New study gives telcos their first-ever benchmark on customer loyalty
A study by WDS, A Xerox Company, calculated that a customer base starts to display a willingness to repurchase and remain loyal to a telecom provider when its NPS reaches +26. This is the first time that an industry-wide target has been established for the NPS, which is now a standard performance measure throughout the telecommunications industry.
WDS tracked the NPS of more than 32 mobile carriers globally and interviewed more than 4,000 customers to calculate the “sweet spot”. Customers with a strong chance of repurchasing from their current provider in the next 12 months delivered a collective, cross-industry NPS of +26. The current telecoms industry average is +5.
“NPS only measures a customer’s intent to recommend; it’s a good indicator of satisfaction and loyalty but we wanted to associate NPS to actual behaviour, in particular the customer’s likelihood of repurchasing from the same provider,” said Doug Overton, head of consulting & analysis at WDS. “Brands typically use NPS to benchmark against each other. This is a myopic view of customer satisfaction as it only measures success relative to the performance of others. Instead, we wanted to give the industry something to aim for; a number that we know actually translates into a business benefit.”
Taken from its study, “Net Promoter Score: Finding the Magic Number”, WDS was also able to quantify the risk that detractors present to providers. In particular, that 57% of NPS detractors are at risk of switching to another mobile provider in the next 12 months. The risk is seven times greater than it is for NPS Promoters.
In addition to identifying the “sweet spot”, the report also calculated the danger zone. While any negative score is undesirable, real damage begins at -36. At this point, an entire customer base is at risk of churning in the next 12 months.
“Customer churn has always been a concern for the telecommunications industry,” said Overton. “That’s why the Net Promoter Score has been so widely adopted as it does provide a strong indicator of customer satisfaction. As a simple, one-number result, NPS now features as a key performance indicator for senior management.”
It remains a valid measurement but our goal is to help brands understand that it shouldn’t be measured in a vacuum. Brands are, of course, interested in outperforming their competitors, but they should also be targeting a number that they know translates into actual customer behaviour.”
NPS distinguishes between ‘promoters’, ‘passives’ and ‘detractors’, or customers who actively recommend a brand to others, those who are indifferent, and those who actively share negative brand experiences.
The WDS study was based on research which surveyed over 4,000 mobile customers, spanning 30 mobile networks in four countries (UK, USA, Australia and South Africa).