Net Promoter Score (NPS): The Ultimate Guide
Buying a product or service may be a big decision for some people – especially if it involves spending a massive sum of money.
Many customers tend to go over the internet and conduct their research which may also include asking a friend or colleague about their intent to purchase.
Customers play a vital role in business growth, whatever industry you are in. In fact, small businesses owe it to customers that have turned into loyal enthusiasts. How?
Well, customer loyalty can lead to free promotions!
A lot of customers that have enjoyed your product or service can spread positive word of mouth which can help your business achieve organic growth.
Therefore, we can say that keeping your customers happy by giving them the most positive customer experience there is can be a great starting point to entice new customers to come in.
In fact, most companies that are already big in the market still see the significance of customers giving reviews to their product or service as 89% or 9 out of 10 consumers make the effort of reading reviews before purchasing a product.
This goes to show that how customers experience doing business with you can indeed affect your company’s reputation. In fact, 92% of B2B buyers are more likely to purchase a product or service after reading a trusted review.
Not only that, customer perception is so significant that it also has the power to increase or decrease your revenue growth. Market research has also shown that for every one-star increase that a business gets on Yelp, they see a 5-9% increase in revenue.
Purchase chances also increase by 270% whenever a product gets five-star reviews, even higher-priced items can increase by 380%.
Nowadays, social media has shaped the way customers share their recommendations and reviews – and yes, even the negative ones.
This is both a blessing and a curse for many businesses, as in just one click, customer feedback – whether from enthusiastic customers or not, can directly influence how customers perceive your business.
Therefore, customer satisfaction is one of the many factors that every business owner should take into consideration. Every customer’s experience should be taken into account and no feedback should be left unheard.
But how do we gauge customer loyalty and satisfaction? What metric should we use?
If you are curious to see how you can measure your success through customer loyalty and how it plays a role in your company’s growth, then you’re just reading the right article.
What is the Net Promoter Score (NPS)?
Net Promoter Score Definition
Net Promoter Score (NPS) is the primary benchmark that companies use to evaluate and gauge customer loyalty. It uses an index that ranges from -100 to 100 to measure how willing customers are to recommend a company’s product or service to other people.
Thus, when we talk about the Net Promoter Score, we talk about how well the customer’s experience is and how it fostered their loyalty to your brand.
The NPS score is gathered by asking the ultimate question to track promoters and detractors that result in having a clear measure of the organization’s performance from the perspective of customers.
The Net Promoter Score (NPS) was first developed by Fred Reichheld under Bain and Company in 2003. At present, the measure is used by millions of companies all over the world to gauge and track customer perception. Primarily, NPS scores segment the poor and positive feedback.
Fred Reichheld took two years of research that linked survey responses with customer behaviors, purchasing patterns, and referrals and how they impacted company growth. It turns out, after careful research that a single question can be a useful indicator of company growth.
The rigorously phrased survey question, “How likely are you to recommend this product or service of [ABC company] to a friend or colleague?” is now used by millions of businesses worldwide.
NPS results help organizations to achieve the common goal of increasing their scores by encouraging enthusiastic customers which can be tracked and quantified over time.
Calculating your Net Promoter Score (NPS)
NPS calculation is simple and easy.
Following the formula below, your Net Promoter Score is simply the percentage of promoters minus the percentage of detractors.
So, for example, if you have a 60% promoter score vs a 20% detractor score then 60-20 is 40% which is your NPS score. Check out the detailed guide for Churn rate.
Categories of Net Promoter Scores
A survey respondent gives a rating between 0 (not at all likely) and 10 (extremely likely). The Net Promoter Scores are then segmented into three different categories, namely, promoters, passives, and detractors.
Promoter
The promoter score consists of scores with a value of 9 or 10. These describe customers that loved your company’s products and services. They have repeat purchases and can be considered brand evangelists that highly recommend your product and services to other potential clients.
