Net Promotor Score (NPS)

At Alunta we have decided to createa a dictionary for words and important terms related to running a subcription busniess. You are now reading about “Net Promotor Score (NPS)”.




What is Net Promotor Score (NPS)?

Net Promoter Score (NPS): Welcome to the wild, wild world of NPS! No, it’s not a cool new sports channel or a secret club where people discuss the merits of pineapple on pizza. NPS stands for Net Promoter Score, and it’s a big deal in the land of subscription businesses. But don’t worry, we’ve got your back. Let’s dive in! So, imagine you’re running a business. You’ve got customers, products, maybe even a catchy jingle. But how do you know if your customers are really into you, or if they’re just sticking around because they’ve forgotten to cancel their subscription? Enter NPS, your new best friend. Picture this: NPS is like that brutally honest mate who tells you if your outfit looks rubbish before you step out the door. It’s a customer loyalty metric that measures customer satisfaction and predicts business growth. Think of it as a mood ring for your business – a very, very important mood ring. Now, here’s the math part (don’t panic!). To calculate NPS, you have to ask your customers one simple question: “On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?” Then, you divide your customers into three categories based on their responses: Promoters (score 9-10), Passives (score 7-8), and Detractors (score 0-6). Promoters are like your mum, always singing your praises. Passives are like that friend who always says your cooking is “fine” – they’re satisfied, but not ecstatic. Detractors are the customers who may have had a bad experience and are likely to spread negative word-of-mouth. Yikes! Subtract the percentage of Detractors from the percentage of Promoters, and voilà! You’ve got your NPS. Now, anything above 0 is considered good because it means you have more promoters than detractors. And if your NPS is higher than 50? Well, pop the champagne because you’re doing great! But remember, the NPS is not a magic crystal ball. It’s a tool to help you understand your customer’s experience and identify areas for improvement. So, don’t just sit there staring at your score, get out there and make those improvements! And, hey, if your NPS is lower than you’d like, don’t despair. Every business has its ups and downs. It’s like a rollercoaster ride, but instead of screaming, you’re calculating percentages and making strategic decisions. Fun, right? So, next time someone says NPS, you don’t have to nod and smile like you’re in some secret club. Now you can join the conversation and even throw in a joke or two. “Why don’t we let the NPS decide if pineapple belongs on pizza?” You’re welcome.

Frequent questions about Net Promotor Score (NPS)

A high NPS is an indicator of customer satisfaction, loyalty and advocacy. It means that customers are not only pleased with your product or service, but they are also likely to recommend it to others. This can lead to increased customer retention, reduced churn rate, and more referrals, all of which are crucial for the growth and profitability of a subscription-based business. In addition, high NPS can also provide a competitive edge in the market, as it reflects superior customer experience.

Improving NPS requires efforts to enhance customer satisfaction and loyalty. This could include offering high-quality products or services, providing excellent customer service, and responding promptly to customer inquiries or complaints. Regularly soliciting customer feedback and acting on it can also be effective. It's important to identify the factors that drive promoter scores and work on them. Additionally, it can be beneficial to segment customers and devise tailored strategies to meet their specific needs or expectations. Training staff in customer service skills can also contribute to a higher NPS.

A negative NPS implies that a business has more detractors than promoters, which can be detrimental for its reputation and growth. Detractors are likely to discourage others from subscribing to the service, leading to fewer new customers. They may also leave negative reviews online, impacting the business's brand image and credibility. This can further result in reduced customer retention and increased churn rate, both of which can negatively affect the business's revenue and profitability. Therefore, it's critical for subscription businesses to strive for a positive NPS.

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