What are the key factors that influence nps. NPS: what is Net Promoter Score and how to start calculating it

In order to understand how effectively a company satisfies the needs of its customers, there are a number of marketing methods, one of which is calculating the customer loyalty index, or NPS (Net Promoter Score). What is customer loyalty index? How, using the NPS value, to improve the performance of your company and increase its attractiveness to buyers, as well as how this value affects the financial performance of the organization - we will talk about all this in our article.

You will learn:

• How is the concept of NPS (customer loyalty index) interpreted?
• What are the advantages and disadvantages of the NPS customer loyalty index?
• How a customer loyalty index can improve a company's performance.
• How is NPS customer loyalty index determined?
• How to implement it into the company's work.
• What factors influence NPS indicators.
• How to increase and maintain your customer loyalty index.
• How to establish communication with members of the customer loyalty index.
• What difficulties can you encounter when implementing a customer loyalty index?

What is NPS - customer loyalty index

NPS or Net Promoter Score– an index that allows the head of the company to assess the level of customer loyalty. By tracking changes in this indicator, the manager receives a convenient tool, thanks to which it is easy to identify shortcomings in the operation of the enterprise and eliminate them, thereby increasing the efficiency of the staff and the organization as a whole. NPS allows you to competently build a policy for relationships with customers.

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Calculating the customer loyalty index is very simple. It is generally accepted that a company’s income is directly related to the NPS value: the higher the index, the higher the growth rate of the company and its profits. A high NPS index indicates the stable operation of the enterprise.

Customer loyalty consists of the following indicators:

• repeat purchases;
• positive feedback about the purchase made or services provided;
• recommendations given by customers and clients to their friends, acquaintances and colleagues;
• consent to purchase not only the product, but also related products and accessories, ordering additional services, using an optional service provided by the company, purchasing an extended warranty for the product.

Russian and foreign experts highly valued the NPS customer loyalty index as one of the fairest tools characterizing the company’s activities.

The concept of NPS was originally published as a study in 2003 in Harvard Business Review under the title “The One Number You Need to Grow.” The author of the Net Promoter Score concept was Fred Reichheld from Bain & Company Satmetrix.

Believing that standard studies were too long and complex, Fred suggested asking just one question to determine the customer loyalty index: “Are you ready, after making a purchase or receiving a service, to recommend our company to your friends and acquaintances?”

The NPS customer loyalty index has gone through several stages of development since 2003, the system has evolved as follows:

• 2003– after the publication of the article by Fred Reichheld, the NPS system is increasingly used by various companies and organizations.
• 2006– Outstanding global companies such as Siemens, Apple, Philips are implementing an NPS measurement system.
• 2011– technology for assessing a company’s rating and customer loyalty index moves from research to the category of management systems. Enterprises are beginning to actively implement the methodology and adjust their activities in relation to the consumer loyalty index, which allows them to identify shortcomings in their work and optimize business processes, increasing profits.
• 2016– the NPS system becomes the main indicator that allows you to find out how successful the company is with customers. Based on NPS, enterprise policies focused on working with clients are built.

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What are the advantages and disadvantages of customer loyalty index

The NPS determination system has a number of advantages.

1. Easy to understand.

Due to the fact that the NPS system is based on just one elementary question, it does not require complex analysis of the data obtained, as a result of which the customer loyalty index is built on the principles of simple understanding and application of the results obtained.

1. Easy to operate.

The high speed and simplicity of surveys is due to the fact that when studying the loyalty index, the questions asked are short, clear, and imply the same answers.

1. Providing actionable feedback.

By identifying NPS, it is possible to establish high-quality feedback with clients and understand their assessment of the company’s activities.

1. Target audience segmentation.

When analyzing the NPS rating, it becomes possible to superimpose response statistics on the demographic and social indicators of the audience, thereby obtaining the opportunity to conduct an analysis of various groups of service consumers and product buyers and find out why certain social groups evaluate the company’s work positively or negatively.

1. Revision of the product sales plan.

When conducting a survey, high-quality feedback is established with customers, thanks to which the company manager has the opportunity to quickly clarify or revise sales plans and mechanisms.

1. Reducing customer churn.

A survey can show what customers are unhappy with when purchasing goods or services and prevent further customer churn.

1. Setting the right goal.

Any activity must have a purpose. A survey and identification of the NPS customer loyalty index will help the manager to set it correctly in front of his company. In addition, this research allows you to more accurately motivate employees by explaining to them their current tasks, as well as the common goal that the company strives for. This will increase staff productivity and improve the performance of the entire enterprise.

1. Competitive advantages.

A company that conducts an NPS survey gains a unique advantage over its competitors who do not use such surveys. When identifying a customer loyalty index, an enterprise receives information through feedback about the mistakes of its employees and even managers - consumer reviews allow an analysis to be carried out in the shortest possible time and defects in work to be eliminated.

1. Availability for any company.

Almost any company can conduct a similar study of customer loyalty, because for this it does not need to resort to the services of research centers and hire experts; it is enough to carry out a simple survey of its customers by asking them simple questions.

But, despite the accessibility and effectiveness of determining NPS (customer loyalty index), the method also has disadvantages, the main one of which experts in the field of marketing research consider its one-sidedness. When implementing the method, answers to questions are received both from supporters of the company who have a positive attitude towards it, and from critics who are not satisfied with something, but these are not all the company’s customers; most consumers are neutral. Therefore, the customer loyalty index reflects only the opinion of the most active part of customers. In addition, experts recommend refraining from using only one customer loyalty index and, when developing important marketing decisions and business management tools, still resort to deeper and larger-scale research of the market, the company itself, and objectively evaluate competitors’ data.

Calculation of customer loyalty index indicators must be carried out at regular intervals; this will make it possible to formulate company policy, focusing on changes in the NPS index, and identify factors that positively or negatively affect the company’s efficiency and its profit.

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What company indicators will NPS help improve?

1. Stable development and customer retention.

A high customer loyalty index characterizes a company as a market leader, which owns a significant share of customers, thus NPS is one of the main indicators showing the growth of an enterprise. As a rule, about 65 percent of the company’s customers have already been formed; attracting new ones is a difficult task. Often, analysis of the customer loyalty index allows not only to expand the audience of consumers of goods and services, but also gives the company serious tools for retaining existing customers. Also, data from the customer loyalty index can be used to develop a method that allows turning the company’s existing growth at the time of research into sustainable development.

1. Product sales management.

The customer loyalty index can be used in prioritizing the company’s product base, since NPS allows you to understand which products and services are in greatest demand among consumers, thanks to which you can quickly change your sales policy.

1. Marketing.

Verizon research has shown that more than 8 out of 10 new company customers learn about a brand from such a simple source of information as word of mouth. The NPS rating is directly related to the customer's opinion, so if it is generally positive, then he is likely to recommend your business to his friends and acquaintances. Accordingly, with a high customer loyalty index, company managers will not need to spend huge amounts of money on marketing campaigns and promotion of goods and services in the markets, since a satisfied consumer himself will become a carrier of information about the manufacturer and will advertise it to his friends.

With the help of NPS, company managers can measure the emotional mood and opinions of customers, and then organize the work of staff in such a way as to most effectively achieve the goal set for the organization, which, in the end, most often is meeting people's needs and making a profit.

Also, the customer loyalty index, together with other research tools, allows you to predict customer behavior and even shape it in the most beneficial form for the company, that is, create so-called behavioral patterns.

1. Personnel potential management.

NPS allows you not only to assess customer loyalty, but also to conduct research among company employees, find out how satisfied they are with working in the company, their salaries, form a new corporate culture based on this indicator and find out how staff react to its changes.

1. Are commonKPIs and reporting.

NPS values ​​can serve as the only index on which to rely when assessing customer satisfaction. However, it is necessary to regularly conduct this research and compare the company’s financial indicators with the NPS index, which will make it possible to predict customer behavior in the long term, as well as assess possible risks for the company. For example, if, while profits are growing, the NPS indicator is falling, the head of the company should think about adjusting long-term policy and development, since income may increase by inertia, while a decrease in the customer loyalty index indicates the necessary changes before profits begin to decrease. Thus, by correlating the company’s financial indicators and the consumer loyalty index, it is possible to understand and prevent a drop in sales at an early stage, even though the company’s indicators are currently growing.