Passives
Passives are those respondents that gave a score of 7 or 8. They are those that can be described as somewhat satisfied but can easily be swayed by other competitive offerings once opportunities arise. They are those that would not necessarily spread negative word of mouth about your product but are not as earnest enough to promote them. Remember that in NPS surveys, an increase in the number of passives can indicate a risk of customer churn which can eventually result in negative reviews.
Detractors
Detractors are those that gave a score of 6 or lower. They are the customers who may have had a bad customer experience and can be described as unhappy customers. Given that they were not entirely elated with what you offer, you may expect that they will not be purchasing again, and the worse part of it is the possibility of damaging your company’s reputation through negative word of mouth.
The NPS Survey Process and Analysis: Understanding your NPS Results
Before you calculate Net Promoter Score, you first have to give out your survey questions to a number of respondents. The key to your NPS score becoming a reliable predictor, is important that your NPS surveys are given to a number of customers. Gauging customer loyalty may give out a better Net Promoter Score especially if you have a great number of promoters instead of detractors.
The Net Promoter Score is always expressed as a number with a value in the range of -100 to 100. So when your score comes up as a negative number, it may mean that you have more detractors than promoters in your pool of respondents and vice versa. Check out some sales-related guides, B2B sales, tech sales and SaaS sales.
But first, how do you make an NPS Survey?
Creating NPS surveys is quite easy. However, it is essential that you must think about how NPS data will be utilized in the long run when coming to a decision on how you will collect your data from your customer base. You may either create your own Net Promoter Score Surveys through software or simply create a simple survey using your own template.
Here are some things you may include in your survey questions.
Demographic profile questions
For many Net Promoter Score surveys, setting up the demographic profile is not a new thing. Demographic questions typically include your customer’s age, gender, and income, among others. These data can be very important when there is a need to create sections during the research process and analysis of data.
However, you may avoid demographic questions in the survey once they are not needed, or you may get your answers from the data that you already have available in your systems.
Net Promoter Score (NPS) question
This is the foundation of your NPS survey. As mentioned earlier, gathering NPS feedback would require you to ask the primary question to be able to measure customer satisfaction and loyalty. The other questions which you may include are used to make data analysis easier and follow up with a respondent and address customer feedback.
Open-ended customer feedback
In the second part of the survey, your respondents are able to explain the reason behind their rating through an open-ended follow-up question. This is what will help you discover what drives promoters and detractors in their responses. With the context that supports their rating, your customers may be free from any bias that other survey questions may impart.
It will also give you a complete picture of how their negative experience shaped their rating and vice-versa.
Although analyzing responses to these types of questions in an NPS survey may be time-consuming and challenging, your team may use different text analysis tools to save you a lot of time. Check out the best feedback tool.
Suggestions for improvement
In this survey question, you are basically asking the respondent to give out their suggestions on how you can improve their experience and customer journey. This can be a helpful question if you want to have a baseline for directly resolving an issue directly with a customer.
It is important to take note that there are some cases where you do not need to have the open-ended customer feedback and the improvement section as there are times that customers have the same answer for both questions.
Permission to follow up with the customer
One good practice for every company is to ask a survey respondent whether they can follow up with them as needed since you may not expect all survey respondents will want to voice out their concerns or issues. If you do not have any copy of their contact details, it will always be a good move to ask them. However, if you can get their contact details from your system, or if you have a demographic question message in the first part of your survey, you may choose to omit asking for the respondent’s email.
How to Interpret Net Promoter Score
As mentioned earlier, the net promoter score system is always expressed as a number of -100 to 100. This means that the score is negative when a company has more detractors than promoters and vice versa.
In the Net Promoter System, there is a great difference in the average scores in most industries.
In fact, research done by the Temkin Group in 2018 found that average NPS data range between 0 internet and TV service providers and 39 auto dealers. They also found out that NPS scores were between -1 (internet service providers) and 65 (department and specialty or novelty stores).
Having knowledge about NPS averages according to the industry helps you to understand how competitors move within a specific market and provide context to what can is depicted as a good or bad net promoter score. It allows you to calculate the net promoter score better and use it as your leverage for your own business.
