A net promoter score (NPS) is something that business consultants, business owners and marketing experts use to see how well a business is doing in one key area: customer satisfaction. The number, ranging from -100 to 100, is a great indicator of how well your business is doing and if you can expect exponential growth or shrinkage in the future. If you're a business owner and don't know your number, you're not doing everything you can to succeed and increase your profits. Following are three ways your number affects your bottom line.
An astounding 80 percent of your future revenue will come from just 20 percent of your existing customers. So there is a lot riding on your NPS. If customers aren't happy, they're more likely to defect, meaning they won't do business with you ever again. If you can keep customers happy and increase your customer retention percentage, you can increase your profits dramatically. It is estimated that 5 percent retention growth increases profits by a whopping 75 percent.
At first glance, you might think that customer retention and customer loyalty are one in the same. However, they are vastly different. Customer retention basically means that a customer is a repeat customer. A loyal customer, on the other hand, is considered a promoter. They love you, and they will tell all their friends and family about your products and services. In fact, many loyal promoters will push everyone they know to give you a try, which is word-of-mouth advertising at its best. And the best part? It's free.
Cost of Advertising
More than 70 percent of companies report that it is far cheaper to keep an existing customer than it is to acquire a new one. What's more, repeat customers tend to spend more money than new ones. Therefore, you will make more money by increasing your customer retention and pay out less in advertising to acquire new customers. Both improve your bottom line. All you have to do is improve your customer satisfaction rating.
As you can see, your NPS number is a vital indicator of your business' health and ability to earn profits in the future. To figure out what your customer satisfaction rating is, hire an NPS consultant who can help you gather feedback from your customers and tally the results. Gathering feedback that's representative of how your customer base feels about you is a complicated task. So it's a great idea to hire someone who knows what they're doing.