How to determineNPScustomer loyalty index

The NPS determination system consists of several stages. Immediately after purchasing a product or receiving a service, the client is asked the following question: “What is the likelihood that you will recommend our company to your friends, acquaintances, relatives or colleagues?” The answer to this question is assessed on a ten-point scale. Zero on this scale means the client’s categorical refusal to recommend the company, 10 points means a sincere desire to recommend the company to his friends. As a result, all buyers who participated in the survey are divided into three groups.

1. Supporters, promoters– those who gave 9 and 10 points. This group of people is loyal to the company, they are likely to recommend purchasing goods or ordering services from your company, and will also return to you again. These people, as a rule, are absolutely satisfied with the level of the product or service; perhaps they did not even expect that the product would be of such high quality, so they subconsciously agree to recommend your company to their friends.
2. Neutrals– those who gave a score of 7-8 points. This group of people is quite satisfied with the product or service, but the likelihood that they, as promoters, will recommend your company to their friends is low. In addition, a neutral attitude will allow them to prefer your competitor to your company if it provides its customers with a discount or some additional services for the same price, provided that you do not have similar promotions and offers at that time. These people are happy with your company, but it is very easy to lose them if competitors make a better offer for them.
3. Critics– those who rated it 0 – 6 points, also called “detractors”. This group of people who are dissatisfied with a product or service will probably never come back to buy something again. Moreover, people who give the lowest scores may make their criticism public, for example by writing negative reviews on the Internet, or by circulating bad reviews about your company on social networks and blogs. This phenomenon can demotivate your employees and also cause serious damage to the reputation of your company, which will certainly affect the level of sales and lead to a drop in profits. People who remain dissatisfied after purchasing a product or providing a service are dangerous for the company, as they can negate all the efforts of managers and employees to create a positive image of the company.

The final result of the study is the calculation of the customer loyalty index, which is determined by the following formula:

For example, The company collected responses from 100 customers during a survey.

5 reviews – from critics who gave 0 – 6 points.

10 – from neutrals who rated the company's work 7-8 points.

So, from 85 we subtract 5, we get 80, divide by 100, get 0.8 and multiply by 100, as a result we have a customer loyalty index of 80.

According to this formula, the index can vary from minus 100 points to plus 100. In the first case, all customers did not like the company’s work, they are all critics (-100 points), in the second case, all customers assessed the company positively and they are all promoters (+ 100 points), ready to recommend the brand to their friends.

Depending on the score the person gave, you can ask additional questions. If the client rated the product highly, you can ask him what exactly he liked, but if the scores are low, then the question is asked what was not satisfactory, what needs to be improved in the company’s work.

Based on the answers to additional questions, you can draw conclusions about the strengths and weaknesses in the company’s activities; based on the analysis of this data, you can change the company’s policies, apply other marketing tools, improve interaction with customers, and also provide a service that is more convenient for the buyer.

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A practitioner tells

NPS – a simple customer loyalty tool

Maria Turcan,

manager of the company "Umnitsa", Chelyabinsk

More than half of our company's sales come from regular customers, so we have made a key bet on maintaining their loyalty. Having abandoned complex marketing market research, we came up with a simple method that allows us to assess customer loyalty and, based on this index, build a long-term strategy for cooperation with our customers. When selling a product, we always conduct a survey of consumers, regardless of the amount and volume of purchase, and invite them to evaluate the work of our company using a ten-point system.

Next, we collect the results, calculate the customer loyalty index, and based on it we plan our activities, of course, focusing on other marketing research. But at the same time, the NPS index is very convenient, as it allows us to assess in the simplest form customer satisfaction with our products and the work of our company in general. The research itself is included in the marketing development plan. You can compare the NPS index both with your own indicators for previous periods and with data from competing companies. We also not only research the opinions of our customers, but also have introduced several different bonus programs, thanks to which our consumers can receive bonuses when purchasing goods. We also abandoned campaigns to provide our customers with discounts on goods; instead, we made bonus programs flexible and convenient, created a virtual club of loyal customers, providing them with additional services.

How to implement NPS customer loyalty index

Companies can determine the customer loyalty index in various ways. For example, many enterprises with a developed network of branches install electronic devices at their points of sale that allow a person to evaluate the company’s performance. For surveys, software products are used that display answer options on the screen and store the results of customer surveys in special databases.

Financial organizations use paper cards, often in the form of emoticons, to calculate the customer loyalty index. Depending on satisfaction with the service, the client can choose a green, yellow or red smiley and put it in a special basket. Green means complete satisfaction with the service provided, yellow means a neutral attitude, red means the client evaluates the service negatively.

Online stores do it even simpler by placing simple voting plugins on their website. But it is worth considering the peculiarity of collecting information on sites on the Internet: surveys should be unobtrusive and not take a long time from the user.

You can also collect information to form a customer loyalty index through phone calls and SMS mailings. Most often, after purchasing a product, a call center operator calls a person and asks a question about the quality of service and satisfaction with the purchased product and service.

The disadvantage of remote methods of collecting information is that a dissatisfied client simply will not answer the letter, will reject the operator’s call and will not express his negative opinion about the product or service. Thus, a person will remain dissatisfied, but will not be included in the statistics, which will distort the real state of the NPS index, and this may lead to erroneous marketing moves on the part of company management.

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What affects NPS indicators

Determining significant factors using only one customer loyalty index is an extremely wrong decision, since with an NPS value of 30 points, a sports equipment store may be objectively the worst in its field, and with almost the same indicator, for example, 35 points, the operator providing access to Internet network may have 95 percent of the market in a particular city. It seems that the customer loyalty index is almost equal, but one company is an outsider, and the second, on the contrary, occupies almost the entire market.

What objective factors influence NPS assessment? How can you tell if your NPS is good or if you need to work on improving it?

In total, there are two main factors influencing the customer loyalty index.

1. Competition.

The more competitive certain markets are, the more normal the average NPS level is. For example, average NPS values ​​characterize such areas as banking, finance, insurance, and medical. If a company produces some complex electronic equipment, the market of which is not as saturated as, for example, the market for paid medical services, then the NPS index should be above average, because the competition is lower.

Average NPS score for different business areas. Banking – 0, auto insurance – 22, healthcare – 27, airlines – 36, travel – 38, hotels – 43, eCommerce – 45, Internet services – 48.

1. Customer tolerance.

Customer tolerance has a significant impact on the loyalty index. Often people are extremely straightforward in their statements about goods and services.

How to increase and maintain a high level of customer loyalty index

In the process of activity, companies need not only to conduct customer loyalty research, but also to constantly maintain the NPS level. This requires a quick response from management to information received about errors in the work of personnel. You also need to identify shortcomings in real time and try to create an ideal system of interaction with customers. Thanks to constant checks of activity using checklists, sellers become professionals in their field, which allows them to work with consumers in such a way that they are satisfied with both the service and the product itself. Every customer who is satisfied after purchasing a product is likely to use the company’s services again and will recommend the company to their friends. The more satisfied customers there are, the higher the number of promoters will be and the longer the NPS rating will remain high.

The use of new, modern innovative technologies allows companies to improve sales processes and eliminate violations, which, in turn, has a positive effect on the customer loyalty index and can even increase it.

When collecting information using electronic devices, various additional questions may be displayed on the screen, depending on the assessment. For example, if a person was satisfied with the purchase and is a promoter, after he gave a rating of 10 points, you can display the following question on the tablet screen: “What did you especially like about our store?”

If a person gives a low score, then additionally, for example, the following message can be displayed on the screen: “What would you improve in the work of our store?” If the main question when researching the customer loyalty index requires answers in points, then all additional questions should contain answers according to pre-prepared text lists.

All collected information on the customer loyalty index immediately goes from electronic devices to a common database. The advantage of this method is that it is possible to evaluate both one individual store and obtain general data, thus generating a report both for one point of sale and for the activities of the entire chain of stores as a whole.

Also, with this research method, reports are generated in real time, which allows for an instant assessment of the company’s activities and timely adjustments to it. For example, having received data for two nearby stores, you can analyze why the index is higher in one of them and lower in the other, thereby comparing other indicators, identifying problems and improving the performance of a point with a low NPS index.

A practitioner tells

How we increase our customer loyalty score (NPS)

Anastasia Orkina,

Executive Vice President of Marketing at VimpelCom

We constantly analyze customer data, which increases the NPS index. For example, by assessing information from customer devices, we obtain information about the quality of voice communications in a given area. When developing new tariff plans, we try to study how people accepted the previously introduced tariffs, which services they use more, and which ones they prefer. Subscribers' assessment of the quality of services provided allows us to make changes and improve our service. For example, we conducted a study and concluded that contacting a call center is not popular and clients increasingly prefer to resolve any issues through online services, often independently and without the help of specialists, so we relied on the development of such services and began to introduce online service channels.

