The best kind of startup is the one where your customers are your biggest sales team.
If your customers:
- are promoting your product to their friends or family then your customer base will grow naturally,
- don’t care enough about your product to promote it then your customer base will stagnate,
- are unhappy about your product and feel that they are stuck in a bad relationship with you, your customer base will shrink and your business will eventually fail.
How do you tell whether your customers fall into categories 1 (“promoters”), 2 (“passives”) or 3 (“detractors”)?
One way is to use the Net Promoter Score (NPS).
Calculating NPS before and after a change to a product or service offering could help evaluate whether the customers value this change or not.
To calculate NPS ask your customers one easy question:
Between 1 and 10, how likely is it that you would recommend <product name> to a friend or colleague? (10 being very likely and 0 being very unlikely)
Users that respond with:
9 0r 10 are Promoters
0 to 6 are Detractors
7 or 8 are Passives
The NPS is calculated by:
(% of all users that are promoters) — (% of all users that are detractors)
The score can range from -100 (everyone is a detractor) to +100 (everyone is a promoter).
A +ve NPS indicates that your user base should be growing naturally. An NPS greater than +50 is seen is being good.
Example:
During the checkout process in your online shop, 1000 customers answer the NPS question.
– 300 answer between 0 and 6,
– 300 answer 7 or 8 and
– 400 choose 9 and 10
Your NPS is (400 / 1000 x 100) — (300 / 1000 x 100) = 40–30 = +10
The +10 indicates that your customers are promoting your shop. Your customer base should grow.