Small Business Benefits of Net Promoter Score (NPS)
In many ways, it’s never been easier to launch & begin finding new customers for a new small business.
E-Commerce and digital marketing channels means you can create, launch & start scaling a business in as little as a few weeks or months – a process which used to take years.
At the same time, this new frictionless business creation process means that other small business owners can pop up just as easy as you can. Since the barrier to entry is so much lower now, in a lot of ways it is much harder to scale a business.
It’s harder because it’s easier. That’s not confusing at all!
The truth is, the competition is fierce, and the smallest of advantages separate the winners from the losers.
Because of this high competition, most small business owners end up competing on price, especially if there is a high concentration of competitors in their local market or the service is undifferentiated.
However, there are some opportunities to outperform. Given that most consumers tend to buy/pay more for a good experience or an exciting brand, price isn’t the main consideration; it is more about the overall experience of making your clientele happy in ways that encourage them to try, buy and stay loyal to you.
Successful companies grow by turning their customers into advocates.
As digital channels saturate, word-of-mouth growth is the only reliable way to scale. However, until you have a system to evaluate, monitor, and develop it; you can’t leverage its full potential as a growth strategy for small businesses.
Small businesses that have generated customer love feel like everything comes easy, while others feel like they’re pushing a rock up a hill.
So, how do you determine the number of satisfied customers you actually have?
Which of them are your biggest advocates and may be willing to recommend your service to their networks of friends, family and co-workers?
These are questions you need to intimately understand to drive better service, and in turn ramp up your referral business. And let’s reiterate once more – referral business is the only reliable channel that scales.
Enter NPS for Small Business
Let’s make this as simple as possible: Think of NPS (Net Promoter Score), as the fuel for your rocket.
If left alone, your NPS won’t do much. However, when loaded into an engaging, proactive, customer-oriented business: it’s the catalyst to send you soaring.
Assessing how useful your services are at keeping customers happy is important because, typically, brands are more likely to overestimate the satisfaction levels of their customers.
This is why NPS Tracking for Small Businesses is absolutely essential.
What Exactly Is NPS?
NPS is an instrument used by entrepreneurs and small businesses to gauge the loyalty levels of their customers.
NPS emerged in 2003 and was initially used exclusively by big companies.
Today, with cheaper tools available online, entrepreneurs and smaller businesses have started taking advantage.
NPS allows businesses to quickly gain insight into their business based on feedback from consumers.
With one simple question, you can assess your brand’s performance, and then you can respond with hard info, instead of hunches.
NPS is calculated from answers to straightforward questions like:
“Are you likely to recommend our service to your colleagues and friends?” Yes, Maybe, or No.
The most successful businesses are those that collect NPS data and apply it while making product developments, developing marketing strategies, as well as customer-based best practices.
While, acquiring your company’s NPS can be done effortlessly, knowing how to apply this data effectively is anything but.
Any rocket scientist will tell you that lots of first-rate rockets don’t eventually reach orbit. NPS is the king of “vanity metrics” if it’s not done properly.
Why Use NPS for Small Businesses?
NPS keeps tracks of the company’s pace in the market. It gives business owners a pulse on how well their brand is really performing.
And because NPS surveys are repeated after a couple of months, businesses can follow and monitor customer satisfaction trends.
Since last year, did the business fare better or worse? If worse, what happened, and how does the company learn from it?
How Does NPS Work?
Businesses can categorize their clients into three distinct promoter, passive, and detractor groups by using number scales.
The promoters of your brand are people who are most likely to be loyal and often leave behind a 9 to 10 (5 star) rating.
Passive consumers often give 7 or 8 (4 star) ratings, and they appear more or less unresponsive to your service.
Detractors, on the other hand, will surely rate you between 0 and 6 and are most likely your most prominent critics.
At this point, businesses can calculate their NPS tally by deducting their detractor percentage from their promoter percentage.
The outcome should be anywhere between -100 and +100.
If your NPS score is positive, your business is doing well. But if your NPS rating falls in the negative region, then there is cause for concern.
Ultimately, your NPS score represents your client’s satisfaction levels.
So when gathering NPS, you should request for unrestricted feedback.
When you notice the start of any negative trend, the NPS tool will show you what dissatisfied customers are saying.
This information can then be used to improve your brand, develop your support, or modify your approach to meet more expectations.
Benefits of NPS for Small Businesses
After collecting customer feedback expressing their feelings on your brand, and their reasons for feeling that way, this information can be actionable in a number of different ways.
Firstly, the detractor complaints must be addressed immediately. It’s not only an opportunity to save business, but the detractors are the ones who identify the black holes in your business – the weak areas of your service that are bleeding customers.
Secondly, business owners should pay attention to what promoters like about their service and promote it. This may lead to fresh insight which may not have been considered before – and ultimately, doubling down on your best customers is a proven scale approach.
And of course, the passives must be converted into promoters. Examine their responses and try getting them to be excited about your service/product – find the USP to bridge that gap.
Some broad categories you can leverage NPS for:
Growing Customer Loyalty – Building loyalty amongst your customers is necessary for today’s retail environment because consumers are entirely spoilt for choice.
Some years ago, consumers may have had only a couple of brands to pick from.
Nowadays, people can simply go online to search for and locate a vast plethora of product and price options; this means that modern era retailers must make deliberate efforts to ensure repeat patronage from the majority of their consumers so that they won’t need to go looking elsewhere.
Convert More Clients into Advocates – Upmarketing existing customers is significantly cheaper than acquiring new ones – not to mention all the benefits of referral marketing we’ve outlined. The best businesses don’t just have customers, they have advocates.
With an NPS system, businesses can find out how many advocates they have within their consumer base – and identify how to convert more.
An NPS score of 50+ typically implies a customer who’s “advocacy-ready” – so it’s worthwhile driving as many customers past that goalpost as possible.
Final Words on NPS
Once you’re done, gathering NPS data, remember to start the entire process over again after every six months. It’s important to ensure that NPS isn’t the only metric you’re tracking – while it can certainly by a solid North Star metric to chase after, it works best when buffered with a solid compliment of different guiding metrics.