How else can you maintain a high level of customer loyalty index?

The NPS system involves not only direct collection of feedback on the company’s performance and customer opinions. There are a variety of loyalty programs that help managers understand how customers feel about their business. For example, retail chains use various loyalty programs, bonus programs, and sales in their activities. The Cashback system is very popular, suggesting a return of 5% of the check amount to a special discount card. These points can be used to pay for part of your next purchases. Such programs are profitable because they allow people to get a discount on their next trip to the store, and companies can retain their customers.

Online stores also use various customer retention and feedback systems. When ordering goods on the website, the buyer can receive the most favorable discounts, and he is also awarded bonus points in his personal account, which can be spent on his next purchase. Referral programs are also very popular, when in their personal account each user can receive a special link, following which a new buyer will be the owner of an individual discount. By distributing such links, users themselves attract new customers to the online store, for which they receive additional bonuses or discounts on products for each referral.

Also, large chain stores use special bonus programs, issue gift certificates and cards, the purchase of which is much more profitable than usual. Many companies enter into agreements with each other. This is how, for example, connections between banks and retail trade enterprises work: by buying a product in a store and paying for it with a card from a certain bank, a person can receive bonuses or a good discount.

The customer loyalty index is also positively influenced by constant monitoring of the activities and prices of competitors, this allows companies to quickly change the price list for their goods and services, as well as provide discounts to certain groups of people.

Economic and emotional customer loyalty

Bonus programs to motivate customers, as well as the provision of favorable discounts, undoubtedly stimulate people to make repeated purchases, but are they still satisfied with the purchase and are completely loyal to the company?

Enterprises that plan their activities to retain old and attract new customers, correlating them only with bonus or discount programs, sooner or later may encounter conditions under which it will be impossible to provide a discount or continue bonus programs and this activity will turn out to be economically unprofitable. At the time of crisis, people tied to companies only by economic factors can easily leave for competitors or postpone the purchase, waiting out difficult days. Thus, a client’s loyalty to a company, based only on economic factors, is not some kind of absolute indicator of the success of an enterprise and does not guarantee stable profits in the future.

It is also a mistake to believe that a company can bind a client to itself by offering him some unique product or service that cannot be purchased from another company. As the global economy has shown, no matter how complex a product is, no matter how unique it may seem, sooner or later competitors always appear, and often their offer is significantly more profitable for the buyer.

For the company, the most profitable thing is the emotional attachment of the client, when he is guided in his actions not by stingy economic sense, but by strong emotional motivation. To do this, enterprises need to establish business processes in such a way that a person receives only positive emotions at all stages of interaction with them. To do this, the manager needs to organize the company’s activities in such a way that it works like clockwork, all mechanisms are convenient for both employees and customers, and the staff must be as competent as possible in their field, polite and loyal to each client. Having made a purchase or received a service, a person should be as emotionally satisfied as possible. He should tell his friends about a great company where everything goes quickly, conveniently and efficiently. Thus, the person himself will not only be emotionally loyal to the company, but will also describe its activities in vivid colors and positively to his social circle - your potential clients.

A striking example of establishing emotional loyalty between a client and a seller is the STV INK company, whose employees not only advised their customers over the phone about the capabilities of modern computer equipment, but also offered to try playing computer games on computers assembled by this company in one of the nearest branches. Next, the person received the address and time at which his visit to the office was scheduled, where the potential client was warmly greeted by employees, they explained everything to him, showed him the capabilities of the equipment, and even tested computer games together. A satisfied client entered into an agreement for the supply of equipment, and then also recommended the company to his friends. Thus, by relying on the emotional factor of cooperation between the company and the buyer, the company was able to become a leader in its market segment and increase profits many times over, scaling the network of branches throughout the country and making the consulting service loyal to the client.

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How to establish feedback with respondents who have become part of your company's customer loyalty index

The creator of the NPS customer loyalty index system, Fred Reichheld, argued that this indicator of customer loyalty itself is undoubtedly important, but even more significant are the actions of the company’s head to attract and retain promoters, that is, people who speak highly of the company’s activities and are key players in the NPS system. It is important not to obtain the NPS index, but to be able to quickly use it.

1. Critics: Make a personal connection.

The NPS ecosystem itself does not start with a company. To successfully establish feedback, a number of measures are required to maintain cooperation between the company and the consumer. The purpose of these measures is to let customers know that you care. Even if the person was dissatisfied, but the company solved the problems that arose, 70 percent of such outcomes will be in favor of the company, and the buyer will still remain with it.

The number one mistake businesses make without fully understanding the NPS system is abandoning customers named by critics. Firms consider such consumers to be lost forever, but this is completely wrong: even a customer who remains dissatisfied can turn from a critic into a satisfied promoter.

If clients, for example, after a free trial service begin to criticize both the product and the company, this only means that these people care, they want to improve the service with their comments or make the company’s services better. As soon as the company fulfills their conditions, these initially dissatisfied customers can become those same promoters and begin to advertise your brand among their acquaintances, friends and colleagues.

It can be assumed that the best way to re-attract customers who have abandoned your company would be to send them personal messages in which they will be asked to answer the question of what they didn’t like about the product, service or in general what they didn’t like about the company, as well as asking for advice what and how they would like to change and improve. The essence of all these actions is to collect information that allows you to improve the perception of your company and your brand by potential buyers and service customers.

For example, to solve problems that your customers have, you can offer them a free instruction manual for the purchased product by posting it on your website, and also place sections with drivers for electronic devices there.

You can extend the period of free use of your software product, offer discounts when upgrading to an advanced paid version of the software.

1. Neutrals: attract them before they become too numerous.

Neutrals are so named because they are generally indifferent to your products: there is no negative feeling, but they also do not evaluate your product positively. Neutrals seem to be in thought, waiting for what will happen, and only then they will decide on their choice or refusal.

But since neutrals respond very poorly to feedback, unlike critics and promoters, attracting them is a non-trivial and very difficult task. According to research, only 37 percent of people in this category responded to feedback.

Neutrals, due to their position, do not have a direct negative impact on business, but, being somewhere nearby, without taking any actions, as if hanging in anticipation, they are able to begin to look for better opportunities for themselves. Your competitors may find them, and your neutrals will quickly become their promoters, strengthening the position of their rivals in the market they share with you. If this category is not attracted to purchases, their number can grow like an avalanche, and accordingly, if your competitors have any advantages, this whole huge mass of neutrals can immediately go to them.

To attract neutrals, you can use the following methods:

• Offer them discounts or upgrades to your service level.

To attract neutrals, you can use personal, exclusive discounts; attract them to you by providing them with the best conditions of service.

• Send them emails with product updates.

Probably, having become acquainted with your products for the first time, neutrals at that time did not find an attractive offer for themselves. But this does not mean that they have completely abandoned your services and will not return to your store or website. Offer them something new in your email newsletter, make your product offering more interesting than your competitors. Perhaps neutrals who would never visit your website again will click the link in the email and check out your updated product range when they receive it.

1. Promoters: Express your gratitude.

The most profitable customer segment is promoters. They buy the product, are satisfied, and recommend it to their friends and colleagues. But you shouldn’t take the presence of this category of clients for granted, they didn’t just appear out of nowhere, something in your company and services attracted and retained them. If you understand what promoters liked so much when interacting with your company, you will receive a unique tool for enterprise growth and increased sales. Feedback from this category is very important because it allows you to understand what attracts them to your company. Loyalty and gratitude programs help establish such a connection; they will not only allow you to analyze the data received, but also help strengthen relationships with promoters and will make them your regular customers in the future.

To resolve feedback issues with promoters, you can use the following methods:

• Thank them. Send a letter of personal gratitude by e-mail, give your company paraphernalia, the main thing is that your clients see and know that they are remembered and appreciated.
• Invite them to check out your other projects. Since promoters are initially ready to recommend your company to their friends, it would be a good idea to introduce them to your other products, as well as give them personal discounts.

1. Non-respondents: reach them.

When conducting an NPS survey, only 60 percent of buyers agree to answer the questions. The remaining 40 percent are people who can also become clients of your company. But in fact, attracting this category of consumers is extremely difficult; it is easier to change the opinions of critics than to get feedback from those who did not respond. But you shouldn’t immediately give up working with such a huge group of potential clients; you should still try to reach out to them. Although these people have no impact on customer loyalty scores, they can have a significant impact on your business and your earnings in the future, so take this into account.

