How to Gauge Customer Loyalty

The best kind of startup is the one where your customers are your biggest sales team.

If your customers:

  1. are promoting your product to their friends or family then your customer base will grow naturally,
  2. don’t care enough about your product to promote it then your customer base will stagnate,
  3. 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.