What is a Good Net Promoter Score? (Latest 2018 NPS Benchmark)
One of the most frequently asked questions we get from our customers at Retently is “What is a good Net Promoter Score®?”. Although we emphasize that the score value is irrelevant, we do understand that comparing the metric to other companies can help gaining a more accurate picture of where they stand in the competitive landscape.
To be honest, benchmarking NPS® is a complicated process. Behind every CX metric, there is a series of factors that influence it. NPS is no different.
To prove that let’s look at the following examples. According to a recent Temkin study, the average Net Promoter Score for auto dealers lies in the range of 39 with the lowest being 20, while the average NPS for Internet Service Providers in the range of 0, with the lowest being -16 and the highest 19.
That essentially means – you cannot say a lot about a company just by looking at their absolute NPS, without considering their relative performance within the industry. While for some businesses an NPS of 30 might turn the worst in the industry, for others – as being ranked among the market leaders.
So from what you can see, Net Promoter Score can vary dramatically, and if you want to figure out whether your NPS score is good or bad, there is a variety of aspects to look at. Further on we will be looking at the absolute values of a good Net Promoter Score across industries, factors affecting NPS benchmarks and steps you need to take when comparing your scores against competitors to get the most out of your NPS score.
What is a good NPS score?
Generally speaking, a Net Promoter Score that is below 0 would be an indication that your business has a lot of issues to address.
A score between 0 and 30 is a good range to be in, however, there is still room for progress. If your NPS is higher than 30 that would indicate that your company is doing great and has far more happy customers than unhappy ones.
An NPS over 70 means your customers love you and your company is generating a lot of positive word-of-mouth from their referrals. The higher your NPS is, the more likely it is that your customer referrals will convert into new leads and more revenue for your company.
Do your best to keep your score above 0. Even though an NPS of -50 might be higher than others in your niche, finding yourself below zero might be discouraging and it should definitely ring a bell as to the provided customer experience.
But the data above is very relative. Truth be told, there are markets that never get an NPS higher than 20. If you are one of them, there are several steps you need to go through to compare your scores against competitors.
Step 1: Compare it with your industry average
To understand your Net Promoter Score better, start by comparing it with the average scores within your industry, and against competitors. This is also referred to as the relative method, as opposed to the absolute method, which involves benchmarking your number to an agreed standard across industries for what a good NPS is.
When comparing NPS scores, it’s important to understand what market you’re operating in. Some businesses have a more positive image than others. Department stores, for example, bring more happiness to customers than banks and insurance companies, thus they tend to have higher NPS.
If you are in a travel business you can’t compare yourself to a company that provides internet or TV services. It will simply give you the wrong idea.
To prove that let’s look at the Verizon NPS score, which is 32. Taking into consideration that the maximum score you can get is 100 (which no company ever did by the way), you might think that it is pretty low. As a matter of fact, Verizon has the best score in the ISP industry.
United, with an NPS score of 10, on the other hand, ranks as one of the worst companies in the Airlines. While both companies have a somewhat similar score, their performance among their peers differs considerably.
NPS shouldn’t be the end point of your benchmarking process – conduct a competitive analysis. It will significantly broaden your ideas and inspiration base, pinpoint your weaknesses and strengths.
Step 2: Compare the score within a region
Not only NPS varies by the industry, it also varies by geographical areas and countries. Cultural differences can influence NPS scores a lot. There is a tendency for different regions to rate companies with varying degrees of enthusiasm. For example, in some countries, customers are less willing to use the top end of any scale, whilst others opt for the extremes, avoiding the middle values.
Anyone who has ever compared NPS scores in the US and Europe probably knows what we are talking about. Europeans rate company performances very conservatively and they are less likely to give you 10 or 9s.
In Europe, children are graded on a scale of 0 to 10 and it’s almost impossible to get a 10. In Europeans minds – 8 is good, 9 is great and 10 is genius. So when confronted with a classical 1-10 scale in NPS, survey respondents give you 8 even if they are satisfied.
In Japan, customers tend to give lower ratings as well, since it is considered poor etiquette to rate any business too high or too poor, regardless of their performance. Americans, on the other hand, give higher scores than just about anyone else. And it’s not at all surprising since Net Promoter System was originally developed in the US.