What problems can you encounter when implementing NPS (customer loyalty index)

The NPS customer loyalty assessment system, despite its simplicity and effectiveness, has a number of disadvantages. First of all, the NPS methodology has been criticized due to the need to separate it into economic and emotional components. Also, the problems of technology include the fact that it characterizes the theoretical possibility that the client will make a repeat purchase, a kind of probability of this event, but does not give firm confidence that this will happen in reality.

The question itself is very vague: “Will you recommend your friends to visit our store and make purchases in it?” Yes, promoters are ready to advertise your company to their friends, but this does not mean at all that a well-disposed consumer and his entourage will come to your store and make a purchase there. Also, the customer loyalty index assessment system does not take into account acquisitions that have already taken place from your competitors, and possible similar transactions in the future. You should also take into account that a person cannot be completely confident in his future and the fact that he is going to come to your store and re-purchase a product does not mean that he will definitely do so.

It should be noted that purchase satisfaction and customer loyalty do not always have a direct relationship. A person may be satisfied with the purchase of a product, but the second time he will go to competitors and purchase products from them. Therefore, purchase satisfaction and loyalty in some individual cases should be taken into account separately.

To use the customer loyalty index most effectively, you need to ask them not only one main question, but also a number of clarifying ones. For example, a client, having assessed the company’s work, gave not 10 points, but 9. Yes, he is still loyal and is a promoter, but how do you find out why he wrote off one point, what motivated him to give not the highest rating, what circumstances influenced this? Additional questions allow you to collect statistics and, based on it, improve the company’s activities, increasing the customer loyalty index.

It is also necessary to take into account that NPS can perform well in a calm market, but when there is high demand for a new product, reviews can be fanatical and not entirely objective.

For example, when a new game console enters the market, stores in the first days are crowded with customers wanting to purchase the new product. Excessive demand for a new set-top box will not give objective estimates according to the NPS system. When interest subsides, calm consumers will go to the store, who will soberly evaluate the product and service and give objective answers to the questions asked to obtain a customer loyalty index.

It is also worth considering the factor of when the purchase is made and statistics on customer reviews are collected. Often, at the beginning of sales, reviews are very positive, but then there is a certain decline and even customer indifference.

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A simple example. The buyer comes to the store and purchases a SLR camera; during testing, polite consultants talk about the technical characteristics of the device and take test pictures. The customer goes home with a new camera, satisfied with their purchase. At this point, he is ready to give the store 10 out of 10 points. But after a week, having already become accustomed to the new technique, the client begins to notice noise in the photographs in one of the areas of the image: it turns out that this is a group of dead pixels on the camera’s matrix. The client is forced to submit the camera for diagnostics and warranty repairs, wasting his time and nerves. And if at this very moment they call him from the feedback processing center and ask the buyer’s opinion about the store, it is very unlikely that he will answer with the same positive 10 points out of 10. Most likely, the person will be disappointed with the purchase, because he bought a low-quality product and cannot You can fully use it by returning the camera for repair. But it should be borne in mind that the client’s opinion may again change to a positive one if he did not experience any difficulties when accepting the camera for repair or if the device was replaced with another, new one that does not have any defects.

Thus, the example shows that the timing of collecting reviews is extremely important when creating a customer loyalty index.

Also, experts who criticize the system for collecting NPS reviews and forming a customer loyalty index point to too high a bias in the breakdown into buyer groups. For example, the category of critics contains everyone who gave both 0 points and 6, but often those who gave a rating of 6 when purchasing in a regular store can rate the service 10 points when making a transaction through an online store website. Neutrals are unfairly removed from the NPS calculation formula, but this is a huge group of customers whose opinion is also important for the store.

Very often NPS has to be calculated for each specific outlet. For example, it is inconvenient for a person to buy a product in a store located on the other side of the city, which is difficult to reach by public or personal transport, so this buyer would never purchase the product there or would rate the convenience of the store as 1 – 3 points. But, having used the services of the same store through the website and received free delivery of goods to your home, the same client can give 10 points in the review on the web page.

In addition, there are industries and areas of trade in which the NPS index most likely will not reflect the real state of affairs of the company. For example, a person, by his psychological essence, is unlikely to recommend to his friends the purchase of a certain brand of toilet paper, but in a store he will rate this product 10 points, entering the group of promoters according to the NPS system, but not being one in this particular case.

As we can see, the customer loyalty index is an excellent tool for business in terms of assessing customer attitudes both to goods and services, and to the company as a whole. The customer loyalty index is very easy to use, provides good analytical data, allows you to build a flexible marketing policy, conduct convenient and profitable promotions, introduce discounts and bonus programs. But this indicator is also imperfect and has a number of significant drawbacks, therefore, when using NPS, it is necessary to take into account all the features of doing business in each specific case, and when developing a long-term company policy, rely not only on the customer loyalty index, but also on other market research systems.

Information about the experts

Maria Turcan, manager of the company "Umnitsa", Chelyabinsk. "Clever girl." Field of activity: production of goods for children's development. Territory: head office – in Chelyabinsk; representative office in Moscow; stores - in Chelyabinsk, Moscow, Yekaterinburg and Krasnodar. Number of personnel: 100.

Anastasia Orkina, executive vice president of marketing at VimpelCom. "VimpelCom" is part of the VimpelCom Ltd Group of Companies, which is one of the world's largest telecommunications holdings. The group's companies provide services under the brands Beeline, Kyivstar, Wind, Infostrada, Mobilink, Banglalink, Telecel and Djezzy. As of June 30, 2015, the number of mobile communications subscribers of the Civil Code is 213 million people. Official website - www.vimpelcom.com.

The resource NPSBenchmarks.com - a data repository on indices of global companies Net Promoter Score (customer loyalty index) - has published information on best practices in the field of service. According to the calculations, high NPS values ​​are in the following industries: technology – 61%, consumer goods – 46%, hospitality – 52%. Global retail leaders Amazon and Costco (industry leaders in the top 100 international companies by market capitalization) have NPS of 69% and 79%, respectively.

Unfortunately, in Russian practice there is no consolidated data on loyalty, and NPS as a method of assessing loyalty is not used everywhere. UBS Evidence Lab published figures for Russian retailers: of the 14 largest players, five have positive values. The highest NPS was received by Lenta - 7% and Okay - 3%. In the banking sector, Sberbank loyalty reaches 59%, in telecommunications Tele2 - 35%, Megafon - 17%, Beeline - 25% . And if in the West there are more and more companies for which the connection between the level of service and staff motivation is obvious, then in Russia business does not often think about this. In the HeadHunter survey, 96% of participants responded that the HR service should not be involved in internal and external customer focus at all.

The main problem of Russian companies remains the gap between plans and actions. In particular, the study, which involved 419 Russian companies from 39 regions of Russia, revealed a dissonance between real business processes and stated values. Another contradiction, according to a study in which 313 Russian companies took part, was the fact that managers willingly declare the primacy of the client’s interests, but do not take any action to assess their satisfaction. A common problem for companies in low-competitive markets is that those that emerge first set records for profits and growth rates, believing the business structure to be the secret to success. As a result, an extremely small number of players pay serious attention to service and the fight for customers. Why do something if everything is fine? And this is the main trap for owners. Nobody thinks that the reason for success is simply the lack of competition.

In the West, in a saturated market, more and more companies are building their strategy on customer service. If we compare the dynamics of consumer opinions and company value, the connection is obvious. Thus, Amazon’s capitalization in 2000 amounted to $16.62 billion, in 2010 - $58.76 billion, in 2016 - $422.83 billion. Thus, an increase of more than 25 times with an NPS of 69%. At the same time, Walmart, which became famous for a lot of negativity from customers, saw its capitalization fall from $239.44 billion in 2000 to $222.02 billion in 2016. The most successful example is Apple, whose market value exceeds the total capitalization of public Russian companies. The company was the first to elevate customer experience to the rank of corporate strategy. When building a sales system at Apple, top management removed revenue from the sellers’ KPIs, leaving them with NPS indicators and time spent servicing the client. Steve Jobs believed that if you work on an emotional level, making every interaction enjoyable for both customers and employees, they will repay their loyalty. As a result, Apple customer satisfaction reached 89%, profit per employee exceeded $110,000, and revenue amounted to $500,000 for the year.

