Maximise Client Retention: How NPS Boosts Company Profitability Through Client Relationships

Maximise Client Retention: How NPS Boosts Company Profitability Through Client Relationships

NPS is short for Net Promoter System℠. It’s a powerful tool that can maximise client retention.

Let me explain why this is my focus in this article.

Retaining clients is crucial to the success and profitability of a business. As a business coach, I’ve watched business leaders underestimate the power of client retention when it comes to business growth. They come to me because they’re trying to boost their company revenue through product development, marketing campaigns and many more - but they’re not seeing the desired results.

Upon a closer look, I realised what was missing. They don’t put importance on client retention.

If you want to improve your business and profitability, pay attention to how you retain clients. Fortunately, there’s a powerful tool that you can use to enhance client retention so it leads to significant company growth and profitability. It’s called the Net Promoter System or NPS.

In this article, you’ll discover what an NPS is and how it can help you boost the growth of your business. You’ll also gain a deeper understanding of how clients can help you increase sales and profitability.

What is a Net Promoter System℠?

Back in 2003, a partner at Bain & Company created a way to measure how a company treats their clients. This man is Fred Reichheld. He developed a metric system called the Net Promoter System℠ or NPS to help businesses identify how many loyal customers they have against those who are dissatisfied with them or can easily be swayed to leave the business.

The concept behind NPS lies in a simple question: “On a scale of 0 to 10, how likely will you recommend our product/service?”

The response is then analysed to come up with an NPS Score and identify how many customers fall under 3 categories: Promoters, Passives and Detractors. If a company has more promoters over detractors, it has a high retention rate. This information can then be used to strengthen the company’s ability to create a beneficial relationship with its client base.

This system proved to be quite effective in increasing client retention among known companies like AT&T, eBay, Zappos, Tesla, Procter & Gamble, General Motors, Delta Air Lines, GE, Lego, Johnson & Johnson, etc.

3 Client Categories According to the NPS

To use the NPS metric efficiently, it’s important to understand the three categories that you’ll be measuring: Promoters, Passives and Detractors. Depending on how many clients fall under these categories, you can tailor your strategies to strengthen relationships and improve retention.

How will you determine what category the client falls into?

When you ask the recommendation question and the client chooses between 0 - 10, you can categorise them based on their answer.

Promoters (9 or 10)

The promoters are those who have chosen 9 or 10. They are the loyal and enthusiastic fans of your products and services. These people are more likely to show high satisfaction ratings and will provide free word-of-mouth advertising. They are the ones you can rely on to praise your brand and refer you to their family, friends and colleagues.

If you nurture these people, they can make a huge contribution to your referral system and in effect, the company’s long-term profitability.

Passives (7 or 8)

The passives are clients who have chosen 7 or 8. They are also satisfied with your products and services, but they are not enthusiastic about recommending you to others. Their satisfaction is only in the now - which means they are not yet loyal to your brand. They may decide to repurchase but it’s not a guarantee.

And since they are not yet loyal, they can still decide to switch to another company if something better catches their eye. You need to work harder to win these people over so they can feel more loyal to you. If you can convert them into Promoters, they can boost your client retention rate.

Detractors (0 to 6)

The detractors are those who voted 0 to 6. They are the ones who are not satisfied with your product or service. These are also the people who are more likely to defect or churn. This group can affect the brand’s reputation, especially if they are very vocal about their disappointment. If you don’t do anything to appease them, they could discourage potential clients and affect the morale of your team.

How to Calculate the NPS Score

To calculate the New Promoter Score, count how many of your clients are Promoters and Detractors. Get the percentage of these two categories and get the difference between them. The formula would be as follows:

NPS = %Promoters - %Detractors

So let’s assume that the Promoters are 50%, Passive are 30% and Detractors are 20%. Your company’s NPS will be 30.

Is this a good score for your company?

What is a Good NPS Score

Technically, the higher the NPS score, the better the client retention and referral rate will be. However, identifying what is a good score would depend on the industry that you are in.

Some experts would actually say that there’s no such thing as a “good” score. This is because it varies from one industry or sector to the next. Based on research, the Healthcare industry has an average of 62 while Telecommunications have 24.

For the purpose of having a benchmark, look at the average NPS in the industry you belong to. But don’t focus on that alone.

