Net Promoter Score® is a customer loyalty metric developed by Fred Reichheld, Bain & Company, and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article ‘One Number You Need to Grow’.
This post is a collection of parameters that one must take care of when implementing Net Promoter System in one’s business. I have divided this into a 3 part series.
You can read the part 1 of this series here where I talk about:
- What the Net Promoter Score® is
- Why Net Promoter Score® is important and
- The common myths surrounding Net Promoter Score®
So now that we understand NPS®, how it’s computed, and why it’s important, let’s look at the next important step in executing an NPS campaign – Building Customer Segments. This is exactly what I cover in this post, which is the part 2 of this 3-part series.
In this post, I cover:
- The need to segment customers when implementing NPS
- The manner of segmenting customers
- The method of putting customers into buckets using NPS
- The reason to loop in the senior management and ways to do so
The need to segment customers when implementing NPS®
The first question that needs to be answered is why should you segment customers? The five points below give you the reasons for why this step is important.
It helps to provide a personalized service
When you’ve segmented your customers into different categories, you also understand how each of these segment of customers behaves and what each segment of customers needs. That’s when you can offer a personalized service. Customer experience is no more about offering a one-size-fits-all service. You have to deliver a very concentrated, focused, and personalized experience to each of your customer segment.
It aids in providing targeted marketing through better customer understanding
You understand your customers better so your marketing campaigns are tweaked to individual customer needs. That’s where the customer resonates a lot more with your marketing message because if your marketing message is generic then it’s very difficult to hold the attention of your customer in today’s information overload age.
It improves customer retention
When you have different customer types who you understand well and when you are able to deliver a differentiated experience, that’s when you can deliver a fantastic experience to your customers. This directly improves your customer retention.
It helps to identify and target profitable segments
There could be multiple types of customer segments in the market and in your industry. Does it make sense to go all of them? Maybe not! How do you identify which is the segment that you have to aim? You will be able to comprehend that only after either working with each customer segment or building a deep understanding of these segments and subsequently, evaluating whose needs can you best fulfill profitably.
It helps to time marketing effort
Marketing chocolates to children is very different from marketing to men. Maybe you need to market to children in the holiday season (or around the year!). However, the way this could be marketed to men in the Valentine season would be different from the way it would be marketed to them at other times of the year. Once you have segmented your customer base, you can channelize your marketing efforts better and more fruitfully.
The manner of segmenting customers
While we understand that the benefit of segmenting customers is manifold, let’s see how can you actually segment your customers. The segmentation can be done using parameters, a few of which are discussed below.
This segmentation can be done based on city, location, or country. For instance, your customers in Asia could have different needs from your customers in Europe. The language that you to plan in your marketing message has to be different for each of these geographies.
This can be done based on factors such as the age, gender, and occupation of your customers. Like we discussed earlier, marketing a product for children follows a significantly different path when compared to marketing a product for men or women. The demographic aspects and the changing needs have to be kept into account.
This kind of segmentation can be done based on customer behavior by evaluating factors such as loyalty, purchase pattern, usage and the like. NPS allows you to do so very effectively because it helps you observe these factors across promoters, passives, and detractors. You can observe how do each of these patterns change across your promoters, passives, or detractors upon implementation of a particular project or new initiative.
Customer segmentation by psychography involves considering factors such as personality, lifestyle, and class of the customers. For example, you would want to market an ultra-luxury premium car to a customer base that has opted to take holidays that are ultra luxurious. You wouldn’t want to market to a budget traveler.
Let’s see an example of this kind of a segmentation from the tours and travel industry:
- The price sensitive buyer
This is typically a buyer who is comparing the fare of the hotels or the train/flight tickets across multiple websites. Such a buyer can be called a price-sensitive buyer and this is a customer segment in itself.
- The business traveler
This customer segment is always concerned with the ease of booking. Customers that fall under this segment already have many things on their plate and do not have the time to book their tickets. If someone can actually extend this service to them, they would be happy to pay a fee for the service.
- The luxury holiday traveler
This customer segment is looking to have a hassle-free travel. Customers that fall under this category do not wish to worry about the booking, the cab that will take them to take to a particular location, and anything else to do with the holiday preparation or management. They just want to luxuriate and have a jolly good time.
Similarly, you can segment your customers based on geography, demography, behavior and psychographic traits. Once you have segmented your customers, to build a deeper understanding of each customer segment, you need to build their personas. Let’s take a quick look at why should you define your customer personas?
Helps add a face to the name
Your team is able to empathize with the needs and wants of a customer better when they see a person associated with the customer. Hence, this helps to keep the team motivated to deliver exception customer experience.