A focus on service is not only the prerogative of companies focused on the above-average segment. An example of this is the American low-cost airline Costco, the world's largest network of club-type self-service warehouse stores. An annual membership to the Costco Club system in the US and Canada costs between $55 and $110, in Spain from €25 to €30, and in the UK £20. Costco stores offer hearing aid centers, opticians, gas stations and many other related services. At the entrance to the hypermarket there are greeters whose task is to greet the guest. Costco's capitalization in 2000 was $18.03 billion; in 2010 - $25.7 billion, in 2016 - $73.91 billion. The company's value has quadrupled with an NPS of 79%, and profit is $2.35 billion.

In Russia, only a few have yet realized that the loyalty indicator is as important as EBITDA. Some major players are making efforts to change the structure towards customer centricity. Aeroflot's NPS, which with the arrival of Vitaly Savelyev seriously changed the approach to service, grew from 44% in 2010 to 72% in 2017. In 2016, the company’s capitalization for the first time reached a maximum of 116 billion rubles. Unfortunately, this is the exception rather than the rule. For many, NPS remains a formal indicator: the NPS of the Pobeda airline, which only the lazy did not scold, was 72% versus 67% of Aeroflot in 2015.

At the same time, young Russian companies are finding interesting solutions using service as their main competitive advantage. Oleg Tinkov returned to the Forbes ranking this year, in particular due to the fact that he took a completely new approach to the creation of the Tinkoff Bank service, which took second place according to the results of the popular vote banki.ru. There are no queues at the bank; all documents are delivered to clients by “representatives”. The office space is open-space, and the atmosphere is more reminiscent of a democratic IT company than a strict bank. Clients receive prompt service and a user-friendly interface, and Tinkov receives a highly motivated and dedicated team.

It should be obvious to businesses that external loyalty never comes before internal loyalty. The productivity of employees also depends on it, because labor productivity is the main point of growth. Revenue per employee at the Western low-cost airline Costco exceeds $610,000 per year. For comparison: a good result in Russia in retail hardly exceeds $100,000. It is worth looking for a solution in working with the motivation and involvement of employees. In 2014, economists at the University of Warwick showed that employee productivity increases by 12% or more if they are happy.

In the Russian HR management system, practically no attention is paid to this issue, but market experience shows that the mood of the team is directly proportional to labor productivity. Several years ago at Uyuterra we radically changed the approach to managing employees in the field, turning the manager from a “boss by position” into a leader and mentor. We launched large motivational programs based on gamification (the use of games in training and uniting staff). We relied on non-material motivation, included the mood of employees in the list of KPIs for managers, and began to cultivate heroism for the sake of the client. As a result, productivity more than doubled in two years. Last year, we launched a similar project with the Far Eastern chain of hypermarkets Samberi, collecting over 2,000 examples of outstanding service in a few months, when employees did more for the client than was required by standards. At the end of the year, NPS reached more than 60%, which is almost impossible for hypermarkets. Now the company is approaching revenue of 50 billion rubles.

The NPS customer loyalty index shows the degree of satisfaction of your customers: how satisfied they are that they will recommend you to their surroundings. The calculation of the NPS index must be carried out constantly at some intervals in order to have an idea of ​​​​customer sentiment. We will examine this issue in more detail in our article.

NPS consumer loyalty index

This is an indicator that tells an entrepreneur how strongly his customers are committed to his product or his brand. More precisely, this indicator characterizes their willingness to make repeat purchases in your store (use your services again if you provide services).

Moreover, it shows not only how willingly customers will come to your store again, but how willingly they will recommend it to their surroundings - friends, relatives, colleagues, etc.

NPS loyalty index stands for “NetPromoterScore”. If translated from English literally, this means “Net Support Rate”, meaning, of course, customer support for your product or brand.

Adapted into Russian, this term is translated as “NPS Loyalty Index”.

Customers for life. How to build long-term relationships with buyers. Video

NPS index calculation

Calculating your customers' loyalty to you, your business or your product is quite simple. This is done in three stages.

1. First, you need to conduct a survey of customers, asking them one single question: “With what probability from 0 to 10 are they ready to recommend your company (product, mark, brand) to their environment?”

“From 0 to 10” is a ten-point scale, where extreme values ​​indicate:

• 10 – “I will definitely recommend your store (brand, brand) to all my friends, relatives, and colleagues!”;
• 0 – “I will never, under any circumstances, recommend you to my circle!”;
• From 0 to 10 – variations from “Never” to “Always, definitely”.

• Those who rated the likelihood that they would recommend your business to their surroundings at 9-10 points. In the terminology of the developers of the loyalty indicator, this category of clients is called “Promoters”, literally “Promoters”, that is, those who will definitely support and recommend your business to others;
• The second group are those who rated this probability at 7-8 points. These are the so-called neutral buyers;
• The third group is those who rated support for your brand with a probability of 0-6. In business terminology, this category of buyers is called “Detractors”. Literally translated from English, this term means “Slanderers” or “Those who distract”, that is, opponents of your brand, those who do not like what you sell.

When calculating the NPS index, you can not pay attention to the exact translation of the terms; the essence and importance of the loyalty indicator does not depend on them; they are given for general information.

3. The third stage is actually the calculation of the NPS index, which is the difference between those who will definitely support you and those who will not do this under any circumstances.

Calculation formula:

NPS Index = Share of supporters – Share of critics

Let's say you surveyed 100 customers.

Of these, 55 people (55%) answered that they would definitely recommend you to their circle.

Another 30 people (30%) said that everything is absolutely not important to them, they are not interested in anything, they are neutral about everything.

And the third group, 15 people (15%) are those who didn’t like you, who won’t recommend you, your opponents.

NPS indicator - calculation:

Index NPS = 55 – 15 = 40

The survey itself in order to identify loyalty of your customers can be done in the following ways:

• Survey directly on the sales floor, recording the answers;
• By offering the buyer a questionnaire, for example, at the checkout;
• By phone;
• Online on the company’s website (not only applies to online stores).

The latter method, by the way, is the most convenient for both the entrepreneur and the client, when you don’t have to waste time filling out forms and communicating with store employees; you can evaluate your attitude towards the company at any convenient time.

Advantages and disadvantages of the NPS index

The main advantage of measuring your customer loyalty index is that it is simple and accessible to any entrepreneur. The question asked of customers is extremely specific and does not require time to think, search for solutions and answer options.

Despite its simplicity, this method is quite informative. It shows quite accurately how your business satisfies your customers and clients.

The disadvantage of this method, according to experts in the field of marketing, is that it is still somewhat one-sided, so the assessment is made on the basis of two categories - those who support the brand and those who criticize it, when a large number of customers are neither the first nor the second. They do not consider themselves to be in the second category.

In addition, calculating the NPS index is one of the methods for assessing business performance. When developing important management decisions, experts and specialists recommend relying not only on this method, but also on the results of broader and more thorough research.

At the same time, it is necessary to calculate the loyalty indicator; this must be done constantly, with some frequency, in order to know how the attitude of customers towards your business is changing so that, if necessary, you can quickly make the right management decisions.

Increase customer loyalty with the Business.Ru CRM system. In the program you can save all information about communication with the client: telephone calls, correspondence, execution of contracts.

How to increase your NPS index

There are no recommended values ​​for this index; it all depends on the type of business and the current situation in it.

Some experts say that it should be no less than “50” and, if it is lower, it’s time to do something. For someone, more precisely, for some business and for some situation, the value “30” may be satisfactory.

General rule: the index should not be negative. In this case, it turns out that there will be more of those who are definitely in a bad mood towards you than those who are definitely in a positive mood.

In this case, it is urgent to take action. This means that it is necessary to come up with and implement one or another or several customer loyalty programs and loyalty increasing programs. There are many ways to do this:

1. Discount loyalty program. These are various discounts, discount cards, including those with the so-called CashBack, that is, cash back. This is when from each purchase a small part of its value, usually about 3-5%, is returned to the card holder (buyer);

For the first time, twelve years ago, customer loyalty index(NPS, Net Promoter Score) was described by Frederick Reichheld in the Harvard Business Review.

The method itself is simple - the company asks customers to answer just one question: “How likely are you to recommend us to friends and colleagues?” on a 10-point scale. The answer “0” means “in no case”, “10 points” means “I would definitely recommend”. Based on the scores obtained, consumers are divided into three groups: 9-10 points are supporters, 7-8 points are those who don’t care, and 0-6 points are critics. All shares are calculated as percentages.

