Here are four strategies that ensure sustainable development of any business:
competitive advantage strategies (unique offerings, price advantages, product differentiation);
innovation (constant implementation of new technologies in products, marketing, business processes);
effective management of cash flows and investments;
high customer shop satisfaction and loyalty (creating value for customers).
In this article, we will look at how exactly measuring customer loyalty using NPS surveys affects business growth, how to conduct these surveys, and how to interpret their results.
What is loyalty and how to measure it
High customer loyalty is one of the factors of success, and Apple, Tesla and Amazon are betting on it. Loyalty is more than just repeat purchases.
Loyalty is a strong idea that is connected to the values of the customer. When a customer is loyal to a company, he enthusiastically recommends the brand’s products and services to people who are important to him.
Customer value can be expressed through parameters such as price, specific product characteristics, quality, functionality, ease of use, etc.
In 2003, business consultant Fred Reichheld described a method for measuring customer loyalty in his article, “The Only Number It Takes to Grow .” Two years earlier, Reichheld had conducted a study involving 400 American companies. The goal of the study was to determine how customer loyalty growth (using the NPS index he developed) correlated with business growth.
In the article, he stated that the NPS customer survey, consisting of just one main question and a second additional one, allows one to quickly determine the degree of consumer loyalty to the company. A high loyalty index, according to Reicheld, predicts future business development.
Despite its simplicity, the NPS survey method has gradually become used around the world. In the 2000s, it was implemented by companies such as Netflix, Apple, Dell, Salesforce. According to a 2020 study , the NPS metric is used in a third of Fortune 1000 organizations (a list of the 1000 largest US companies according to the American Fortune magazine).
What is an NPS survey
An NPS survey is a study that includes two questions:
On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?
Additional question to identify the reason for the rating given: What is the main reason for your rating?
The study allows us to identify 3 categories of clients.
Critics (rated 6 or below)
People who are dissatisfied with the interaction with the company. This category willingly leaves negative reviews on Internet sites and generally expresses its opinion more actively than other categories of clients. And they also go to competitors as soon as such an opportunity arises.
Neutrals (gave 7 or 8 points)
These customers got exactly what they paid for and nothing more. Fred Reichheld calls this category passively satisfied. Neutrals rarely how to create discount codes in woocommerce? recommend a company; if they see a tempting offer from a competitor, they are more likely to go to him.
Promoters (gave 9 or 10 points)
A category of loyal customers who have received some value from the company. They make repeat purchases and recommend the company to their friends and family.
The loyalty index is calculated using the formula NPS = % promoters – % critics
Example of NPS calculation
Let’s say a company conducted a survey among its customers and received the following results:
40% of customers gave ratings of 9 or 10 points;
20% of customers gave ratings of 6 or below.
NPS = 40% – 20% = 40%
Interpretation of results
NPS < 0 is definitely a bad indicator, which indicates that the business urgently needs to improve interaction with customers. It is more difficult to determine a normal indicator – each industry has its own norm. It is also virgin islands send necessary to take into account the influence of such factors as the size of the company, the category of business, and market characteristics.
