Net Promoter Score Calculation on the Example of Promodo

How to correctly interpret Net Promoter Score survey results and increase consumer loyalty index? What pitfalls you will have to face and how to avoid them, – Alexei Gorovenko, head of the marketing department at Promodo, shares his tips. 

Net Promoter Score is the only number that business needs to grow

Cost of customer loyalty research

Benefits of the NPS research

Disadvantages of the NPS research

Preparatory phase and interpretation of the results

NPS is done. What’s next?

Errors in Net Promoter Score Calculation

Advanced Loyalty Research: ABC + NPS

Net Promoter Score Automation

eNPS: measuring employee loyalty

Key points

At the beginning of 2017, a strategy session was coming to an end in our conference room. An invited business coach who worked with market leaders presented on the whiteboard an action plan for the upcoming quarter. And one of the first points was: “Marketing department: to perform an NPS study of clients “. 

In the Promodo company, we measure Net Promoter Score twice a year. That being said, LTV of our clients grows from year to year. During this time I faced lots of pitfalls and am ready to tell you how to avoid them.

Net Promoter Score is the only number that business needs to grow 

NPS (Net Promoter Score) is a digital expression of customer loyalty. In his book “Sincere Loyalty”, Fred Reichheld provides several pros of using Net Promoter Score as the main metric for business development: 

  • industry-leading companies using NPS metric grow 2 times faster than their competitors; 
  • 20% to 60% of the company’s organic growth depends on the customer loyalty index; 
  • a 1% increase in NPS equals a 5% cost reduction.  
  • companies like Monobank, Rozetka, Apple, Amazon, Booking constantly monitor customer NPS

Cost of customer loyalty research 

Before taking it all on my own, I researched the market of market researches (no matter how suspicious it may sound). I sent a request to 18 companies and received replies from only 9 of them

All the companies that passed the initial selection had enormous experience with various types of marketing researches in their portfolio. Unfortunately, none of them used the NPS metric to measure customer loyalty. Instead, they offered to conduct high-quality surveys or in-depth interviews, the cost of which was significantly higher. 

Price from: $ 275 – 6500

 

The high cost of such studies can be explained by a large amount of information that needs to be processed. And this is completely justified if a company has serious problems with customer loyalty, is going to launch new products or emerge in a new marketplace

We did not need such an array of information. We decided to use the Net Promoter Score method and conduct our own research. 

Benefits of the NPS research

Speed and cost. The first NPS study took us 3 weeks and $220. The fourth NPS took 4 days (3 of which was dedicated to customer surveys only) and $135 spent. 

* the cost does not include employee salaries and other fixed expenses that the company incurs regardless of an NPS study conducted

Levelling of ambiguous and false answers. Many people, by nature, prefer not to speak negatively about others and avoid conflicts. An NPS survey helps to prevent such situations. A respondent gives assessment not to the others but expresses the attitude. 

Simplicity and efficiency. Just a couple of questions are easy to analyse. The answers received are serious arguments for making managerial decisions that can improve the customer experience. 

Convenience for the client. Just a few minutes are needed for a client to answer, which allows measuring NPS quite often. In my practice, there were clients that awaited a request to provide their feedback. 

Disadvantages of the NPS research

The Net Promoter Score survey does not give an overall assessment of user experience. Clients only talk about what was remarkable and impressive to them (as opposed to in-depth interviews or SERVQUAL studies). It’s not always possible to get an objective assessment. Many clients answer something like: “I am good with everything, but give you a 9 because there is always room for improvement. ” 

Preparatory phase and interpretation of the results 

The project manager is responsible for all stages of the study and decides how to use the data obtained in the future. The deeper you dive into the topic, the more detailed your technical inquiry is, the better you get at the end.

What questions to ask?

  • How likely are you to recommend <Company Name> to your friends and relatives? Rate from 0 to 10.

  • What influenced your assessment the most?

The answer to the second question helps to “close the loop”, justify changes in business processes and internal procedures of the company. 

If you already know your business’ bottleneck, just add a precise question to the NPS questionnaire. For example: 

  1. On a scale of 0 to 10, please rate the quality of service in our online store
  2. Tell us what we can improve

Net Promoter Score is a quantitative study, so you can not ignore the calculation of statistical indicators. Now it is easy to do online using one of the following online calculators:

How to calculate the margin of error in the NPS index: 

  • A high confidence level and reliability, we set 99%. Just remember that you always need to put 99%. Trusting quantitative research with a lower value of this parameter is no good practice
  • confidence interval, error ±% – at this stage, we set 3%. This is enough to calculate the minimum number of answers. Do not go below this figure

Example: 

Let’s say, Promodo currently has 3,000 customers. How many of them need to be interviewed to get a reliable net promoters score calculation? 

