It’s a fact, for most companies, especially SaaS companies, losing customers is a major problem. Today, to have a business that lasts, you need to know how to minimize attrition and understand customer needs. If you look for it, you can find a lot of information about NPS ®, which can help you reduce churn. But often, the deeper you dig into the subject, the harder it is to understand the true power of NPS ®. Because the focus is usually on the score. But it’s not the score itself that counts. It’s how you use it. We save you time: we give you 5 ready-to-use steps to reduce your churn with NPS ®.
What is a customer churn?
According to the Cambridge Dictionary, churn is “the situation in which customers stop buying the products or services of a particular company, especially to buy them from a competitor”. In other words, it’s the end of a business relationship between a customer and a company.
Churn costs your business a lot: lost revenue, of course, but also a lot of time and effort to replace lost customers. We all know that it is more difficult to acquire a new customer than to do business with an existing one. Right? Moreover, sometimes, the acquisition cost of a customer has not been covered by this customer, which is also a significant expense. This is why businesses need to be able to understand the reasons why customers drop out. And NPS® is a very effective tool to reduce churn, if used correctly of course.
5 steps to reduce churn with NPS ®
1. Understand what NPS ® means (and correlation to churn)
Little reminder or interesting information (for the full details, read this): NPS ® is based on the question “How likely is it – on a scale from 0 to 10 – that you would recommend our customer service to a friend or a colleague?” And, depending on their choice, respondents are divided into 3 categories:
- Promoters (score 9 or 10): loyal and enthusiastic customers
- Passives (score 7 or 8): satisfied customers
- Detractors (score between 0 and 6): unhappy customers
To get your NPS ®, you need subtract the percentage of detractors from the percentage of promoters. This gives you a score between -100 and 100, your NPS ®. For example, if you have 60% promoters, and 15% detractors, your NPS ® is 45. Ok, it seems not so good. But be careful, a score may seem low at first glance, but it always depends on the context. A score should always be interpreted according to the reality of the sector and the company. This is how NPS ® can help you reduce your churn.
So, with just one question, the Net Promoter Score ® measures customer loyalty. If you are aware of your customers’ level of loyalty, you can identify the risk of turnover. And once you know this, you can act to reduce the risk of churn. And all with NPS ® and just one question. Cool, isn’t it?
2. Benchmark your sector
As mentioned above, an NPS ® means nothing without context and, therefore, without benchmarking. Your customers’ ratings are always in the context of their experience of your sector. That’s why technology companies achieve a higher NPS ® on average than public sector organizations.
Of course, you always want your NPS ® to be 100, so reducing churn is a much simpler challenge. But, in most sectors, it’s impossible. Take the media sector, for example, where the average NPS ® is only 35. So if you’re a media company and your NPS ® is 40, you’re doing a good job.
3. Identify different types of customers
The NPS ® gives you valuable insights into how your customers perceive your customer service. And by combining NPS ® data with other customer satisfaction surveys, you can obtain even more precise information. And each piece of data sheds light on a particular aspect of your customers’ situation.
From all this information, you can identify different groups of individuals. This will be an excellent basis for building a global retention strategy and more specific ones, for each group. It will consist of concrete actions that are more effective because tailored to particular target groups. Because speaking directly to your target is more effective than talking broadly. And that’s where you can start to reduce your churn effectively.
4. Share the results of your NPS ® and surveys
Once you have analyzed your data properly, it is time to share the results with your entire company. While honest feedback from customers can be scary, it’s the only way to get a clear picture of your business. For you and for your team members. Take care to share a reliable, honest analysis. That’s the only way it can help you reduce churn with NPS ®.
Moreover, sharing feedback makes your collaborators more empathetic towards your customers. By hearing their feedback, your employees will want to get involved. They will be motivated to think about how they can improve customer service. For a better score and more positive feedback. A snowball effect that is more than profitable in the long term.
5. Act accordingly to reduce churn with NPS ®
Analysis is meaningless without, on the one hand, the lessons we learn and, on the other, the actions we take afterwards. Do you know why your detractors aren’t satisfied? Why your passives aren’t engaged? Ask yourself as many questions as you can about your results and analyses. So you can go further. Then you have all the knowledge you need to reduce your churn rate and improve customer care. The good news? You can get started today.
Looking for your NPS ® or a tool to find it out? Want to take your customer feedback analysis a step further? Contact our team of experts to calculate your NPS ® and reduce churn in your business.