In order to thrive in the retail industry, it is imperative that you know what the customer is thinking. Do they like your product? What was their purchasing experience? Are there features they would like to change? The challenge is knowing the best way to get this information.
It turns out that gauging the satisfaction and loyalty of your customers is as simple as asking a single question. From the answers to this question, you’ll know whether your customers are loyal and touting your products or at risk of being poached by a competitor.
Your customers’ answers can be used to determine your net promoter score (NPS), a single measurement that reveals customer experience satisfaction and predicts business growth.
What Is NPS and How Is It Calculated?
Your net promoter score is a number between -100 and 100. It indicates the quality of your customer’s experience. Figuring out your NPS begins with asking your customers the all-important question— “On a scale of zero to ten, how likely are you to recommend our company’s products or services to a friend or colleague?”
Once your customers answer this question, they are placed into one of three categories. Anybody giving an answer of six or below is placed in the “detractor” category. These individuals have not had a positive experience. Worse yet, they are likely to cause some harm by sharing negative comments online and with friends. They are also at a high risk of being lured away by a competitor.
Individuals giving an answer of seven or eight are placed into the “passive” category. Their feelings about you and your products are neutral. They aren’t giving you glowing reviews, but they likely aren’t giving you negative reviews, either.
Customers who answered with a nine or ten are put into the “promoter” category. These are your true cheerleaders. They like your product, have had a positive experience, and are ready to share this information with their friends.
Once customers have been divided into these three categories, you’re ready to determine your net promoter score. The percentage of detractors is subtracted from the percentage of promoters and this gives you a measurement between -100 and 100. If you only have detractors, your score will be -100. If you only have promoters, your score will be 100. Everyone else (which is nearly everyone) falls somewhere in between.
What Can NPS Tell You?
The net promoter method of gauging customer loyalty has been shown to accurately indicate customer satisfaction and future growth. In fact, companies that attain long-term, profitable growth have an NPS two times higher than the average company.
It is important to remember that different industries have different NPS averages. For example, a cable TV service with an NPS of 17 is doing quite well, while a specialty store with the same score is doing rather poorly. That’s because the average NPS for cable companies is -6, while for specialty and department stores it’s 52.
NPS is a good indicator of customer loyalty, and anyone in the retail industry knows the importance of said loyalty. You’ve likely heard these statistics before, but they bear repeating. It is five to 25 times more expensive to acquire a new customer than it is to retain an existing one. In addition, increasing customer retention by five percent can increase profits by 25 to 95%.
While NPS can do a great job at telling you how you are doing, on its own it cannot tell you why. Whether your NPS tells you that you’re providing your customers what they want or that your company’s customer experience management needs a reboot, you must take the next steps to put that number to good use.
What Can You Do with NPS?
Your NPS gives you a great idea of where you are, but you’ll need more information from your customer if you want to know where to go. Many companies follow up their NPS question with an open-ended one like, “Please tell us why you chose four.” By asking for open-ended feedback, you’re not steering the customer in one direction or another. It’s a good method for getting your customer’s unbiased thoughts and feelings.
A detractor’s feedback can tell you where the customer experience could use some attention. Feedback from one of your promoters can tell you what you’re getting right and shouldn’t change. You can make adjustments based on this feedback, and this is where your NPS score becomes very powerful. By making modifications to the customer journey while continually gauging your customers’ satisfaction, you can track your NPS over time. This can show you what changes have made a positive impact on loyalty and what other changes should be made.
Taylor & Hart, a London-based jeweler of ethically-sources diamond rings, began measuring and tracking their net promoter score about four years ago. By organizing and analyzing the data, they have been able to give their customers exactly what they want. Since focusing on NPS and how they can continually improve it, they have seen a 70 percent increase in revenue.
Your net promoter score can be a valuable tool, not only for quantifying customer satisfaction, but also for tracking how modifications made to the customer journey impact customer experience. Using NPS for your business can improve customer retention. It can also help you hone your customer experience management strategies and give your company the clear direction it needs. All you need to do is ask one question.