Enter: 

The confidence level is 99%. 

The confidence interval, margin of error is 3%. 

Total of respondents is 3,000. 

_________ 

Click “Calculate” and get: 1,144 people. 

We need to receive answers from at least 1,144 people. With such a number of respondents, the error in the NPS index will be no higher than ± 3%. 

I recommend interviewing more people than were calculated. This way the final margin of error would be less than ± 3%

Record conversations with clients. The most valuable insights are hidden here. Be sure to record all conversations – the most important stage of Net Promoter Score research is built on them. 

Choose interviewers and conduct briefing. How likely are you to buy a good product from a rude salesman? The situation is quite similar when it comes to interviewing customers. Choose the ones familiar with your product and make sure they are able to settle the situation even with a negatively predisposed client. Prepare scripts, conduct training, and supervise. Here is an example of questionnaire we use. 

Operator report format. If you do not have a special interface in a CRM or call processing system, you can create a common file in Google Docs for the first NPS survey. 

Interpretation of Net Promoter rating results. You calculated the % Detractors and took it away from the Promoters % and received the precious NPS value. Now you need to understand how much you are in the market. 

Industry benchmark. There are several companies in the USA that publically provide NPS data in various industries. Let’s say you work in the retail market. Your company will be considered a niche leader with a loyalty index of 51 and above. 

Range of Net Promoter Scores Across Industries

Unfortunately, it’s quite difficult to get similar data about the Eastern European market. I was gambling on the average US market indicators when calculating Net Promoter Score index. 

Net Promoter Score in dynamics 

The most revealing analytics of NPS is the comparison of oneself with oneself in the past. 

Analyse: 

  • how the changes, that were introduced into business processes after the previous loyalty research, influenced the Net Promoter Score level
  • what clients or client categories we managed to improve and due to what
  • if there is a dependency between the dynamics of the NPS and LTV levels; NPS and Churn Rate

Income at risk or “poor” income 

Detractors (Critics) are clients who, all other things being equal, are ready to exchange you for the closest competitor. 

Demonstrate the share of the annual turnover from the Detractors to top management. This is what we call “poor income” or the turnover at risk. Detractors are very unlikely to bring you new customers, nor will they buy anything from you again. Unlike the Promoters and the “good Income” they generate. 

These figures engage managers to introduce changes that can improve user experience.

NPS is done. What’s next? 

Together with your marketing department listen to the records of customer interviews. If the conversations are many, listen to those conducted with the group of Promoters (NPS = 9-10) and Detractors (NPS = 0-6). Focus on the answers to the question: “What influenced your assessment the most?” 

Let those of your colleagues who work closely with customers listen to the recordings. May they express their opinions, highlight mistakes and suggest what needs to be improved.

The idea of improving customer experience based on the NPS research is based on a simple rule: “Treat others the way you want to be treated.” This is called the Golden Rule of Morality. 

Worth apologising to the Detractors? 

Vladislav Chechetkin, the CEO of Rozetka, the largest online marketplace in Ukraine, talked about a client’s case at the Promodo Partners conference. 

A customer ordered a keyboard online, but couldn’t pick it up from a local post office on time. The free storage period expired, hence he needed to pay a significant fee. The keyboard itself cost less than the fee he had to pay, and the client refused to pay. Rozetka didn’t see their fault for the customer not being able to pick this order for two weeks. 

As a result, the dissatisfied customer ordered 10 more keyboards to be delivered to different post offices all over the country. As you might have guessed, none of them has ever been picked up,  and the marketplace ended up covering the costs for delivery and return at their own expense. Giving the keyboard for free along with all the fines would cost the company three times less.

If there is a chance to positively influence your customer experience and it does not cost you a fortune, always do so. At the same time remember that it’s impossible to please everyone. Sometimes the best thing you can do is not to bother the client at all. 

Update business processes to determine customer loyalty or its absence

Track customer responses for repetitive patterns. This is where you can improve your customer NPS. Moreover, this data allows you to determine the most important criteria for choosing clients and prove hypotheses for updating value proposition. 

 

An example from the latest NPS: three of the respondents complained that our monthly reports on the results of the work done are difficult to deal with. Outcome: we changed the structure and formats of the reports for all the customers from this niche.

Errors in Net Promoter Score Calculation

Calculation of NPS level by email only. Loyal customers are more likely to open your emails, while the dissatisfied ones would rather ignore them or simply mark as junk. It is definitely worth conducting NPS via email, but you shouldn’t consider this the only channel for analysis.

The NPS conducted by Promodo using the email channel only made 95%. Although when we called those who didn’t react to emails, the number was significantly lower.

