Are your customers happy?
Such a simple question is remarkably difficult to answer. You could ask them, but rarely will someone tell you their honest opinion of you. You could wait and see if they remain customers (unhappy customers will leave), but by then it’s too late to change their mind. You could have someone else ask them, but in the end, most people have difficulty explaining their own feelings.
Ideally, you would have a way to measure customer satisfaction that:
- Is a simple metric (a single number).
- Fast enough that you can measure it on a regular basis.
- Does not require a lot of analysis.
The great news is that this simple measurement exists, and it is called the Net Promoter Score. It allows you to ask your customers a single question to tell you everything you need to know. That question is:
How likely are you to recommend our company/product/service to your friends and colleagues?
The answer takes the form of a score, from 0 to 10, with 0 being not at all and 10 being extremely likely. To see how this works, please take the Sean on Startups net promoter survey here. I appreciate the feedback!
You then group your customers into three groups based on their response:
- Promoters (9-10): Customers who love your product and will recommend it to others.
- Passives (7-8): Customers who are ambivalent.
- Detractors (0-6): Customers who are unhappy and may advise against working with you.
At first, this seems rather aggressive since you need to score a nine or higher to be considered a promoter. However, most people have an inherent ratings bias where they avoid giving very low ratings. Setting the thresholds at these levels adjusts for that bias.
To calculate your Net Promoter Score (NPS), you simply subtract the percentage of customers who are Detractors from the percentage of customers who are Promoters:
Net Promoter Score = % who are Promoters – % who are Detractors
Your NPS can be anywhere in the range of -100 (very bad) to 100 (very good). In most cases, it will be in between with a positive value better than a negative value. For example, in 2013 the Apple iPhone had an NPS of 70, Costco had an NPS of 78 and Southwest Airlines had 66 (source).
What then do you do with this number?
The most common use is to compare your NPS to average NPS scores for your industry. There are many resources available to do this, and the more narrow your industry, the more useful the benchmark. You can also easily find NPS scores for companies and products online.
This should also become a core metric for your business that you track on a regular basis. It is fast enough that you can survey your customers on a regular basis and track your NPS over time. In fact, Survey Monkey even has a pre-built template (which I used to create the survey for this blog). If you want to measure NPS on a very frequent basis (say, monthly), it is a good idea to randomly sample customers for each survey as even this short question can lead to fatigue if you ask it too often.
The NPS is not a replacement for talking to your customers, which you should still do on a regular basis. However, it does provide an objective and quantitative measurement for customer satisfaction that you can use to measure your progress over time.
So, are your customers happy? Ask them one question, and find out.
This article was originally published at Sean on Startups, a blog about starting and growing companies.
Image Credit: CC by ecastro