Testing for Customer Satisfaction

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If your business deals with more than a handful of customers, you’d probably benefit from better understanding how well your business is meeting their needs. Using the Net Promoter Score (NPS) to track customer satisfaction in your business can be a valuable test of your customers’ loyalty. NPS essentially works by asking customers to rate, on a ten point scale, how likely they would be to recommend your business to a colleague, friend or customer. It’s a surprisingly simple way to gauge customer satisfaction.

Calculating NPS

Customers who score between 0 to 6 are deemed as ‘detractors’, scores 7-8 are ‘passive customers’, and scores 9-10 are ‘promoters’. Once you’ve surveyed your customers, subtract the percentage of customers who are ‘detractors’ from the percentage who are ‘promoters’, revealing your business’ NPS.

A business’ NPS can range from -100 to +100, with the average company recorded as having a score less than +10, and with top-level companies consistently achieving between +50 to +80.

NPS and Customer Satisfaction

The logic behind NPS suggests that promoters are enthusiastically satisfied; they believe in your business’ mission and they are willing to help fuel your growth. While passive scorers may still be satisfied, they are not as likely to grow your business and may be enticed by other firms’ offers. The detractors are seen as unsatisfied customers that will, over time, weaken your brand.

In terms of customer satisfaction, this scale is a good baseline to survey customers with. The straightforward survey question provides a clear view of how satisfied customers are with the service they receive, making it easy to interpret results. A word of caution, however – NPS should not be the only bellwether of customer satisfaction. By asking “why” or “what could we do to raise the score”, passive customers and detractors can provide you with valuable feedback about how to improve customer satisfaction.

The benefit of NPS for customer relations is that the data gathered can be interpreted by businesses in multiple ways. While the surveying technique may start as one for a Net Promoter Score, it can be used to rank overall customer satisfaction and show how many clients are willing to participate in improving your business.

Can NPS be a Red Herring?

Like any surveying and scoring technique, NPS has some downfalls. One regular criticism is that the model is too simple, so the net score may not accurately represent customer behaviour. For example, a promoter may claim they would recommend a business in theory but, in reality, he or she may be unlikely to be in a position to actually influence other customers.

Another argument is that NPS lacks nuance and colour, with scores between 0 and 6 being regarded as equal despite being a gulf apart. Likewise, disregarding those who score 7-8 may not reflect the value of those customers to a business – if specifically asked, those customers might in fact recommend your firm over a competitor. It’s also worth noting that customers who are truly impartial about your service are unlikely to bother filling in a survey.

As with any survey, individual customers ratings will vary in line with customer attitudes. Some customers will rate a business higher than others, even when both sets of customers are equally likely to actually recommend the business. All this underlines a crucial statistical truth – a large sample size is essential.

All in all, NPS is a great way to start analysing customer satisfaction, but must be used in conjunction to other surveying techniques and questions to gain more insightful feedback. While NPS does have downfalls, it can estimate where your business is ranked by customers and how you can improve. Because NPS involves asking a quick and simple question, customers are more likely to respond so you’re likely to get more responses. Consider tracking NPS over time; will you identify any useful trends?

Looking for other ways to improve your customers’ satisfaction? Have you considered the way pricing affects their satisfaction or how improvements to your inventory management will impact your customer satisfaction?

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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