The customer loyalty index is the difference between the shares of supporters and detractors. Sometimes NPS can even be negative. In the West they are used to measuring NPS. Whoever has more of it satisfies customers better. Those who have less clearly do not want to work on themselves.

• Customer loyalty program: examples and tips for business

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Online clothing, footwear and accessories retailer Zappos, which was acquired by Amazon six years ago, knows how to listen to consumers like no other. One day, his employee answered client questions for five hours straight. He couldn’t decide whether the boots suited him or not, or whether it was better to take moccasins, although sneakers looked nicer. In any Russian store they will hang up after 10 minutes of such doubts. But Zappos values ​​every customer, even if he is a bore, and never records the average call time.

At Microsoft it’s the same story: everything is for the client. The company has an entire department dedicated to audience feedback. More than 300 specialists in different representative offices around the world ask consumers whether they are ready to recommend the product line to their friends, and then, based on the answers, they calculate the customer loyalty index - NPS. In the West, this indicator is like a barometer: it determines the KPI of the entire corporation and the size of employee salaries depends on NPS.

Advantages and disadvantages of calculating customer loyalty index

The main advantage of the customer loyalty index is its simplicity and accessibility for any company. All questions asked to clients are precise and specific. It doesn’t take buyers much time to answer them. But, despite its simplicity, this method is very informative, since it allows you to find out exactly whether clients are satisfied with your work.

Marketing experts say there is a downside to the method. It is one-sided, since during the study information is obtained from supporters and critics. At the same time, the overwhelming majority of buyers are not included in either the first or second groups.

Determining the customer loyalty index allows you to objectively assess business performance. According to experts, when developing a marketing campaign and making important decisions in company management, you need to rely not only on this method, but also on the results of larger and more in-depth research.

At the same time, loyalty indicators should be calculated regularly, with a certain frequency. This allows you to learn about changes in customer attitudes towards the brand and, if necessary, urgently make the right management decisions.

Which companies regularly use customer loyalty index

Companies around the world use the NPS (Net Promoter Score) index. These include small startups and multinational corporations. The reasons for such widespread use of NPS are simple - simple calculations, rapid collection of information, direct correlation with income and comparability with competitors in the field of activity. All this ensures ease of use of the technique. Based on calculations, it is convenient to draw a conclusion in which direction the company is moving, make important management decisions, calculate KPIs, open or close entire directions, pay or cut bonuses to employees.

Almost all large companies use NPS in their work: Amazon, Apple, Microsoft, Zappos, Dell, Walmart, Procter & Gamble, Sony, Costco and others. In some ways, NPS has become a kind of “de facto standard.” Amazon's NPS is approximately 70, Apple - 72, Costco - 77, and USAA, a little-known financial and investment company in Russia, has 87.

Russian companies operating in the retail, insurance, telecommunications, banking, restaurant and hotel businesses, air and railway transportation industries also actively use the index. Among them are MTS, MegaFon, Beeline, Ingosstrakh, Rosgosstrakh, Alfa-Bank, Aeroflot, etc.

What exactly will the customer loyalty index give you?

1. Stable development and customer retention

Extensive research has shown that NPS is one of the main indicators of growth. If this indicator exceeds competitors, it means that your company has the most significant market share.

Gartmer research shows that 65% of startups already have an established customer base. It costs five times more to attract new customers than to retain existing ones. Thanks to the loyalty index, you can objectively assess how satisfied customers are with the company’s work and how many customers remain with it after the first interaction.

The loyalty score can be used as a development method to turn a company's current growth into sustainable growth.

2. Product sales management

Based on the NPS indicator, you can make decisions regarding the company's products themselves.

The loyalty index allows you to set the right priorities based on customer needs. It makes it easier to receive feedback, which allows you to quickly change the order of sales of goods.

3. Marketing

Based on Verizon research, 85% of new customers learn about a brand through word of mouth. If your NPS scores are high, you won't have to spend a lot on advertising and marketing campaigns. Clients will come on their own.

With NPS, marketers can measure customer sentiment and opinions and then provide feedback to the entire company. This ensures the coordinated work of all departments of the company in achieving a common goal - meeting the needs of customers.

If you use the customer loyalty index together with analytical tools, you can predict how customers will behave, that is, create so-called behavioral patterns.

4. Personnel potential management

NPS allows you to measure how satisfied your employees are with their jobs. This is especially true for companies operating in the service sector.

The customer loyalty index can be used to choose a new vector of corporate culture. This indicator also allows you to find out what employees think about the new corporate policy.

5. General KPIs and reporting

NPS scores can be used as the sole metric for customer satisfaction. To do this, you need to regularly calculate the loyalty index and conduct quarterly reporting. This will allow you to receive meaningful insights and build long-term plans for business development.

If you correlate NPS with financial statements, you can evaluate how the company is developing. For example, if profits grow and NPS decreases, you should worry about long-term development prospects.

How to Survey Customers to Calculate NPS

Many companies install tablets in service offices and points of sale so that customers can evaluate the quality of work. At the same time, companies receive NPS (customer loyalty index). Examples of calculations vary. For surveys, special applications are often used that display answer options on the screen of a mobile device and store information based on customer ratings. The tablet with the application running is placed on special stands with a holder that protects the device from theft.

Banks and insurance companies place cards with multi-colored “smiley faces” at customer service counters. If the client is completely satisfied with the service, he takes a green card. The yellow color of the emoticon means a neutral attitude towards the service, red means dissatisfaction with the quality of work. At the exit, customers are asked to put their cards in a special box.

To obtain a loyalty index, online stores use special plugins if the resource engine is some common “boxed” CMS, or the modification is carried out by the company’s in-house specialists. Some resort to the services of third-party web services that offer to install an NPS counter on the company website. Thanks to this counter, it is convenient to conduct surveys and receive reports on their results.

Collecting reviews yourself has certain disadvantages. With this method of obtaining information, you can incorrectly design the survey form and implement it as an intrusive pop-under banner that pops up when you enter the site. Such tools irritate users, and many people mistake them for advertising. That is why they unconsciously try to brush aside unnecessary information, often without even delving into the essence.

You can collect customer opinions through phone calls, e-mail newsletters and SMS if you have a contact database. Call center operators usually call customers some time after the sale of a product or provision of a service. They also use IVR (Interactive Voice Response) systems of pre-recorded voice messages, which communicate with customers without operator participation. Such methods are often used by large online stores and mobile operators, which have contact information for their customers.

The disadvantage of receiving information through calling or emailing is that a negative client may simply refuse to participate in the survey after receiving the questionnaire by email or will drop the call because he has a bad attitude towards the brand. As a result, he will not express his opinion and will not become a respondent. Moreover, even if we are talking about a brand supporter, he can also ignore the information if the letter accidentally ends up in the “spam” folder in his mail. That is, the survey results are significantly influenced by technical problems and incorrect information.

Many organizations use not only the methods listed above, but also further expand the functionality of their CRM systems in order to successfully solve problems such as collecting information and calculating the customer loyalty index. But here it is worth emphasizing that not all “boxed” CRM systems can be modified in this way without the help of third-party key developers.

How to Interpret Customer Loyalty Index

The NPS indicator demonstrates how customers feel about the company and what its reputation is in the eyes of the audience. When calculating the loyalty index, companies want to find out whether everything is normal and what they need to work on. The NPS methodology has a general rule according to which the indicator should not be negative.

If the result of the calculations is positive, it means that there are still more supporters than critics. Accordingly, when expanding their audience, companies should work primarily on loyalty, so that satisfied customers bring new people with them.

If the result is zero or negative, it means there are more critics than supporters. Consequently, there are no prerequisites for expanding the audience and an outflow of customers due to the company’s low rating cannot be ruled out.

How to know if your NPS (customer loyalty score) is satisfactory

It is impossible to objectively assess the position of a business based on indicators alone. You should consider where the company ranks in its industry. For example, a large store may have a customer loyalty index of 30, while occupying the lowest line in the rating among its competitors. However, a telecommunications company could have an index of 32 and be the industry leader.

What do the criteria for assessing the customer loyalty index depend on? How do you know if your NPS is positive? Let's consider three factors that influence the criteria for assessing the customer loyalty index.

