Net Promoter Score: Pros and Cons

Net Promoter Score: Pros and Cons

When managing any business, you need a steady focus that will enable you to grow the venture. You have to think about how you will increase sales and the best ways to do so. There are various strategies that you can use to attract customers and increase the conversion rate, from social media advertising to offering the buyers free samples. However, before you choose an advertising platform, you have to do some consumer research to find out how the buyers feel about your business. One method that you can use to do so is the net promoter score (NPS).

What is NPS?

To put it simply, the net promoter score is a business management tool that’s used to evaluate and measure the level of loyalty of the company-customer relationship. In most cases, you carry out a survey and ask your customers the likelihood of them referring your products to other people that they may know.

The answers are rated on a scale from 1 to 10. The customers that respond by choosing any number between 0 and 6 are called detractors. This category of people is highly unlikely to recommend your products to someone else. On the other hand, there are those customers that will give you a response of between 7 and 8. These are called passives, and they may or may not recommend your products. Then finally, we have the promoters that give a response of 9 or 10. These are the people you want.

To find out more about NPS and why it’s gaining popularity, we have highlighted some of the advantages below. We have also highlighted the cons to enable you to make an informed decision about whether or not you should use it.

Advantages of Net Promoter Score

Advantages of Net Promoter Score

1. Displays the Bigger Picture

Every business spends much of their time and resources in marketing to get the right leads and generate more sales. Even so, getting customers is just the first step of becoming a successful business. If you really want to keep those customers, you have to make a follow-up to ensure that they are satisfied with the entire experience.

By using NPS, you’ll be able to dig deeper and reveal customer perceptions towards your business as a whole. This includes your services, products, website experience, front-of-line staff, online social presence, and so much more. This beats the use of Customer Satisfaction (CSAT) and Customer Effort Score (CES) surveys. In those, you’re only able to understand customer satisfaction based on their last interaction with the business.

2. Relevancy

Every company needs a key performance indicator (KPI) that clearly depicts where the business is headed. The performance indicator is also meant to help the management make better decisions on current projects. If you look at the way some NPS are structured, the -100 to +100 score system is very easy for anybody to understand. This makes it a relevant KPI for everyone in the office.

Both business executive partners and office staff members can be able to use the NPS system to gauge customer satisfaction rates and see whether their efforts are paying off. A high NPS figure directly indicates that your business is going in the right direction. This means that everybody is putting in the required effort to make things work. On the other hand, a low score could mean that some departments or individuals may not be putting in the required effort. It can encourage the management to look into the weak areas or teams and work on improving their morale.

3. Lead to the Possibility of Repeat Business

Just as mentioned earlier, customer satisfaction tools such as CSAT and CES are mostly used to gauge customer satisfaction towards a product or service, and the effort put towards the company to ensure needs are met.

NPS, on the other hand, is essential for measuring the level of customer loyalty. This alone will enable the company to determine the likelihood of both new and repeat business. This is important for any business looking for consistent growth, customer satisfaction, a healthy state of the brand, and cash-flow.

4. Provides Insight for Change and Development

Being in business means that you need to make a follow-up on the quality of work as well as make certain adjustments based on the evaluation. Surprisingly, many business owners think that NPS consists of one single question, but it shouldn’t be that way.

In a real sense, NPS requires that you ask several follow-up questions in order to get an insight into why new and repeat customers would or would not recommend you. A lack of customer feedback will only leave you with nothing, but a number as a representation of the NPS. To make it worse, you won’t know what needs to be changed so as to better your NPS score.

Disadvantages of Net Promoter Score

1. No Call-to-Action Plan Makes the Survey Useless

Since the NPS acts as a guide to your business, you need to keep in mind that it’ll always reflect the effort your business has put into customer satisfaction. Therefore, without the right plan to deal with the identified issues, the entire survey will be as good as a waste. You need to make sure that there are various plans on how to deal with the detected areas of weakness so as to make the NPS system relevant and useful for the business at large.

2. It’s not Very Specific

One of the biggest criticisms against the NPS system is that it doesn’t provide enough information as to why exactly some customers may withdraw from your services or products. In order to get a deeper understanding as to why customers wouldn’t recommend your business, you’ll need to apply the use of follow-up market research surveys.

3. What about the Finances?

Even though it’s important to know whether or not customers are satisfied with your product, you can’t do much if you don’t pay attention to the finances. The NPS score could show that you have a lot of promoters, but if you pay more attention to the individuals, you may realize that they don’t spend a lot on your products. Therefore, NPS can fool you into thinking that your business is doing good while in reality, your revenues are on the decline.

Conclusion

NPS is meant to propel your business in the right direction and with the required momentum. At the end of the day, you need to make sure that you make good use of the system while making the necessary adjustments to your business needs. Finally, if you want to really grow, focus on all the areas, not just the customer satisfaction part.

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