Get the max out of your NPS effort

By Betina Munkholm Johansson, Loyalty Group

The strengths and weaknesses of the NPS method in customer loyalty work was on the agenda when Loyalty Group recently held their seminar; "NPS - The Holy Grail or Fata Morgana?" in Copenhagen.

Customer loyalty and Insight are becoming more and more important according to the latest results from Loaylty Group's yearly CMO Index. By this statement Loyalty Group's CEO Mikkel Korntved opened the sold out seminar about NPS and customer loyalty. 

Customer loyalty predicts future behaviour

Customer loyalty is an important metrics because it gives a picture of the individual customer's future behaviour including if he/she is: 

  • open for repurchase and increased spending with you
  • an easy target for competitors
  • already looking for alternative suppliers

NPS is not the goal

Mikkel Korntved på LoyalytInsight-seminar den 21. maj

NPS is not a separate goal but can be seen as a measure of the customers' loyalty. The goal is the effect of developing factors that help increasing the loyalty.

-The causes of the individual customer's NPS score is far more interesting than the score itself, Mikkel Korntved pointed out.

- Keep your eyes on the goal and make sure to have the top management's full support in your customer loyalty work, the CEO warned.

Recommendations for working with NPS

Mikkel Korntved's strongest recommendations to NPS work were: 

  • Remember that NPS is not the goal; -creating customer loyalty is
  • Always identify the drivers of loyalty
  • Implement other relevant metrics in your work with customers
  • Do not forget the group of "Passives" (7-8), but evaluate how they can be "moved"
  • Look at individual customer's answers; not only the total segments
  • Collect data about your customers' experience at all relevant touch points
  • Be aware of sudden change in results and react to "disloyal" customers
  • Continuously collect customer data and make it visible for the organisation
  • Uncover the link between loyalty and growth  

The link between customer loyalty and the bottom line

Thomas Laursen på LoyalytInsight-seminar den 21. maj

- There is clearly a connection between loyal customers and the company's bottom line, stated Project Manager Thomas Laursen from TDC.

An increase in NPS means: roject Manager Thomas Laursen from TDC.

  • Additional sales
  • Reduced churn (customer defection)
  • More recommendations 

In TDC they see NPS as an expression of the customer's potential growth, and have for years been measuring and developing their customer's NPS. 

The strengths and weaknesses of the NPS-method

There are a lot of strengths and weaknesses connected to NPS that TDC is aware of and take into consideration in their use of NPS. According to Thomas Laursen the strength of NPS clearly overshadows the weakness.

The strengths of NPS The weaknesses of NPS
  • Measure loyalty and potential growth
  • Looks to the future instead of the past
  • Easy to understand and communicate
  • An important KPI for the whole business
  • Doesn't give "the full picture"
  • Difficult to explain the development
  • Can develop differently than other KPI's
  • Guided by emotional factors
  • Doesn't identify "drivers"

3 essential KPI's in customer loyalty work

TDC has taken the consequence of the method's strengths and weaknesses and chosen to work with 3 essential KPI's that support each other and give a better view of the customer loyalty: 

  • Recommendation score; average response to the recommendation question
  • % Ambassadors; How many answer 9-10
  • % Critics; How many answer 0-6 

Why TDC has had success with their customer loyalty work

Among the most important reasons for TDC's success are according to Thomas Laursen that they have: 

  • a clear program for following up the results
  • a top management that leads the Customer work
  • turned customer loyalty into actual financial results
  • established customer loyalty as the essential KPI across the whole organisation
  • created visibility around development and challenges
  • shared ideas and best practice about customer loyalty internally in the business
  • awarded employees for focusing on customer Loyalty
  • secured that employees have access to relevant customer data
  • taken initiatives to influence customer behaviour  

Challenges on the way to Customer Centricity

Line Udengaard på LoyalytInsight-seminar den 21. maj

The importance of having a top management that lead the work to create loyal customers was, stressed by Brand Manger Line Udengaard from OK.

OK's journey towards increased customer centricity was presented as a long and troublesome road with a lot of projects that all had this in common: 

  • They were not well anchored in the organisation
  • They lacked relevant customer data
  • They were not on the top management's agenda
  • They all crashed before ending 

Success with customer loyalty demands a cultural change internally as well as the top management's total dedication and focus, Line Udengaard stressed.           

Pilot project shall secure long term customer focus

Line Udengaard believes that OK's financial results can be strengthened through focus on increasing customer loyalty and is therefore conducting a pilot project with Loyalty Group with the purpose of:

  • Securing a long term focus on customer loyalty
  • Securing the top management's focus and support in customer centricity
  • Putting customer loyalty on the agenda for the Board of Directors

The project shall document the business potential related to a structured work with customer loyalty. In other words it will show that customer loyalty today is not only "nice to have" but actually something you "need to have" to succeed.

NPS will be used to segment a sample of OK's Customer base and thereafter be linked to economic transactional data to reveal the link between Customer Loyalty and financial profit. 

The large financial potential in increased customer loyalty

The first indications show that there is a large hidden economic potential in moving customers higher up in the Loyalty hierarchy where behaviour and attitude is more favourable. The gross margin among the loyal customers is significantly higher and their repurchase rate is also a lot better.

The results will be presented for the OK management who will then decide on the next steps in their customer centricity work to increase the loyalty. 

Some good advice to get customer centricity on the agenda

The best advice to give businesses who think about starting a customer centricity project is according to Line Udengaard:

  • Grow the company culture
  • Create ownership among top management
  • Visualize the financial value ("Show me the money")
  • Get a good reliable external partner to help in the process

Put NPS and customer loyalty in the right context 

Make sure that the use of NPS is fitted into the right context in the company's customer centricity strategy. 

-It's the framework for customer loyalty work, the efforts towards the customers and the financial arguments that shall secure the success, concludes Mikkel Korntved.

Download article about pros & cons of NPS