Bizrate Insights· Author
In today’s competitive market, net-new traffic is expensive. The best way to grow your store is by fostering habit and brand allegiance in your existing customers. One crucial metric in that effort is Net Promoter Score (NPS®). In this article, we will explore what NPS® is and how it correlates to the ultimate success of your ecommerce store.
Understanding Net Promoter Score (NPS®)
The phrase Net Promoter Score was created in 2003 by Fred Reichheld, a partner at Bain & Company, as a new way to measure how well an organization treats the people whose lives it affects—how well it generates relationships with its customers.
Net Promoter Score is a customer loyalty metric that gauges the likelihood of customers recommending a company or its products/services to others, measured through a simple survey question:
“On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?”
Based on their responses, customers are classified into three categories:
- Promoters (9-10)
- Passives (7-8)
- Detractors (0-6)
The NPS® is calculated by subtracting the percentage of Detractors from the portion of Promoters, yielding a score ranging from -100 to +100.
Why NPS® Is A Critical Metric
- Higher NPS® leads to increased customer retention
A study conducted by Bain & Company found that companies with above-average NPS® tend to experience higher customer retention rates. Loyal customers are more likely to make repeat purchases, increasing the lifetime value of a customer and reducing the costs associated with acquiring new ones.
- NPS® drives organic growth through referrals
Promoters, who are enthusiastic about a brand, actively recommend it to others. According to research by Nielsen, 92% of consumers trust recommendations from friends and family more than any other form of advertising. By nurturing a solid base of Promoters, businesses can tap into the power of word-of-mouth marketing, leading to increased organic growth and customer acquisition.
- Improved NPS® correlates with higher revenue
Research by Fred Reichheld, creator of NPS®, revealed that companies with higher NPS® outperform competitors in revenue growth. A strong positive NPS® indicates customer satisfaction and suggests that the business provides exceptional experiences that resonate with customers, driving revenue growth.
3 Reasons Why Merchants Fail To Track NPS®
- “NPS® is subjective/unreliable.”
While NPS® is based on customers’ perceptions, its simplicity and standardized methodology make it a reliable indicator of loyalty and potential growth. It serves as a starting point for further analysis, complementing other qualitative and quantitative measures to comprehensively understand customer sentiment.
- “We already track other metrics.”
While other metrics like customer satisfaction (CSAT) and customer lifetime value (CLTV) are essential, NPS® offers a unique perspective by focusing on the willingness to recommend. NPS® provides actionable insights that go beyond individual transactions, enabling businesses to uncover systemic issues, enhance overall customer experience, and drive long-term growth.
- “We don’t have the resources to track NPS®.”
Implementing NPS® can be something other than resource-intensive. It can be as simple as implementing our voice-of-customer (VoC) solutions, including the Online Buyer Survey. These solutions install at no cost to you, the merchant, and track a number of KPIs and demographic data from verified shoppers. One of these critical indicators is NPS®, which allows you to monitor and report on this statistic on an ongoing basis.
Tracking and leveraging Net Promoter Score can be a game-changer for sustainable growth and increased revenue. The ability to measure customer loyalty and identify Promoters opens doors to enhanced customer retention, organic growth through referrals, and improved revenue performance.
In an era where customer experience reigns supreme, tracking NPS® is not just an option—it’s a must. By embracing NPS® as a valuable tool for growth, you can gain a competitive edge.
Start tracking NPS® today and lead your ecommerce initiative to new heights.