Level of competition

The main factor is the number of competitors in the business and the uniqueness of your selling proposition. If you work in the banking, insurance, or health care industries, average is the norm. However, if there are not many competitors in your segment (for example, you produce wireless headphones or electric cars), the index value should be quite high. This will indicate the uniqueness of your offer and positive consumer perception of the brand.

From the figure below you can learn about the optimal NPS indicators for various business industries.

Tolerance

Another factor on which NPS evaluation criteria depend is customer tolerance. This is due to the fact that consumers are very categorical about the quality of work or services that they regularly use.

Let's give an example that will allow you to more accurately understand how customer tolerance affects NPS. The Vid company has an indicator of 38. At first glance, the figure is average. At the same time, the company is one of the market leaders. The indicators of its competitors, companies A and B, are 15 and 22. The low index of the Vid company is not explained by the low quality of work. This means that it operates in a very competitive industry, where consumers do not turn a blind eye to even minor gaps in service.

Obstacles

As a rule, in order to improve an already purchased product or switch to the services of another company, the client must incur certain financial costs. To appear consistent in decisions, consumers often remain loyal to the same brand.

Problems of this kind regularly arise for SaaS companies. According to the conditions, a person must first deposit a certain amount and only then become a full-fledged client. Because of this, organizations operating in this area find it difficult to retain consumers and maintain their loyalty. This is why SaaS businesses have below average customer loyalty scores.

What is a good NPS score?

It is impossible to give an exact number. It all depends on your field of activity. However, the questions below can help you assess how good your score is.

1. Is my NPS higher than my direct competitors? If yes, the company is doing well. But to talk about the success of a business, this is not enough.
2. Is my NPS score increasing? If after 3-6 months NPS increases, this is a good trend.
3. Is my NPS score greater than zero? If it is equal to −40 and exceeds the indicator of competitors, you should not draw hasty conclusions. This figure directly indicates the dissatisfaction of your customers.

It should be understood that NPS is not measured literally. Many companies are overly concerned with growth rates and try in every possible way to improve them. At the same time, the customer loyalty index is not a quantitative metric. Rather, it is a qualitative indicator that allows you to objectively assess the state of the business.

NPS aims to become the new standard for measuring customer loyalty, but due to its simplicity, it is constantly criticized. According to several experts, NPS cannot provide a clear picture of customer satisfaction. Experts believe that firms with the same NPS score may have different numbers of supporters, neutral clients, and critics. In this regard, businessmen should pay attention not to the numbers, but to what the indicator indicates.

How to increase your customer loyalty index

How to reach critics

About 70% of consumers will again agree to cooperate with the company if it resolves a controversial situation in their favor and eliminates the unpleasant aftertaste. You need to maintain feedback with dissatisfied clients, that is, establish a trusting relationship and demonstrate your interest in cooperation. Many companies make the mistake of thinking that critics cannot turn into customers.

Here are some ways to solve consumer problems:

• Providing a free manual for using the product - for this, a download button is installed on the site.
• Extend your free trial and unlock additional features.
• Offer to use the services of third parties that can provide support to your customers (even if these companies are not associated with your products).

If you actively try to solve people's problems, it is likely that critics will turn into supporters who will be happy to talk about the actions you have taken to increase their loyalty (for example, if you have changed the product in some way).

How to reach neutrals

Customers who are neutral towards a brand are a rather interesting group. They don't like your product, but they don't hate it either. It may seem that they are waiting for something good or bad to finally decide. Clients of the neutral group, as a rule, do not give any feedback and do not get in touch. That is why it is quite difficult to work with them. It was possible to determine that only 37% of consumers from the neutral segment are ready for feedback.

At first glance, neutrals cannot harm the company's reputation. But this opinion is wrong. There are almost as many clients in this segment as there are critics and supporters. At the same time, critics act decisively, and neutrals are in search of better opportunities for themselves. They are able to stay around the brand for a long time, but if they are not involved, their number will increase.

Here are some steps you can take to improve feedback from neutrals:

1. Offer them discounts or improve the quality of service. Neutrals can be re-engaged subject to exclusive discounts and improved service quality.
2. Make an e-mail newsletter, indicating updates in the assortment. Probably, the clients of the neutral group were not interested in the product, since the first impression was negative. They had no desire to visit your site again and get acquainted with new products. Regularly sending out emails notifying you about innovations and new features will increase the loyalty of neutrals.

How to thank the “promoters”»

“Promoters” is the segment that generates the most income. However, many businesses do the wrong thing when they ignore their presence, taking it for granted. That is, companies show little or no gratitude to supporters. At the same time, they do not seek to find out the opinion of the “promoters” about the quality of the service, what exactly they like about the brand, and rely on this information for further development. Companies that pay attention to supporters and express gratitude for their feedback set the stage for future cooperation and increase their income.

You can establish feedback with “promoters” if:

How to reach unanswered people

Let’s omit three categories of clients - “promoters”, neutrals and critics, and consider another segment, the most numerous. These are people who did not take part in the survey. Considering that 60% of respondents participate in the customer loyalty index survey, it can be determined that at least 40% of customers will not respond. That is, there are even more people who ignored the survey than critics and neutrals.

In practice, it is easier to re-engage a critic than to re-engage a client who has not responded. The only way to attract such a consumer is to contact him. The NPS score is not dependent on people who did not complete the survey. However, they can negatively affect the further development and income of the enterprise.

Why is the customer loyalty index negative?

Companies with high NPS:

• produce reliable products;
• offer a decent level of service;
• provide unique offers.

But now we will look at the “leaders” in customer churn. It will be interesting to compare the mistakes of companies and understand why customers turn away from them.

Complex billing

The brand is at the forefront of Apple's advertising campaigns. This is probably why the company became a leader in the loyalty rating in 2013. Apple's score is 65 for the iPad, 70 for the iPhone and 76 for its laptop line. The outsider was McAfee with an NPS of 2 points. Other antivirus programs, such as Kaspersky Lab, have a fairly high customer loyalty index.

The McAfee result is a measure of the quality of customer service, not the overall picture. User complaints against McAfee are identical to complaints against brands with low loyalty levels. For the past six years, customers have been complaining about automatic debits from their bank cards. It's not certain that McAfee does the same, but often companies with low customer loyalty scores engage in hidden billing and aggressive selling.

Brands with low NPS often practice “refusal billing” - automatically charging a subscription before the cancellation occurs. After concluding a contract, the consumer automatically receives invoices until he cancels the product or service.

"Failure billing" isn't such a bad move. Well-known global companies resort to it. Thus, Netflix, with a high customer loyalty index, offers a free demo version that automatically turns into a paid subscription. But, as a rule, brands with good loyalty indicators do not create additional inconvenience for users. In the case of them, it is clear at what time and in what order the invoice is issued. Brands with low ratings, on the contrary, do not have a direct dialogue with the client. Their billing is unclear and opaque.

If recurring charges, such as monthly subscriptions, are part of your business's existence, make sure your fees are transparent. If billing is confusing and aggressive, customers will leave you.

Weak customer support

Companies with low NPS do not serve their customers well. In Temkin Group's 2015 NPS Benchmark, Comcast TV received the lowest score. The company's customer loyalty index was −17. In the US Senate, where plans to improve the brand's image were discussed, Comcast TV was poorly supported. This is not to say that the company has bad service. But it can certainly be called disrespectful. The staff was targeted at support as a means of conducting cold sales. Buyers wanted support and help, but did not receive it. The company still retained some of its customers, but earned a bad reputation. Many users left and never returned.

Consumer Sentiment

In 2007, most consumers were satisfied with their banks. The average loyalty score for financial brands was 30, which is not bad. But due to the global financial crisis, everything changed and people changed their views dramatically. Initially, the customer loyalty index was 40, but within two years it fell to 22. The NPS of credit card providers dropped to 11 from 27.

Changes in industries were not so dramatic. However, due to general market trends, people's mood and attitude have changed. Of course, a low-quality product and poor service reduce the customer loyalty index. However, public opinion also plays an important role in the formation of NPS. If poor-quality service is combined with market trends, the further outcome of the business is obvious, and it is almost impossible to influence this process.

After the crisis passed, clients again became satisfied with banking products. However, banking organizations involved in scandals were unable to restore their positions. HSBC's NPS this year was −24. The record poor service caused many scandals, and it was because of this that the company was unable to regain its lost reputation.

User experience comes first

To successfully overcome market trends, it is enough to release a good product and offer quality service. A bad customer experience in a dubious market is a direct path to a low loyalty index.

