3 Stupidly Simple Ways NPS Helps improve Profitability

3 Stupidly Simple Ways in which NPS® Helps Improve Profitability

Written by Vivek Jaiswal | Co-founder, Customer Guru

Do you know how profitable your promoters are?

Today’s connected world is offering amazing opportunities for all of us to grow. For any company, one of the key criteria for growth is relentless customer acquisition; for which they splurge on marketing, advertisements, discounts, loyalty programs, flash sales, celebrity endorsements….its endless! But is this sufficient? Imagine, after being lured into buying from you, a customer has such a poor experience that she defects even faster than she was lured through these “smart” customer acquisition strategies. What’s the use of acquiring a customer like this?

I say, customers should be given such stellar experience that they not just buy from you and stick around to buy more, but they also can’t stop talking about you and get others to buy from you. It’s like a CEO’s wonder dream – your customers can’t stop raving about your product and about the amazing experience they had, which brings hoards of customers to your business without spending more on customer acquisition! On the other hand the biggest nightmare for a business owner is losing customers at a rate faster than the rate of acquisition. Of course this nightmare immediately triggers only one action – spend more on acquisition because “Hey! We aren’t acquiring more customers fast enough! The numbers don’t lie!!” Yes, I totally agree that the numbers don’t lie, but what about that hole in the bucket?? By spending more on acquisition, you might be able to acquire more customers but because your customer retention is so poor, you will fail to make money out of these customers – your profitability will decline with every new customer acquired!

Here’s how NPS can help:

1. It identifies who are your promoters and detractors

By regularly and frequently conducting the NPS feedback, you are able to identify the promoters and detractors in your customer base. Now, both these groups have their own lifecycle, and they impact the bottomline accordingly:

Promoters Detractors
  1. They are happy doing business with you and hence buy more
  2. Come back for repeat purchases
  3. Recommend to their friends and family leading to more business
  4. Willing to understand your genuine problems
  5. Complain less which means service cost is low
  6. Fewer complains means happier employees
  7. Happier employees are more efficient and serve your customers better!!
  1.  Detractors buy less
  2. Unless you dominate your market they will not come back. Will defect at the first opportunity though!
  3. Spread negative word of mouth creating a –ve chain reaction
  4. Enraged at minuscule issues
  5. Escalate at every opportunity consuming more of your team’s bandwidth
  6. Dent your employee’s morale.
  7. Unsatisfied employees means low efficiency, job dissatisfaction, higher attrition!!

Since Promoters lead to lower costs, happier employees and repeat business, it is imperative that companies focus delivering an experience that creates more promoters. It is also critical to identify the reason why a customer is a detractor. By doing so, you could take action on reducing those reasons and in turn reduce the number of detractors.

2. It helps measure and manage customer loyalty

NPS is a loyalty metric. It helps you measure and manage loyalty and therefore leads you into plugging the customer churn. However, like any other change, this cultural shift from acquisition focus to retention focus may also face resistance within the company. Again, an easy to understand and actionable metric like NPS helps bring people onboard too. One of the things to do when using NPS is to shift the focus from over analysing the score itself, to the WHY behind the score. Use NPS as a change agent and break it down by customer segments to identify different types of issues they are facing, and one by one tackle each of these issues to improve customer loyalty – reflected by increase in NPS.

As Peter Drucker rightly puts it

What gets measured gets managed.

3. It gets everyone onboard

Establish a flow of information across the organisation by creating a social environment around it; share the NPS feedback data along with customer comments throughout the organisation. When everyone has access to this information, individuals, teams, departments and different entities within an organisation can use NPS as a mirror to evaluate and improve themselves. Because it is so simple to understand, anyone can wrap their head around it and identify what needs to be done to improve customer experience. When the teams understand how their actions directly impact customer loyalty they stop waiting for the higher management to show them the way, instead they start thinking and taking action on how to improve customer loyalty themselves. You can imagine that this becomes a self sustaining system that churns only higher customer loyalty and better profitability!

I know that some of you might think that I am oversimplifying this. But this has really worked and is working for a lot of companies; it is just a matter of doing it right. For those who are interested in learning more, I will be talking about “How to REALLY use NPS for Growth” in my webinar next week, please do attend. Register by clicking on the image below:

How to really use NPS for growth