Tying the NPS rating to the incentive system for customer service managers. From experience, this indeed helps to boost your NPS scores shortly but does not bring any positive changes for business or customers. The NPS value will grow even faster if you delegate conducting NPS interviews to the same employees. 

Calculating the NPS level as the average or median. It is now less common but still happens. If you were presented with a value from 0 to 10 or a fractional one (for example, 8.6, 4.5, etc.), ask the contractor how it was counted and ask to recalculate. 

Ignoring failures. You can deal with those who refused the Net Promoter Score survey in several ways. 

  • interpret this behaviour as “not likely to recommend” and assign to group 0-6 (Detractor) 
  • skip such respondents, disregarding them in totality and conditionally rate them with 7-8 (Neutral)

Before analysing and calculating Net Promoter scores, you need to decide which of the two approaches works better with refusals and strictly follow it. The worst scenario is to interpret each rejection differently, making assessments on your own.

I go for the first approach and put a 3. In my opinion, this gives a more reliable assessment of customer loyalty. Even if it’s sometimes lower.

Changes in the polling procedure. During the second and subsequent NPS studies, it will be tempting to improve something in the customer polling procedure. If you want a Net Promoters score calculation that would be reliable for comparison with previous periods and analysis of the dynamics, do not apply any changes. 

Advanced Loyalty Research: ABC + NPS 

In our work, we use customer segmentation based on the ABC analysis of the income they bring the company: 

A – 20% of customers who bring the largest revenue 

B – 30% of customers who bring a little less

C – 50% of customers who bring minimal revenue

We calculate Net Promoter Score separately for each category. This approach helps to understand where we are missing out and define the category which we can rely upon in terms of positive experience.

In the autumn of 2019 NPS of Promodo customers in the A-segment reached a record level over the past 3 years. I have reasons to believe that it’s the highest industry average. Moreover, we doubled our previous performance indicators.

Net Promoter Score Automation 

The ideal solution for businesses is to automate the procedure for measuring customer loyalty. Quality control falls upon a specific employee, and the procedure is prescribed as a separate stage of the sales process. 

Mechanics: once a client confirms the delivery, they receive an email asking to evaluate their experience. If no feedback is received from the client within three days, the operator calls them back.

It’s rather expensive to ask each customer, and not all of them are anxious about giving loyalty marks. You can limit yourself to emails, counting the minimum number of answers. 

Net Promoters Score calculation on the website 

The NPS level is more about the loyalty of customers who have already made a purchase. Usually, once a transaction is completed, you already have user contact information and only need to choose a comfortable time to interview them. The best time would be within three days after the delivery. A survey on the site is not the most suitable option in this case. It does not include an assessment of the user experience after placing an order. 

However, there are situations when you have no user contact information yet, but you still need to get the feedback, for example: 

  • you need to evaluate the customer experience of those who have not yet completed the targeted action on the site 
  • you need to evaluate the effectiveness of a particular page/site element (blog, checkout page, feedback form) 

Also, an online Net Promoter Score survey could be a go-to solution for companies that sell “digital products”. For such purposes, there are many software solutions that integrate with the website, provide detailed reports and dashboards that can immediately write data to the CRM-system via API. 

If your website has up to 10,000 visitors per month, SatisMeter will be one of the best options. Prices: from $50 to $100 per month. 

If your resource is visited by more than 10,000 visitors monthly – I recommend Promoter. Prices: from $200 to $600 per month. 

eNPS: measuring employee loyalty 

eNPS (Employee Net Promoter Score) is a tool for assessing employee loyalty. Adherents of this approach argue that there is a direct relationship between NPS and employee retention rates. An increase in eNPS positively affects employee satisfaction, reduces talent retention costs and allows to attract the new ones faster. 

Key points 

NPS is a powerful tool for assessing customer loyalty, which allows you to improve your user experience in a prompt and appropriate way, meaning to boost the organic company growth. The study will not provide as much information as an in-depth interview, but analytical findings will be more practical and justified. 

Preparing for the very first Net Promoter Score survey takes a lot of time, while re-interviewing can be done much faster and cheaper. You need to strive to automate research and integrate it into the sales process. 

Keep up with the best indicators of your industry, but compare your current results with the ones obtained in the previous surveys. Find reasons for the changes and test new hypotheses that will help increase customer loyalty. 

You should not include the NPS level in the motivational component for employees. Better explain how to track repeating patterns in customer responses and find growth points to improve the customer experience. Be sure to monitor other indicators: repeated purchases, LTV, the effectiveness of retention-marketing tools. Be careful with data analytics. Check the accuracy. Pay attention to the percentage error. 

Recommended for reading: Fred Reichheld, Rob Marks “Sincere Loyalty”

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Net Promoter Score Calculation on the Example of Promodo

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