It is recognized the world over that customer loyalty and satisfaction will be the key drivers for business growth.
In the earlier days, these two terms were largely associated with service based companies but now even manufacturing and product based organizations are embracing customer loyalty and satisfaction like never before.
However, a critical question remains unanswered; how can we measure an intangible value such as customer satisfaction?
Can this metric be objective enough for all the customer centric brands? And if yes, then do metrics like Net Promoter Score and CSAT help companies grow further?
This article will take a look at Net Promoter Score and Customer Satisfaction Score and help readers draw the right conclusions.
Net Promoter Score
In a nutshell, Net Promoter Score tells the likelihood of customers recommending your brand to others.
To calculate the Net Promoter score, customers are required to recommend a brand on a scale of 0 to 10.
Those who gives a score in the range 0 - 6 are the detractors of the brand; they are not likely to speak well of the brand. Moreover, these customers are more likely to demean online reputation of your brand and patronize the competition.
Customers who give a score of 7 or 8 are passives. They may like your service but not love it.
Lastly, promoters are those customers who give a score of 9 or 10 and it is this set of people who will recommend your brand to their peers.
To calculate the NPS score, simply subtract the percentage of detractors from promoters. A good Net Promoter Score supposed to lead to greater revenues.
There is a positive correlation between a high NPS and increased revenues but no direct causation. So the ongoing NPS myth that it is a useless metric holds no water.
Net Promoter Scores are used overwhelmingly by organizations in transport, retail, hospitality, financial services, healthcare, service providers and technology companies.
Customer Satisfaction Score
CSAT measures the satisfaction levels of the customers. Unlike the Net Promoter Score, this metric focuses on the satisfaction of customers at each touchpoint.
Customers are requested to rate their experience on a scale of 1-10, 1-5 or 1-3. The final score is calculated by calculating the average or the median score. Any score below 80% is considered to be a decline in service.
Companies use CSAT to determine the experience of a customer at a particular touch point, say, an after sales service, replacing a damaged or malfunctioning component and so on.
A granular score, CSAT is used by companies to focus upon a specific area.
Like NPS, CSAT scores are used by various product and service based companies. Automobile, consumer, mobile and various other product companies use Customer Satisfaction scores to determine the (un)happiness of their customers during various touchpoints.
Net Promoter Score vs Customer Satisfaction Score
CSAT and Net Promoter Score are as different from each other as a chalk is to cheese.
Net Promoter Score is for driving relationships and not transactions. Insights from Net Promoter Score help companies design their buying processes better.
Having said that, it is vital to note that Net Promoter Score is a one-dimensional tool. It measures just one metric - customer loyalty.
Smart organizations however, use NPS scores to improve customer experience at different touchpoints and develop a loyal customers base.
If your company is focusing on building long term relationships with your customers, then utilize Net Promoter Score.
Create a broad base of loyal customers to drive your business further. Identify your detractors and convert them into promoters of your brand.
CSAT, on the other hand, identifies how satisfied a customer is at various customer touch-points. It is quicker to administer and get results.
It is helpful if a business is engaged with its customers at various levels, and need insights to deliver improved service quality quickly.
Importance of customer loyalty
Satisfying your customers the first time when they visit your restaurant, showroom or even your online portal, is the first step toward creating customer loyalty. Why should you have a loyal client base?
1. A dissatisfied customer can change brand preference within minutes
There is no such thing as a ‘loyal customer for life’. A casual response, a late reply or a shoddy customer service can entice an existing customer to shift to your competitor.
That is why, many brands design their customer experiences in such a way that there is little or no scope for consumer dissonance.
2. Loyal customers impact your revenues in several ways
Loyal customers are more likely to mention your brand or service within their friend circle. More often than not, you can get a higher share of their ‘share of wallet’, and over a period, this higher share translates into healthy market shares.
3. Customer loyalty takes your brand places
Your loyal buyers are more likely to tell you about the areas of improvement or opportunity than anybody else. Market leaders know this and that is why they keep tabs on their buyers and partners.
There is a consistent communication between the market leader and its buyers. Brand extensions, repositioning and new launches have the loyal customer as their pivots.
Customer satisfaction and loyalty are measured by two different tools. NPS indicates the likelihood of an existing customer recommending a particular brand while CSAT determines the satisfaction and dissatisfaction levels of customers.
These two tools are important because both loyal and satisfied customers are critical for the growth of companies.