What is NPS
The Net Promoter Score (NPS) is a tool used to gauge the likelihood that someone will recommend your company to someone else. By using a 1-10 scale, it asks customers how likely they are to recommend your company based on their most recent experience. After the 1-10 scale, there is a second open- ended question that prompts customers to tell more in their own words. This gives them the option to justify their opinion. It is a very simple, quick, and inexpensive metric that lets your company track how well your efforts are received. The reasoning behind NPS is trying to uncover customer satisfaction.
The NPS is based on the theory that customer satisfaction and loyalty are strongly correlated to sales. In addition, it also is shaped around the idea that a stated propensity to tell a friend or colleague about your company’s brand, is strongly connected to customer satisfaction and loyalty.
Why do businesses use NPS?
In order to understand customer satisfaction in the context of the NPS, it’s important to know why recommendations are valued. Essentially, NPS highlights to businesses how they are doing in two different areas. These notable areas are customer promotion and customer loyalty.
In the world of sales, recommendations are the driving force of purchases. Over 60% of marketing executives estimate that word of mouth is by far the most powerful marketing tool.
It’s simple when you think about it. If you were going to buy a product, you are more likely to trust family and friends opinions on the product, rather than an ad on TV. Recommendations are trusted more than other forms of marketing. This includes television and print advertising, as well as various marketing on social media platforms. This gives weight to recommendations, as trustworthy sources will likely influence buying behaviour.
Moreover, NPS can be used to measure customer loyalty. Customer loyalty is paramount for company profits. If you have a loyal customer, it is much easier and cheaper to get their business back again than to try and vye for new customers.
What can companies do with an NPS score
The NPS metric can provide value to a company since it helps paint a picture of whether customers are feeling better or worse about your brand. Not only can it provide this value to gauge customer satisfaction, but it is also easy to implement and analyse.
When a company gets this information, it can shape how they operate and what products they produce. If they see that customers are brand loyal and satisfied with a particular range of products, it may pay to keep those product levels high in your inventory stock.
Moreover, if people are pleased with your delivery service and satisfied with how fast they got a product, it makes sense to keep that inventory stock very accessible. Patterns of customer satisfaction can be derived from the NPS and it’s important to analyse your inventory stock against this data.
A wealth of information can be derived from the those who score as promoters, passives, and detractors. At the end of the day, it is not the perfect score. However, it’s a very quick and simple metric that can bring you closer than ever before to understanding customer satisfaction and customer loyalty.
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.