It is not enough to offer the consumer what he wants and needs. Care must be taken to provide a superior customer experience. In this regard, the McDonald's brand is not always successful. Despite its worldwide fame, its NPS in the US is only −8. You can compare the brand with its direct competitor - KFC. Its loyalty index is also far from ideal, but still positive. And the American fast food chain Pizza Hut, beloved by consumers, has an index of 78.

Brand awareness

A good customer loyalty index is what all companies should strive for. But if loyalty is not linked to performance, it has no meaning. Examples here include Uber and Lyft. The brands' functions are almost identical, and drivers often work for both companies. However, with obvious general parameters, the customer loyalty index for Uber is 37 points, and for Lyft - only 9. The reason is the geography of the companies. Uber gets more press and covers a wider area than Lyft, which only operates in the US. The level of customer awareness of a brand also affects loyalty.

Insurance in the USA is a developed industry. The country is highly competitive, and companies are seriously fighting for customers. Customer satisfaction with the quality of goods and services is a guarantee of high earnings for the company in the future. Enterprises that relied on the short term sank in the NPS rating. This is what happened with CIGNA, a life insurance brand. The customer loyalty index of this company today is 1. The company got involved in a scandal when it refused to recognize a client’s disability, and since 2009 it has been under government surveillance.

Let's compare GIGNA with their competitor GoMedigap. The customer loyalty index of this company is 93 points. Obviously, the problem is not in the industry (as was the case in the earlier example with banks), but in the fact that the brand refused to provide a previously advertised and even sold service.

Closing the feedback loop

United was named the worst airline in the United States in 2014. The customer loyalty index was 10 points. Compared to competitors, this situation can be called catastrophic. Southwest's NPS is 62, JetBlue's is 56, Virgin America's is 48.

For years, passengers have complained about United's performance, including flight cancellations and delays, poor food quality, baggage handling and aircraft conditions. In 2012, the company accounted for 43% of complaints. The remaining 57% goes to other American carriers. However, United monitors NPS, just like its competitors. But why is the difference so significant?

Despite tracking customer loyalty scores, United ignores feedback or takes insufficient action in response. Effective feedback is very important. If a company interacts with customers, responds to comments and eliminates them, it has every chance to increase NPS and take a leadership position in the market.

8 mistakes when calculating customer loyalty index

The main mistake companies make is when they do not measure the level of customer loyalty and satisfaction. In any case, it is necessary to determine how satisfied the audience is with the product and service, even if the company is small and has just started, it has a small audience, there is a test ahead (tender, exhibition), and there is no time for NPS yet, and even if it has never heard of customer loyalty index. If you have extensive experience in customer service and have conducted surveys many times, you still need to improve your skills and knowledge to quickly identify and resolve problems. If you're just planning to start calculating NPS, the information below will help you avoid making common mistakes.

Conducting a survey by employees working with clientsAnd

Do not assign the survey to those employees whose financial compensation and motivation depend on the results of the survey. At first glance, everything is clear. However, companies often neglect this rule. As a result, the numbers are distorted and the organization does not receive food for thought, does not know what to work on, how to improve cooperation with clients.

Why is this happening? Not all buyers are brave enough to express or write a truthful opinion. Agree, you have repeatedly told the waiter that you liked the dish, although in reality everything was different. In addition, many employees put pressure on respondents and directly ask them to give a high score.

Do not segment the customer base for the survey

1. Why did they stop collaborating with the brand?
2. Why they continue to make purchases/use the company’s services.
3. Why didn't they use the mobile application?
4. Why did you place an order once and never use the service again?
5. Will they make purchases in the future?

Even if you ask the same questions to current customers, conduct an NPS analysis by product and manager.

Interview all clients in a row

If feedback and reviews are received regularly and after each purchase you send short e-mails to your customers asking them to evaluate the quality of the service, then you are doing everything right. If you want to fully interview customers by phone, carefully select your respondents. The group of respondents should include, first of all, the most valuable respondents to you.

Don't call clients to get feedback.

The number of respondents should not be less than 65%. Only this guarantees the reliability of the survey and an objective index of customer loyalty. Traditionally, the greatest number of responses can be obtained by calling.

Choosing a phone as a means of survey is also worth doing because this way you will establish a connection with critics of the brand. Often this segment of buyers does not contact the company through other channels or click on links in e-mail messages.

Use a non-standard rating scale or change it periodically

Remember, the rating scale should not be changed under any circumstances. The standard is from 0 to 10. In it, 0 means “I definitely would not recommend”, and 10 means “I will recommend with a high degree of probability.” This is the scale most organizations use. Other options, such as 1 to 10, 10 to 0, do not allow you to compare your results with other brands or find out the exact NPS. The consumer may simply not understand what this or that rating means.

Wrong formulation of the main question

It is very important to formulate questions correctly so that consumers understand them correctly and give objective assessments.

B2B mistake: asking the opinion of one employee in the organization

If you provide services to legal entities, then most likely the issue of further cooperation is decided by several people in the organization. Dmitry Turusin, co-author of the book “Do New Things,” expressed his thoughts very well regarding a survey to obtain NPS for a PR agency. In his opinion, the positive attitude of the manager and marketing director is not a guarantee that your contract will be renewed. You need to look, first of all, at the opinion of the decision maker. You need to talk about problems with client representatives who are loyal to you and try to solve them.

Don’t monitor the indicator over time

So, you have calculated your customer loyalty index. But don't stop there. Compare the results first of all with your previous results. Dynamic NPS helps predict the pace at which the company will develop. In addition, you need to compare your results with the average NPS in the world.

The best option is to compare your customer loyalty index with the results of companies in your industry. This allows you to track the dynamics of changes in NPS, correct the situation in a timely manner by taking certain actions, and remember that the company’s financial position may be seriously shaken if the index lags behind its competitors.

Another recommendation is to use the customer loyalty index as intended. Don't draw graphs and reports that will be stored among unnecessary documents. Based on the index, create an action plan to retain neutral users and critics to turn them into brand advocates. This is where it can be helpful to ask yourself, “What can we do to exceed customer expectations and solve the problems that caused them to not give us a high score?”

Frederick Reichheld is director emeritus of Bain & Company, located in Boston, Massachusetts, USA, and the founder of the method of studying consumer loyalty.

Measuring customer loyalty levels

What is Net Promoter Score (NPS)?

“NPS” is an abbreviation for Net Promoter Score, which can literally be translated as “net promoter index.” The NPS methodology as a tool for measuring customer loyalty was proposed in 2003 by Fred Reichheld in the Harvard Business Review. Setting out to identify which indicators are most strongly associated with customer loyalty, Fred Reichheld analyzed huge amounts of data and came to the conclusion that the willingness to recommend a company to friends and acquaintances is most strongly correlated with actual loyalty. The NPS methodology he created is based precisely on the willingness to recommend the company as the only indicator of loyalty.

Over the course of several years of existence, this technique has gained wide popularity in the world due to its simplicity and functionality. Based on NPS measurements, management decisions are made, branches are opened and closed, bonuses are paid or not paid, etc.

How is NPS calculated?

The essence of the method for measuring customer loyalty in the NPS model is quite simple. It is built on the basis of two main questions asked to the company’s clients (see diagram above). Moreover, it is fundamentally important to ask current clients, and not former or potential ones. The first and main question: “How likely is it that you would recommend company X to your friends/acquaintances”? The client gives a rating on a scale from 0 to 10, where 10 means “I would definitely recommend”, and 0 means “I definitely would not recommend”. Further, based on the answers, clients are divided into three groups:

• “Promoters” (originally “promoters”) - those who gave ratings of 9 and 10. According to Reichheld, these are customers who are highly loyal to the company and are very likely to recommend it to their friends.
• “Neutrals” (in the original “passive clients”) – those who gave ratings of 7 and 8. They are considered “passive” clients who are not very willing to recommend the company, but are not very dissatisfied with it either.
• “Critics” (in the original “detractors”) - those who gave ratings from 0 to 6 - are dissatisfied clients who would rather not recommend the Company to their friends/acquaintances, and, moreover, may even “advise” against using its services.

Actually, the NPS index itself is calculated as the difference between the percentage of “promoters” and “critics” and shows the level of customer loyalty. The final value can vary from -100 (if 100% of the company’s clients are “critics”) to +100% (if all clients are “promoters”).

In addition to the NPS index itself, a question is also asked about the reasons for the score in order to identify the main drivers and barriers to loyalty. This question can be either open or closed in the form of scale ratings on several parameters.