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do you know how to measure customer loyalty?

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At the Nashville Conference in 2004, Armand Feigenbaum, an expert in quality control, stated that: "quality is what the customer says it is". But how can we know what the customer considers quality in our brand? And above all, how can we measure it? Let's see it in this post, are you ready?

what is NPS (net promoter score) and how is it calculated?

The NPS ( Net Promoter Score) is a system and a universal indicator that brands have adopted to measure customer satisfaction and, therefore, loyalty towards the company. The first appearance of this term was in 2003 in the article "The one number you need to grow" written by Frederick F. Reichheld reflecting on how to maintain customer loyalty to make our company grow.

As a measurement system, what the NPS allows us to know is the probability that a user will recommend our brand to other people or the degree of satisfaction they have with us after having made a purchase of one of our products or services.

The data needed to calculate the NPS is obtained through a simple survey that is carried out to customers, online or offline, and which has to contain some essential questions such as:

  • how likely are you to recommend our brand to a friend?
  • how likely are you to recommend our brand to a family member?
  • what is the probability that you would recommend our brand to an acquaintance?
  • how much would you recommend our brand to other people?

These questions will be accompanied by a scale from 0 to 10 on which the customer will be able to indicate the number they want depending on the probability of this happening, being 0 no probability and 10 highly probable. This will help us to calculate our NPS and, therefore, to know the degree of loyalty and satisfaction of our customers.

Moreover, these questions will also be very important for the growth of our brand since, according to a Nielsen study, there is an 83% probability that a user will buy a product or contract a service only because a relative has recommended it to them. This is why the NPS is an essential indicator, especially for those companies that want to grow thanks to the already well-known word-of-mouth system that has helped to generate more sales on so many occasions.

Once we have obtained the responses to our quality survey, it is time to calculate our NPS, but how can we do it?

Although it may seem complicated, the result is based on a simple calculation that will help us rank our customers.

When Reichheld invented this term, he realised that, depending on how customers responded to the likelihood that they would recommend our brand to others, three categories of customers could be distinguished:

  • Promoter customers: this category includes all those users who have answered 9 or 10 to the question, and who, therefore, have obtained a high level of satisfaction in their purchase and would recommend our brand to other people with a very high probability.
  • Passive or neutral customers: this category includes customers who responded with a 7 or 8 to our question. They are considered passive because, although they have made a purchase, they are not overly satisfied with our brand but they do not rate us negatively either.
  • Detractor customers: this category includes customers who answered between 0 and 6 to our question. They are considered detractors because, although they have made a purchase of a product or have contracted a service from our company, they are not satisfied enough to recommend us to others.

Now that we know the different categories in which we can place our customers, it is time to make the calculation. The formula is very simple, it is a matter of converting the results of promoters and detractors into percentages, ignoring those of passive customers.

For example, let's say your brand conducts a quality survey of 1,000 people and you get the following results:

  • 400 people have given a score of 9 or 10 (promoters)
  • 400 people gave a score of 7 or 8 (passive)
  • 200 people gave a score between 0 and 6 (detractors).

Knowing that we do not have to count the responses of passive customers, we will count the 400 promoters and the 200 detractors. To obtain the percentage of each of the groups, we will simply divide the number of people in each group by the total number of respondents. That is, if there are 400 promoters out of a total of 1,000 people, we will divide 400/1,000 and we will obtain that the promoters form 40% of our responses. In the same way we will do the same for the detractors, dividing 200 people by a total of 1,000 (200/1,000), which will lead us to know that this group is 20% of our responses.

So, subtract 20% of our detractors from 40% of the promoters, and we get an NPS of 20%. Now, how do we interpret whether this is a good or a bad result?

It is important to know that an NPS of 100% means that all our customers are promoters, which would be the best possible result. If we obtain a -100% it means that all our customers are detractors, which would be a bad result. Obtaining 50% or more is an excellent result and obtaining between 0% and 50% is also a good result for our brand.

Tips to improve your NPS

After obtaining the results of our NPS, we must keep in mind that the Net Promoter Score is a fundamental tool to guide the path of our company and to know how well or badly we are doing with our customers.

We are now going to look at some tips that will help us to improve our NPS results and to know how to better interpret customer needs:

  • Be aware of what may have gone wrong and put not only the marketing department, but also the sales department or customer service to work to improve the quality of our brand.
  • Loyalty programmes should be as personalised and emotional as possible for each of our customers. Most purchasing decisions are generated in the subconscious and we must be able to form a close bond between the customer and our brand.
  • The benefits of word of mouth marketing are very important to help us grow. Once we know who our promoter customers are, we must maintain their loyalty to our brand and make their opinion about us known to others. We can invite them to leave a review about us online, share their experience with a # that identifies us, etc.

Advantages of the Net Promoter Score (NPS)

In short, and as we have seen throughout the post, there are many advantages of the NPS for our brand and especially to help us understand the relationship of customers with us. Finally, we will break down some of the best advantages of using the Net Promoter Score (NPS) in our company to increase our sales and to know the satisfaction of our customers:

  • It is a very quick and simple measurement system, both for the customer when responding and for the sales manager when interpreting it.
  • It is a strategy that is universally recognised in the marketing world, which makes it very easy to implement and understand.
  • There are many platforms that allow these surveys to be carried out online, without having to go to the customer in person to answer our quality questions.
  • It allows us to obtain values on any other aspect such as: the shopping experience, the quality of the customer service, the functionality of the technical service, the quality of our products or if our services have worked correctly, etc.

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