So what is a good NPS score?
Given that NPS measures the value between -100 to 100, any score above 0 can be depicted as “good” because it is a clear indication that the business has more promoters than detractors.
Most top-rated companies generally score 70 and above. However, it does not go for all big and global companies alike. In 2018, big companies like Netflix had an overall NPS score of 64, Paypal with 63, Amazon 54, Google 53, and Apple with a score of 49.
In short, a score of 100 would indicate that all survey respondents highly recommend the company to a friend and colleague – which nobody has ever scored.
What about a bad NPS score?
Any score below the value of 0 indicates that a business has more detractors than promoters. Here is where measuring customer loyalty needs to be nurtured among your clients. When a business gets low NPS scores, it may mean that you have to make a move and do something to improve your situation. Remember that unhappy customers and negative customer experiences can impede growth in the long shot.
How to Distribute Surveys and Collect NPS
If you are interested in calculating and tracking NPS survey results, the first step is to carry out an NPS survey to collect feedback from your customers. There are two main ways you can do this, depending on whether you want to collect it ask the in-the-moment type of feedback, or collect it sometime after a customer has had any experience with your company.
Here are the following platforms where you can distribute and collect NPS.
Website Survey
On-page websites usually have pop-up surveys that let you acquire your customer’s feedback while a customer is on the website. You may have your developers let it appear on the main conversion pages or post an exit survey before people leave the website.
Email Survey
Instead of using a website pop-up, you can collect NPS through emails and invite them to fill in your NPS survey after their purchase or interaction with your business.
Although email surveys require a bit more work on the part of the customers, giving them an ample amount of time to experience your product can help them develop a clearer picture of whether they would recommend your product or not.
Understanding NPS Data
Take a good look at your data segments
Your business Net Promoter Scores may vary according to segments age group, gender, long-term customers, spending customers, and others. When you are in the starting stage of doing an NPS survey, any information you gather will give you a clearer picture of your business standing.
On the other hand, when you become more experienced, you can further advance your NPS analysis by using segmentation or categorization systems and identify how you should change your strategies to different types of consumers.
Track your performance
NPS is a real-time metric. You get to have a full view of real-time feedback which you can look at on a daily basis. However, it is important to take note that the Net Promoter Score is further ascertained once you see market trends and data fluctuations.
Although there is no assurance that you will get higher response rates for every NPS survey, you can still use these data as foundations to base your strategies for improvement. Once you have an understanding of how the Net Promoter Score changes over time, you can take a deeper look at what contributes to these changes.
Fill in gaps
The Net Promoter Score can provide you with essential information through follow-up questions as part of your survey.
Therefore, it is important to have an underlying methodology for the analysis of your Net Promoter Score so that you can always fill in the gaps for your customers and nurture them to become loyal customers. It helps you hone strategies for a more customer-centered approach.
The Importance of Net Promoter Score
It can gauge customer loyalty
The Net Promoter Score can help you evaluate your customers’ loyalty. With this, you can create strategies to further nurture your relationship with them as you can easily detect your customers churning that results to canceling their subscription or not repeating their purchase.
When potential customers see that you provide a quality customer experience, you can empower existing customers and convert new customers in the process.
It shapes your ability to improve customer satisfaction
When you have accurately calculated the Net Promoter Score, you can have an in-depth understanding on how to improve your marketing strategies. Specific comments about customer experience most especially when they are about bugs, poor user interface, or bad customer service can help your team directly address these concerns.
It boosts referral marketing
Marketing is a vital aspect of running a business. Therefore, to have a loyal customer means that you get free marketing for your company. Having a net promoter system can harness the power of referral marketing by having loyal customers vouch for your brand through testimonials, online reviews, and case studies which can eventually entice new customers.
It can help you reach out to detractors
Once you are able to identify unhappy customers, you can start investing in reaching out to them and turning their perspectives around. This may be done by addressing their concerns which lets them know that they are heard.
