the past five years. Now we are almost on par with MTS, a little left before Megafon , – Slobodkin said in an interview with Vedomosti.

In dealer showrooms, the system works in the same way as in Beeline’s own channels - in the form of an SMS survey. Messages come from short numbers and contain 6 questions. The survey is sent to the customer 24 days after service at the dealership.

Information received from clients forms the basis for resolving individual issues and systemic problems, says the official statement of the VimpelCom company.

Banks: NPS showed a good level of loyalty of B2B clients

Thus, in February 2015, an all-Russian survey by NAFI (National Agency for Financial Research) was conducted, during which 500 executive employees of small, medium and large businesses in 8 federal districts of Russia answered questions.

He showed that most entrepreneurs are satisfied with the quality of service in their bank, although they show low loyalty. Average value NPS in the b2b segment is 26%: this is how many respondents are satisfied with the work of a financial institution, but are in no hurry to recommend it to others. This indicator indicates the average position. Every second respondent is ready to recommend their main bank ( 50% ). More 24% respondents are considering an alternative supplier financial services. The majority of promoters were among companies founded between 1991 and 2000 and representatives of medium-sized businesses. In turn, a neutral position is more often occupied by enterprises created in 1990 and earlier.

This indicator was positively assessed by the NAFI expert. Irina Lobanova, Head of the Banking Sector Research Department at NAFI:

« The average NPS indicator is considered to be 10-15%, but much depends on the specifics of the market.<…>For the financial industry, where interaction with the client is long-term and communication is carried out through many channels, especially for the segment legal entities, the average figure can be considered 25-30%. In the current situation, when the average index value for the market is 26%, we can say that the work of most banks in forming a product line, promoting various services and monitoring the quality of service quite effective».

Automotive industry: up to 100 million rubles. spend by some manufacturers to increase NPS

So, in November 2014, the agency "Autostat" As part of a study of Russian owners' satisfaction with the car and the dealer, NPS was calculated. The leaders of the rating are brands Mercedes-Benz (70% ) and Land Rover ( 68% ). The TOP 10 of mass brands included KIA ( 62% ) and Skoda ( 57% ). Japanese brands have four places in the top ten - Mazda ( 61% ), Subaru ( 60% ), Lexus ( 57% ), and Toyota ( 56% ). Volvo also took the lead ( 60% ), who took seventh place. The obvious outsiders in the rating were representatives of budget brands - LADA (5%) and Daewoo (8%).

Electronics: high NPS allowed Huawei to be in the top three

According to the results of this study, Huawei brand awareness increased from 52% in 2013 to 65% in 2014. This means that almost two-thirds of consumers in these countries are aware of the Huawei brand. According to IPSOS data, the Chinese vendor's Net Promoter Score has reached 43% , which allowed Huawei to be among the top three brands in this study, behind only Apple and Samsung. Thanks to such strong performance, this year the Chinese vendor plans to focus on high-end models that bring greater profits.

Air transportation: NPS confirmed the success of the low-cost Pobeda business model

Thus, Pobeda demonstrated already in the first year of operation high level loyalty of its passengers. The company officially announced this in February 2015 in connection with the transportation of its 100,000th passenger. According to Bain & Company research, Pobeda’s NPS significantly exceeded the indicators of most not only Russian but also European airlines, amounting to 72% . Thus, Pobeda’s customer loyalty index is even higher than that of Aeroflot itself. Although it is worth noting that Aeroflot’s NPS increased in 2014 by 9% compared to the previous year to 67% .

Such a good NPS indicator for Pobeda indicates not only a fairly high quality of service, but also the demand for low-cost air travel and growth prospects for such a business model. Expansion is already planned. Now the airline’s flight map includes 14 cities, but already in the summer schedule of 2015 it is planned to open new destinations, there will be about 20 routes in total.

Conclusion

• leading indicator of business success;
• the most accurate forecast of consumer loyalty in the future;
• the simplest indicator in terms of speed and ease of measurement.

What is most important in business? Of course, a satisfied client who will pay you regularly and is ready to recommend your company to everyone they know. And one of the most common ways to measure customer loyalty to a company is the NPS index.

What is NPS

The NPS loyalty index, from the English Net Promoter Score, can be translated as a net promoter index. NPS is an indicator of willingness to recommend a company or product. A company promoter is a person who is ready to recommend a company. NPS is sometimes called Frederick Reichheld's loyalty management technique.

The NPS score is a fairly recent phenomenon, first formulated by Frederick Reichheld in 2003. His article describing NPS was published by Harvard Business Review and discusses customer loyalty and company profit growth. Later, “The Book of Real Profit and Real Growth” was released, in which Reichheld continued to describe the relationship between revenue and customer loyalty.

Why do you need NPS?

Reichheld based his point of view on a study of more than 400 companies represented in various business sectors. The main topic was to compare company and industry growth rates with the NPS index. The most striking relationship was found in companies where the level of service is important, since the client often communicates with company representatives, for example: passenger air transportation, insurance and car rental. In the future, many large companies began to use the NPS loyalty index in their work.

Quarterly NPS changes help companies compare themselves with their main competitors and understand how effective the measures the company uses are.

Most major players in the Russian telecom market measure NPS. Thus, among the Big Three operators, Beeline had the lowest NPS in 2013. However, thanks to the customer-centric strategy announced in 2014, the company managed to raise this figure and get closer to MTS, says VimpelCom General Director Mikhail Slobodin.

“In the fourth quarter of 2013, unfortunately, we recorded a historical anti-record of balance between those who recommend us and those who categorically do not recommend us. The gap with our competitors was simply catastrophic. Now we can already talk about it - then we modestly kept silent about it. The gap that we had more than a year ago, this simply cannot be allowed in the industry. And this, in fact, was reflected in the outflow of our key client base. In 2014, we invested in ensuring that the client began to trust us again and stopped running away from us like hell. And over the past four quarters, we have been consistently improving this indicator, for the first time in the history of VimpelCom over the past five years. Now we are almost equal to MTS, we are just a little away from Megafon,– Slobodkin said in an interview with Vedomosti.

How to measure NPS

To measure the NPS index, a short survey is conducted, up to 10 questions. One of the questions is: how willing are you to recommend a company/product/service. The participant needs to enter a value from 1 to 10. Based on the survey results, all participants are divided into 3 groups:

• 10-9 points - promoters, loyal customers ready to recommend;
• 9-7 points – passive, generally satisfied, but not ready to recommend;
• 0-6 points – dissatisfied, definitely won’t recommend

The NPS index is calculated using the following formula:

NPS = share of promoters - share of dissatisfied

The NPS index is a faithful assistant on the path to creating a dynamically developing company that will revolutionize the market within ten years.

What is eNPS

eNPS from the English Employee Net Promoter Score is an index of employee loyalty. Not so long ago, along with the development of the NPS index, they began to conduct surveys among employees, called eNPS by adding the word employee to the abbreviation.

Any manager knows that the company has external clients and internal (employees) and how satisfied the internal client is, the external clients are also satisfied. I touched on the topic earlier. The eNPS index is an excellent tool for understanding how ready your own staff are to be promoters. A high eNPS score will help you significantly reduce , which means you'll save money on hiring and onboarding.

Just like NPS, it is recommended to evaluate the employee loyalty index at least once a quarter. This will give you an understanding of where your company is heading. In addition, it is worth assessing the indicator not only for the company as a whole, but also for individual divisions. The immediate manager plays a big role in the value of the eNPS index.