One metric could make or break your business…Net Promotor Score

Every successful business depends on tracking certain metrics. As a business owner, you need to be continually improving; as legendary business analyst Peter Drucker said, “If you can’t measure it, you can’t improve it.”​

Whether it’s the cost of customer acquisition, return on investment, growth rate or any of the other multitude of metrics or Key Performance Indicators (KPI), you need to track how you are performing to identify what areas need improvement, make changes will lead to improvements, and judge whether the changes resulted in the desired outcome. The areas that are most vital to business success should be monitored the most closely.​

For any business, acquiring and keeping customers is key to growth. Any business depends on happy and satisfied customers. It is all but impossible to grow a sustainable business if your customers aren’t satisfied. Measuring customer satisfaction can help you measure two key aspects of your business, returning customers and customer referrals.​

Any first-year business student can tell you that it is far cheaper to get an existing customer to buy from you than to acquire a new customer. Loyal customers will return to you again and again. According to The Harvard Business Review, “acquiring new customers for your business is anywhere from 5 to 25 times more costly than retaining an existing one.”​

An added benefit of satisfied customers is that they will often refer new clients to you, dramatically driving down the cost of acquisition. Happy customers can be your best marketing. Increasing referrals is the cheapest and most powerful way to gain new customers.​

As The Harvard Business Review’s Frederick F. Reichheld writes, “evangelistic customer loyalty is one of the most important drivers of growth. While it doesn’t guarantee growth, in general, profitable growth can’t be achieved without it… A customer’s willingness to recommend to a friend results from how well the customer is treated by frontline employees, which in turn is determined by all the functional areas that contribute to a customer’s experience” explains Reichheld.​

Surveying your customers can be a great way to understand how you are doing. But oftentimes customer satisfaction surveys are too complicated and don’t result in actionable insights. You need a simple, concise way to measure customer satisfaction. By asking a simple question the chances of getting customer feedback goes up dramatically. And by keeping your reporting metrics simple, it gives you and your team a clearer focus.​

So how can you easily but meaningfully measure how satisfied your customers are?​

Almost twenty years ago, Reichheld, then the director emeritus at Bain & Company, a management consultancy, pioneered the idea of Net Promoter Score (NPS). After two years of research, he identified a single survey question that serves as a predictor of growth. He notes “…that the question isn’t about customer satisfaction or even loyalty… it’s about customers’ willingness to recommend a product or service to someone else…the percentage of customers who were enthusiastic enough to refer a friend or colleague—perhaps the strongest sign of customer loyalty—correlated directly with differences in growth rates among competitors.”​

NPS is a simple but powerful way to measure the satisfaction of your customers. It relies on the answer to the question “How likely is it that you would recommend [business X] to a friend or colleague?”​

Reichheld explains that the power of NPS lies in its simplicity. “By substituting a single question for the complex black box of the typical customer satisfaction survey, companies can actually put consumer survey results to use and focus employees on the task of stimulating growth… The path to sustainable, profitable growth begins with creating more promoters and fewer detractors and making your net-promoter number transparent throughout your organization. This number is the one number you need to grow. It’s that simple and that profound.”​

A number of companies will prepare the questions and analyse responses. The ones listed below are the top results when Googling ‘net promotor score template’, but there are many more from which to choose.​

Ask Nicely
Survey Monkey
Qrious
Qualtrics​