You don’t need to go to business school to appreciate the value of a loyal customer. Not only are they less likely to visit a competitor, but they’re also easier to satisfy, more likely to refer friends, and less price sensitive. Most business owners intrinsically know the value of a loyal customer. But what if you could quantify the value of your most loyal customers and find a way to clone them. We’re not talking about questionable genetic experimentation, but rather finding more customers that fit the profile of your most loyal customers.
This is exactly what Andy Taylor, CEO of Enterprise Rent-a-Car, described to CEOs in a groundbreaking 2003 Harvard Business Review Article. At the time, most companies relied on lengthy customer surveys that rarely provided good actionable feedback. Today, more than two-thirds of the Fortune 1000 use Taylor’s method, what came to be known as Net Promoter Scores, to measure customer satisfaction.
What is a Net Promoter Score?
Net promoter score is a measurement of customer loyalty. It ranks your business on a scale of -100 to 100. A score above 0 is good and a score above 50 is considered excellent. Net promoter scores are calculated by asking a random sample of customers two questions about your business.
- On a scale of 1-10, how would you rate my business?
- Tell us, why you chose that rating?
The customers are then divided into three groups—detractors, passive, and promoters—based on their rating of your business.
As the name implies, net promoter scores are used to help business owners focus on promoters, the people who already love and recommend their business. By zeroing in on what makes a promoter, NPS gives you an instant profile of your most profitable customers.
But you don’t have to be in the rental car industry in order to start using NPS. In fact, part of the popularity of the score is the fact that it can be applied almost any industry. Since NPS varies by industry, it’s useful to look at Benchmark net promoter scores, to get an idea of what a good score looks like for your business.
What is a good net promoter score for my business?
A net promoter score essentially measures the difference between what a customer expects and what your business delivers. Before you judge your own scores too harshly, it’s important to take industry into consideration, since customer expectations vary greatly across different industries. To account for this, many businesses use NPS industry benchmarks to determine what counts as a good NPS score.
Here’s a look net promoter score benchmarks by industry:
For most of us, it’s no surprise that TV, internet, and utility companies rank last in terms of customer satisfaction. But would you have guessed that insurance companies outrank hotels? NPS benchmarks can help you identify opportunities within the market as well.
For example, companies like SlingTV, YouTubeTV, and PlaystationVue are all taking advantage of the fact that traditional cable companies have neglected customer service for decades. The cord-cutting movement is just one example of how businesses can use this type of data to improve services to disrupt the status quo.
The Evolution of NPS
Net promoter scores have come a long way since their introduction in 2003. The proliferation of digital tools and online businesses has made it easier to measure NPS. But for the 90% of transactions that happen offline, it’s a different story. And despite the popularity of net promoter scores, many local businesses still struggle to measure their customer satisfaction by touchpoint, location, department, or employee.
Feedback is a new product that gives you an immediate pulse on customer perceptions. It determines your Net Promoter Score (NPS) through two automated texts. No links, no lengthy surveys—just real-time responses and insights. It’s the evolution of net promoter scores.