How to Calculate Your Net Promoter Score
We prefer to do business with people whom we trust. This is natural – there are many options and competitors out there. If someone we trust vouches for a business, we have more confidence in that business’s ability to match our expectations. Hence, when a good friend recommends a supplier we at least take the suggestion seriously. When leads come to you through referrals, that is a lead that cost you nothing to obtain. Encouraging them certainly makes good business sense.
What is the Net Promoter Score?
The Net Promoter Score is a tool used to gauge the relationship between an entity and their patrons. It is a widely used metric and is an alternative to more traditional customer feedback. The score can range from -100 (very bad!) to 0 (neutral) to 100 (outstanding). Any NPS that is positive is regarded as good, with a score of 50+ being excellent.
How does the NPS relate to customer referrals? It’s a metric that we will look at later on to see how you’re faring with customer satisfaction and loyalty. Let’s see first what you can do to increase your chances of receiving referrals.
How to Encourage Clients to Promote Your Business
When we recommend a supplier to a good friend, we do so as a favour to our friend, not to the company. Since no amount of money could convince us to let them down, this is not about making cash on the side. Offering a commission could be counterproductive. So how can you encourage recommendations if not with an incentive? The only true way is by delivering a seamless service. If your service is above and beyond, referrals will come naturally. If you invest effort into creating a greater customer experience, you will benefit twice over.
You will not only increase loyalty with the customers you please. In addition, they may also become advocates of your business, creating more referrals. As a tip, you may want to look into following up with your customers. This would be a short message checking how their experience was, and if they are satisfied.
Doing so in writing, such as an email, provides them with your details proactively. This way, they can easily contact you if need be, and they can also forward your details to others. An added plus is that being proactive this way, the customer will feel cared for and valued. You will bring to their mind your business, and it will likely reflect well on your business.
"There is only one boss: The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else."
– Sam Walton
How to calculate your Net Promoter Score from feedback
When you follow up with your customer, ask them to rate how likely they are to recommend you on a scale of 0 to 10, where 10 is the highest rating. Those that score you 9 or 10 are your Promoters: there is a strong likelihood they will send you business Those between 7 and 8 are Passives, they belong in the same box as those who did not reply at all Those who score you 6 and less are your Detractors: if anything they will bad-mouth you in the marketplace. This scale is the result of extensive research and is a valid indicator of how well you are doing.
The formula is: [(Number of Promoters minus Number of Detractors)] divided by (Number of Respondents) x 100.
An Example: How Is John Doing?
Do you remember John?
He introduced himself to me at the golf club. He explained he was a building contractor that recently moved into town. That was three years ago and we have stayed in touch ever since. During that time, he has built 7 houses and acquired 4 promoters, 1 passive, and the 2 detractors.
His net promoter score is hence: ((4 – 2) / 7) x 100) = 28.5% Any positive net promoter score is good. Most customers will think anything over 5 is a compliment. Therefore, John is already doing fairly well. Over time, if he does well, his score will gradually keep climbing. Is the net promoter score a subjective measurement? You bet it is, and it has its critics. Despite this, more than two-thirds of Fortune 1000 companies use the metric. The more data, and the more varied data you can use will help you fill out a greater perspective of how you’re going.