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Lorenzo Gutierrez

Digital Marketing Consultant

5 Reasons Why NPS Is Important for Developing Your Business

If you work in any kind of industry that serves customers, you’ve probably heard the term NPS thrown around. NPS, or net promoter score, is a powerful metric that has revolutionized how we look at customer experience and satisfaction worldwide. It’s also a great indicator of future business growth, and no company would turn their nose up at that kind of data.

What exactly is NPS?

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Even if you’ve heard people talk about net promoter score, you might not be able to define exactly what it is. Not to worry, we’re happy to break it down for you. 

Net promoter score is evaluated by asking your customers one key question on a scale of one to ten. That is:

How likely is it that you would recommend our brand to a friend or colleague?

Based on their answers, your customers will fall into one of three categories:

  • Promoters (answered with 9 or 10) are true supporters of your brand. They’re likely already repeat customers and regularly refer you to friends, family, and other people in their lives.
  • Passives (answered with 7 or 8) are customers that are generally satisfied with your brand and don’t have any real complaints. Nevertheless, they are not completely loyal and may jump ship if they see another interesting product or enticing offer.
  • Detractors (answered anything from 0 to 6) are unsatisfied customers. This category can negatively impact your brand as these customers are unlikely to buy from you again and will likely give you negative reviews.

Once you’ve collected your responses, your company’s NPS is calculated by subtracting your percentage of detractors from your percentage of promoters. Accordingly, your NPS can range anywhere between -100 and 100.

How does NPS benefit my business?

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Now that we’ve clarified exactly what a net promoter score is, let’s discuss what it can do for your business. 

At the end of the day, business growth is one of the most important success metrics out there. It’s easy to quantify and is universally a pretty positive sign. If your business is growing, you know things are going in the right direction. Many marketers and business owners wisely choose to use a brand management software to optimize their growth. 

We already know that measuring your net promoter score promotes growth and provides valuable insights, but how exactly does it do so?

Well, we’ve compiled the top five reasons why net promoter score is important for the development of your business below, so keep reading to find out.

1. Increases and measures customer retention and loyalty 

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Having loyal, happy, and regular customers is the backbone of any successful business. They’re also a lot more reliable and less expensive than new customers. Tellingly, the probability of selling something to an existing customer is between 60-70%, whereas with a new customer it’s as low as 5-20%. It makes a lot of sense to invest in the satisfaction of those existing customers, right?

It absolutely does, but there’s a catch. Customer loyalty is notoriously tricky to measure. It can be done by monitoring metrics like churn rate or repeat purchases, but net promoter score is another useful tool you can pull out of your customer experience toolbox. 

At face value, it makes sense that regularly calculating your net promoter score can help you measure customer loyalty. It tells you how likely your customers are to refer your services or products to others, which in turn means that they’re big fans. It also helps you answer questions like:

  • How many of our customers are generally satisfied with our products or services?
  • How many of our customers are so impressed with our products or services that they regularly share them with those near and dear?

Once you have an idea of your company’s customer loyalty rating, you can start thinking about whether you need to make efforts to improve it. A high NPS score means you’re in a good spot in terms of customer loyalty. A low NPS score means that it would be worthwhile for you to undertake some research and find out what leaves to be desired about your offerings.

2. Helps you deliver better products or services 

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No matter what, getting negative feedback is never fun. Nevertheless, sometimes it’s necessary. On occasion, what we don’t want to hear is exactly what we need to hear. 

A 2021 report showed that 77% of people agreed that quality products were what made them loyal to a brand. That means if you have issues with your fundamental offerings, you’ll have issues with your whole business model. 

The great thing about net promoter scores is the fact that they give honest feedback about your customer’s overall satisfaction. If you don’t see the results you envisioned, it won’t feel good. However, it’ll give you direction in terms of what you need to improve upon, whether it’s a specific problem with a product or something broader like your digital marketing strategy.

Along with the typical NPS numerical ranking discussed above, customers are often asked one or two follow-up questions. Usually, they’re asked for more details about the numerical score they provided. That means that regularly tracking your NPS will help you troubleshoot and provide great insight on what problems need to be resolved.

3. User-friendly and easy to implement

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Another great feature of net promoter score is the fact that it’s user-friendly and relatively easy to use for both customers and professional team members.

When your customers are presented with a net promoter score form or pop-up, they’re likely to fill it out because it’s short and to the point. It’s not a long-winded customer feedback survey, it just quickly asks them to rate their experience with your brand. Promoters and detractors are usually both very eager to share their opinions. 

NPS is also an easy metric for your customer experience team to understand. It’s easy to calculate and isn’t overly complicated. NPS questionnaires usually have high completion rates and can be embedded directly into your website, so it’s easy to integrate them into your customer experience strategy. 

Many people are intimidated and confused by business metrics, but NPS is a pretty accessible one. 

4. Can be used as a tool to size up the competition

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This benefit might be a little unexpected, but net promoter score can also help you size up the competition in your industry.

The truth is, what’s considered a great NPS score varies a lot from industry to industry. For example, a 2021 Retently report showed that the benchmark NPS score in the consulting industry was 63, whereas for B2B software and SaaS it was just 30. 

If you do a little research and determine the benchmark NPS score for your industry, you’ll get a lot more clarity on what you should be striving for. You’ll know whether or not your business is on track and begin to brainstorm strategies on how to surpass your industry benchmark and ultimately your competition. 

5. Quantifies hard-to-pinpoint metrics

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Last but not least, net promoter score can help your business quantify and measure hard-to-pinpoint metrics. We’ve already discussed how customer loyalty can be hard to measure, but there’s another big one we haven’t mentioned yet. Word of mouth.

There are many ways new customers might hear about your business via word of mouth. They might get a recommendation from a friend, stumble across your social media page, tune in for a live broadcast or read about your business online. Whatever the case, word of mouth is powerful when it comes to attracting new customers, but it’s also hard to quantify.

In comes net promoter score. NPS is a very useful tool for measuring word of mouth traffic because all you have to do is consider the difference between promoters and detractors. A high percentage of promoters means that your word of mouth traffic is going strong, whereas detractors take away from that. 

Although there are other factors that can influence word of mouth traffic, measuring it via NPS will help provide you with a big picture of how your company is doing. If you know you’re getting a lot of word of mouth traffic, you’ll be able to start thinking about implementing strategies like referral programs and discount codes.

Harness the power of the net promoter score for your business

All in all, monitoring your business’s net promoter score is an essential metric when it comes to development and growth. Although you shouldn’t rely on NPS exclusively, it’s certainly an important tool in your customer experience toolbelt that shouldn’t be underestimated. 

As we’ve seen, measuring your net promoter score can do so much for your business. It measures and increases company loyalty, helps you deliver better products and services, is generally easy to use, can be used as a benchmark to size up your competition, and helps quantify hard-to-pinpoint metrics. 

So, what are you waiting for? Start measuring your NPS and see what it can do for your business. 

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Lorenzo Gutierrez
Digital Marketing Consultant
Lorenzo Gutierrez is a Digital Marketing Consultant and a certified Google Partner. He helps small businesses and corporations grow their revenue online. He does this by mixing passion, innovation, & expertise.