What is NPS?
What Is NPS?
Net Promoter Score, or NPS, is a business tool used to measure the loyalty of a company’s customers. It was conceived back in 2003 and is intended to be applicable to almost any organization in any industry, not just telecoms, making it a potentially very versatile tool in any customer service provider’s arsenal.
Even if you don’t know what NPS is, you’ve undoubtedly come across it at some point in your life as a consumer. The ‘test’ consists of a simple question, asking customers something along the lines of:
‘How likely are you to recommend this service/company to a friend?’
This deceptively simple question is actually one of the most common customer satisfaction metrics in the world today. While it is essentially a very basic concept, it can provide some extremely useful insights into any telecoms company’s customer base when used properly.
How Does NPS Work?
The way NPS works is incredibly simple. Customers are presented with the question and can answer it by choosing a number on a scale of 0 (extremely unlikely) to 10 (extremely likely).
Depending on the number they choose, the respondent is then categorized into one of three groups. If they’ve chosen anything from 0-6, they are classed as ‘Detractors’, whilst 7s and 8s are called ‘Passives’, and 9s and 10s are ‘Promoters’.
Obviously, companies should be aiming to get as many Promoters as possible, with a large number of Detractors reflecting a poor customer service record.
To determine the final NPS figure, you simply subtract the percentage of detractors from the percentage of promoters. For example, if 75% of respondents were classed as promoters and 7% were detractors, the NPS would be 68%
Why is NPS Such a Popular Tool?
The fact that NPS is so simple is probably one of the biggest contributors to its success. It is very unintrusive for a customer to quickly click a number on the scale, but provides immediate and valuable feedback to the company about customer loyalty.
Customer loyalty is important as it is strongly linked with profit and sustainable growth. Customers who are happy enough with a service to actively recommend it to other people are likely to remain customers for a longer time, spend more money, and contribute to growing the customer base organically.
- NPS helps companies see how their actions are affecting their customers’ perceptions, so over time and by comparison with older NPS results, it can be used to inform marketing strategies, improve service design, and more.
Why is NPS so Useful for the Telecommunications Industry?
The telecommunications industry is huge, already accounting for a significant proportion of the world’s economy, and it’s growing fast. This means that the customer bases of many telecoms companies are also enormous. These large customer bases are one of the main reasons that NPS is so useful for telecoms companies - because the large sample sizes are able to provide accurate and reliable insights into customer attitudes.
The telecoms industry also relies heavily on repeat custom. The majority of business models in the industry are subscription or contract-based, so it’s important that people stay happy, keep spending, and continue recommending you to their friends and family.
Furthermore, there is little separating most telecoms companies in terms of the service provided (at least in the eyes of many customers), so consumers often depend upon word-of-mouth recommendations to help them choose a provider.
By using NPS to measure customer loyalty, telecoms companies are cheaply, easily, and relatively reliably able to measure one of their key metrics, making it an attractive and cost-effective marketing tool.
Does the Telecommunications Industry Have an Image Problem?
Customers of telecoms companies have an abnormally high sensitivity when it comes to service, with the industry suffering from among the lowest customer service ratings of any industry. According to the NPS Benchmarks Report 2018, telecoms businesses actually have the lowest average industry rating, with a score of just 24.
Phones and the internet have become a hugely integrated part of modern life for most people, so it’s understandable that customers have high standards for the companies behind them.
This shows that it’s particularly important for telecoms businesses to measure, understand, and react to their customer’s attitudes, and utilizing metrics like NPS is a convenient way to do this.
Are There Any Limitations to Using NPS?
While NPS is clearly a useful test for indicating customer loyalty, it is certainly not the be-all and end-all of customer metrics. One of NPS’ greatest benefits - its simplicity - is also one of its greatest drawbacks. There’s only so much info to be gained from one quick rating, and other things need to be measured to build a truly accurate picture of what customers are thinking.
For example, let’s say a customer providers an NPS rating of 2 because he or she is unhappy with the network coverage provided by their mobile service provider. The mobile service provider would be able to realize that the customer was unhappy but would not be able to understand the drivers causing the dissatisfaction. This makes it difficult for companies to identify the factors affecting the customers experience, thus making it challenging to take improve on service standards.
It’s crucial for any telecoms organization to build as accurate a picture as possible of their customer base. Ideally, this means seeing how they’ve responded to things in the past, how they are responding now, and even predicting how they will respond in the future.
Providing an excellent customer experience means understanding your customers and how they perceive your company. This makes NPS an undeniably useful tool, but to get the real picture and go beyond just descriptive information, you need to utilize any tools at your disposal.
Lynx Analytics "Customer Happiness Index" is an advanced predictive analytics platform that helps businesses to identify and measure key drivers that impact Churn, ARPU, CLV and NPS. It automatically assigns satisfaction scores to your entire customer base using advanced AI and Machine Learning to drive smarter customer experience decisions.
Here is a recent case study of how a leading telecom service provider in Asia was able to decrease customer churn and increase ARPU using Customer Happiness Index.