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How NPS helps improve customer loyalty

How NPS helps improve customer loyalty for service providers
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Customer loyalty isn’t easy for any business to achieve, and for service providers, it’s even harder. Loyalty is notoriously low and with rapidly changing customer demands, it’s difficult for providers to get ahead of the game. Research published in 2016 by Accenture suggested that 77% of customers were quicker to retract their loyalty from a brand than they had been only three years earlier. That spells an uphill challenge for service providers – unless, of course, they can understand what their customers really want.

Satisfied customers are loyal. So how can loyalty be won? The Net Promoter Score (NPS) plays an important role in helping you find out the wants and needs of your customers. Let’s look at the NPS and customer loyalty in more detail. 

What does loyalty look like for service providers?

A service provider customer expects to receive the same experiences to many other industries:

  • Excellent customer service
  • Exceeding expectations
  • Personal interactions

Unfortunately, these elements have historically been missing in the industry as a whole. Churn rates go up, the fight to acquire new customers goes on and all the while the business isn’t able to retain customers or build profitable customer relationships.

And that word, ‘relationships’, is key. A total of 77% of consumers surveyed wanted to see more human interactions with service providers online. It’s not enough for service providers to interact with customers digitally, customers care how that interaction comes across.

What is the Net Promoter Score?

NPS is a research method used to determine how satisfied customers are with a company or service. It’s recognised and used around the world and provides a trusted method to quantify customer satisfaction. The system helps determine how likely customers are to recommend your business and the NPS can help predict business growth.

The NPS model divides customers into three categories, based on how they rate your service from 1-10:

  1. Promoters – these people rate your product or service 9 or 10
  2. Passives – these people rate you 7 or 8
  3. Detractors – these people score you 6 or lower

Promoters are super fans. They tell friends and family about your product or service and they help to recruit new customers through positive word of mouth.

Passives are neither satisfied nor dissatisfied. They are not disappointed with the product or service but they are less likely to recommend it.

Detractors are those people who are dissatisfied with the service or product they receive. Unhappy customers, these people are unlikely to recommend it and in fact may warn people off it.

Why the NPS is useful for service providers

The NPS is great at providing an insight into customer satisfaction. Live feedback can be gathered in real-time and customer concerns can be acted upon before it’s too late. In other words, businesses have an opportunity to rectify customer issues before they churn. Given that churn is a particular problem for service providers, the NPS is very useful.

How is Net Promoter Score calculated?

To determine your Net Promoter Score, use a simple formula:

Take the number of promoters and minus the number of detractors; divide by the number of responses and multiply by 100. This is your NPS score – the number can be positive or negative.

For large volumes of responses, it’s also possible to use calculators online or an Excel formula. Whatever method you use, note that the Passives are excluded from the calculations. This is because the passives don’t have a positive or a negative impact on the business: they don’t boost growth and they don’t prevent it either.

The NPS benchmark for service providers

Unfortunately, the NPS score for service providers is the lowest of any sector, at just 31 on average.

According to Bain & Company, the founder of the NPS system, scores can be classified as follows:

  • 0 – Good – A score of zero sounds bad, but it means that there are more Promoters than Detractors.
  • 20 or more – Favourable
  • 50 or more – Excellent
  • 80 or more – World-class

The sweet spot is a score over twenty. At this rate, there is a generally loyal customer base, but there is plenty of room for improvement. Also, it’s easier to convert Passives or Detractors when there are lots of them. At a high score of 50 or 80, there are already a large number of Promoters and moving the needle with Passives and Detractors is harder to do.

Service providers can take heart, then, that although the industry is notoriously bad at retaining customers, there’s hope. By learning to understand customer needs, and by delivering a service that meets them – and goes above – service providers can see a meaningful change in customer loyalty. And, of course, those all-important churn rates.

The link between NPS, loyalty and growth: give customers what they want

Happy customers are loyal customers, that’s easy to see. The more challenging thing is to establish what customers want from their service provider.

Again, the NPS is a great place to start. Gathering feedback is key to understanding what works for customers – and what would make life better. Examine the results of your survey and pay particular attention to the sections that ask for ‘additional comments’. This is the next best thing to have a direct line to your customers: here, they tell you what they want, what they need and what would help them.

The fight for loyalty

In the fight for loyalty, service providers often find themselves offering new services and technology. This is especially pertinent to business customers, who need this tech to run their business. This can be a great opportunity for growth. By providing SMB customers with a website and eCommerce, you give them a reason to stay with you. When you offer service businesses a scheduling tool, you take away a big headache in their business and increase their satisfaction.

Why not take a look at....

Our blog on how helping solve your SMB customer’s challenges increases loyalty. As an SMB provider, you have the opportunity to help SMBs overcome their challenges that in turn creates loyal and satisfied customers.

BaseKit has proven to help service providers for over 13 years increase customer loyalty and satisfaction with their small business customers. To find out how websites, ecommerce and scheduling tools could benefit your customers, increase satisfaction and boost loyalty, contact our partnership team by completing our short contact form.
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