You should also set up internal benchmarks to push your team to improve their client relationships. It’s also important to realise that the NPS results would mean differently across various departments in your company. So the customer service team, for instance, should use the NPS score to improve client interactions. The product development team, on the other hand, should use it to upgrade the products being sold.

What does this all lead to?

In order to benefit from the NPS metric, your company should set unique goals that are relevant to the company. It should also be both measurable and realistic so it can be implemented easily.

Tips to Use NPS to Boost Company Profitability 

Before you make plans, it’s important to realise that having a high score is not the objective here. The goal of this system is to determine how you can improve client relationships so you can boost retention, improve referrals and increase sales and revenue.

With what you know about the Net Promoter System℠, how can you use it to boost company profitability? As mentioned, the implementation would vary across different departments. But to give you ideas, here are a few tips you can follow.

Learn how to run NPS surveys to collect data

The NPS is not just about one recommendation survey. After you’ve done one survey, you have to analyse the data and create a follow up survey so you can create an improvement plan.

Imagine this scenario. A CRM tool is sold and it received incredible reviews for being effective. When clients are asked to answer a recommendation survey, it would result in a high percentage of Promoters. But this isn’t the whole scenario.

If another recommendation survey is created for the customer support and it showed a lower percentage of Promoters, what does it mean? It means the CRM tool is impressive but clients aren’t getting the after-sales support they need.

Make sure you know how to use different surveys to collect sufficient data to improve the company’s relationship with clients as a whole. Use different channels to distribute your surveys like emails, website widgets, etc.

Study promoters to increase referrals and brand awareness

Once you have your NPS data, take a look at the promoters. Study them because they can be a powerful ally in marketing your product. You can rely on them to increase your referrals and create brand awareness.

With what you know about the Promoters profiles, what type of referral scheme will encourage them to refer family and friends? This partnership can be a simple posting of a hashtag or product image on their personal social media accounts in exchange for freebies. Or you can encourage them to write reviews in exchange for an exclusive discount scheme.

Although Promoters will feel enthusiastic about referring you to others, it would increase their loyalty if you can incentivise their efforts.

Identify passive and detractor concerns to minimise churning

The NPS data will also show who the passive and detractor customers are.

For the passive clients, send them a survey to determine what is lacking in your company. What would make them recommend you to others. This will give you clues on what you can improve in product and service offered. Although they are satisfied with you at the moment, it’s not enough if they aren’t loyal to you.

For detractors, give them special attention. These are the people who can bring your brand’s reputation down. Talk to them about their negative experience and discuss how it can be improved. Show sincerity and be transparent about your initiative to listen to their concerns so you can serve them better.

Your genuine efforts will speak volumes and would make them feel valued. Once you’ve done the improvements, wait a couple of months to send another NPS survey. See if the detractors have changed their opinion about you.

Use NPS data to improve products and services

Use your NPS score to uncover issues and areas in need of improvement.

Send promoters a follow up survey to reveal the specific reason why they are satisfied with the company. For passive clients, ask them to give suggestions so you’ll know what need to be improved so you can get their loyalty. For detractors, the goal of your follow up survey is to understand what caused the disappointment.

Whatever is revealed in the follow-up survey will help you understand what your client-base is expecting from your company. Record each of the response and monitor how the answers change each time. This will help you understand what products got the lowest NPS scores and the most complaints. Focus on improving these or changing it into a new product.

Implement NPS Strategies to Achieve Growth

The Net Promoter System℠ is a powerful ally when it comes to improving client retention and increasing profitability. Remember, clients are evolving so getting their ideas and feedback regularly will allow you to stay ahead of trends and changing preferences. You can proactively improve your products and services to ensure high satisfaction among your clients.

While there’s no perfect company, having the right tool or metric system to identify your detractors will allow you to take steps to correct mistakes and improve shortcomings. The more you know about your clients, the better you can respond to their needs and forge powerful relationships. This will build a strong foundation that’ll lead to sustainable growth through higher retention and referral rates.

If you’d like help in implementing the Net Promoter System℠ in your company, partner with a business coach. I can help you implement the system and guide you in analysing the data as it leads to the improvement of your company and its profitability.

Are you ready to maximise client retention? Let’s talk. Book a complimentary 15-minute call here: https://www.butleradvisory.com.au/time-with-trent.