Aids in achieving goals through product/service offering
Employees understand what the customer is really looking for. They develop an appreciation for the personal goal that a customer trying to achieve and the challenges that he/she is facing in doing so.
Supports development of personalized marketing, onboarding, and support process
Building customer personas also support personalization of marketing, onboarding, and support for different kinds of customers. Without this, companies end up offering the same marketing message and customer service experience, which doesn’t satisfy some or most segments of customers.
How can you create your customer persona?
- Provide a name
- Put a name, an imaginary name. Something which your team correlates the most with.
- Give a job title and role if dealing with B2B.
- Provide demographic details such as age, gender, salary, location etc
- Specify primary personal and business goal
The method of bucketing customers through NPS
Promoters, passives, and detractors have extremely different traits. So, the way they should be engaged with should also be different.
Serve your Detractors
You need to close the loop on your detractors, making sure that their concerns are heard and duly addressed. The core issues that are creating detractors in customers should be communicated to your organization. Your team should exactly know the pain area of your detractors so that they can work on and address these problems.
Market your Promoters
The promoters are the ones who said that they would recommend you to others. So, you must make it easy for them to do so. You must plan campaigns around your promoters. Remember that this is a massively engaged customer base: these are customers that have given you a positive feedback. Now, if you’re not asking them for a recommendation, that’s a huge mistake you are making.
Engage with your Passives
These are your customers who are not engaged. Hence, you need to understand how can you deliver more value to your passives and move them to your promoters! They should be able to see the merit in the investment they have made with you. The reason they are sticking in the range of 7-8 is that they don’t see enough merit. Therefore, you must evaluate how you can deliver more value to your passives and increase their engagement with your brand.
NPS is the right tool that helps you bucket your customers into the three categories based on their loyalty. It allows you to plan your marketing, your service, and your customer engagement initiatives.
The reason to loop in the senior management and how to do so
Why should you loop in the senior management?
The entire process of a change begins from the top. Building a business that values its customers is a cultural shift and certainly not a process that could be done overnight. It’s a long process and requires continuous and consistent effort. So here are some key reasons why you should loop in the senior management.
It helps in backing the right projects
The projects that are related to CX wouldn’t get the priority or wouldn’t be supported appropriately unless and until the senior management is looped in. The team is always caught in multiple projects that an organization is undertaking. In these myriad projects, the sure shot way to get customer-centric projects rolling is by getting the senior management to back them up.
It ensures that the team is on track
It may happen that the team goes astray in pursuing the customer experience initiatives. If your senior management is serious about the whole exercise and it puts its weight behind this initiative, you can be sure you can bring the team back on track.
It eases approval for time, effort, and monetary investment
NPS is a way of doing business, and like any new initiative, it needs to be nurtured. You will need monetary investments to drive projects based on the insights that you receive from your NPS campaign. With the senior management buy-in, you will get easy and much-required approvals for these projects and the opportunity to showcase change.
It ensures high standards are set
When your senior management is backing projects that are going to improve the experience, your team sees that the management is serious about delivering a good experience to customers. Employees realize that this is not just a management fad and they emulate actions that improve customer experience.
It helps in sustaining and maintaining focus
When your senior management is aligned, you are assured of a long-term focus on such an initiative. Customer Experience or NPS is not something that can be implemented in a day, a month, or even a quarter. It’s an ongoing process and hence, it’s important to sustain and maintain focus to really derive results. The senior management backing this initiative is going to ensure that there is a focus in the long run.
We do understand that a buy-in from the senior management is crucial in making this initiative work. The next question that must be answered is how the senior management can be aligned with the goal of customer-centricity.
Share stories from across the globe and the industry
Most of the customer-centric organizations are the most loved and admired brands in the world. Biggies of the world be it Apple, Sennheiser, The Enterprise Rental Car, Dell, HP and multiple other startups in today’s age use NPS as a metric to improve the experience that they are delivering to their customers. So, use these stories to showcase the power of customer experience to your management and the team.
Use existing research
Use the wealth of information available to drive home the idea that customer experience is the only differentiator today. Do read this article to find a very interesting case study that proves how NPS correlates to increased profitability, wallet share, and referrals.
Focus on quick wins
Once you have initiated an NPS campaign, you need to look at what is that quick win that you can plan based on the insights from the feedback you’ve received. Use these to showcase success stories to your senior management. Use this momentum with the team and the management to get approvals for larger and long-term projects.
So start with an NPS benchmarking exercise in your business. Drive a couple of initiatives, get some early results and use that to get approvals for larger initiatives.
Want to Benchmark your NPS? Talk to us…
Once the senior management is looped in, its time for some action… NPS Survey Execution which we cover in part 3 of this series.