CheckMarket wrote a compelling article where it suggested that maybe there needs to be another NPS survey format for European countries, where respondents who give you 8 are also considered Promoters? We think it’s a great idea, but for now, if you’re not happy with your NPS score read step three.
Step 3: Consider the survey channel
Pay attention to the differences in the survey channel (email, in-app, SMS) and the methodology used to conduct the survey, since it can have a big impact on the NPS score. Big companies may have the financial means to do an independent survey, whereas small companies will most probably measure it on their own.
There is much discussion on the surveying methodologies favored by respondents. Fueled by the growth of the internet, web surveying seems to take the lead. However, criteria such as approach, outreach method, cost, demographics allow some of the channels to outperform in particular cases.
For instance, the social interaction proper to a phone call may determine more engagement from the respondent since he is assisted in the discussion. It may also affect their answers as people tend to present their opinion in a more positive light to a real person. Web surveys (in-app) turn to be less expensive, less intrusive, but, at times, they might have a weaker impact on enforcing customer dialogue.
Whatever channel you go for, make sure you run your NPS campaign using the same method as performed by the benchmarked competitor, otherwise, the comparison will simply not give you accurate results. Don’t try to compare apples to oranges.
Step 4: Use your baseline NPS as your own benchmark
Since the score alone is nothing but vanity, it’s impossible to give you a certain number that shows you what a good NPS is. The only number that’s good, is the one that’s better than your previous score. That’s the most important benchmark.
The best way of measuring progress would be to compare your NPS against your score over the last three or six months. If you notice a 5-10% increase in score, you’re going in the right direction and progressing towards building a successful business.
On the contrary, if you notice a significant decrease in the number, treat it as a warning sign that something went wrong and certain measures or actions need to be taken. If you are continually improving your own NPS, then you’re likely to be continually improving your customer satisfaction, growth, and revenue.
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Factors affecting NPS benchmarks across industries
So, which are the factors that affect NPS benchmarks? How do you know if you have a good NPS, and how do you know it’s not enough? Primarily, there are three factors that affect NPS benchmarks:
1. Niche Competition
Generally, NPS tends to be a better indicator in highly competitive verticals with many players, since it helps you assess relative performance. For instance, the reason why Tesla has an NPS of 96 can be partly due to their unique position in the market for luxury, long-range electric automobiles. As a result, customers have little choice, therefore are more satisfied.
Of course, there’s no denying that Tesla is making awesome electric cars and Elon Musk is building an aspirational brand, but NPS benchmarks tend to be higher for industries dominated by a bigwig and have less competition.
If you think it over, you’d realize that Apple doesn’t make the cheapest smartphones (they provide the best user experience); Netflix doesn’t provide a generic, free video streaming service (they provide a uniquely affordable, personalized and on-demand premium content streaming service); Amazon doesn’t lure customers with cheap discounts or flash sales all year (instead, it locks them in by offering Prime benefits).
All these companies lead their market-segment and have a unique brag-worthy proposition. That’s the prime factor to consider while evaluating your NPS – how crowded is your industry and how unique is your value proposition?
2. Customer Tolerance Levels
Tolerance is one of the crucial factors that affect Net Promoter Score benchmarks, as people are more likely to be opinionated by how much value your products and services deliver to them on a day-to-day basis or how much does their business or life depend on it.
You can measure the tolerance level for your business by asking a simple question: “On the scale of 1-10, how likely are your customers to get mad, if you can’t address the needs on an immediate basis.”
If the number is closer to 10, your business is in a low-tolerance industry towards service interruption, but if the number is close to 3-4, you’re in a high-tolerance industry.
The easiest way to increase the tolerance level for your company is to transform the customer experience by providing more customer touchpoints, greater transparency, and easier accessibility. Perhaps, the best example of companies who have managed to achieve high tolerance, despite being in a low-tolerance industry, are Uber, Southwest, Netflix and more.
3. Vendor Switching Barriers
One of the reasons why non-SaaS businesses tend to fetch higher NPS than SaaS ones is because it’s easier to infuse brand loyalty and high tolerance, as they have inherently high switching barriers.
For instance, if you bought a car and you loved the driving experience, you are inclined towards recommending it to your friends, even if the car gave you a little trouble over the period of time. It’s partly confirmatory bias, but mostly high switching barriers.
You cannot afford to switch to a different brand, without taking a financial hit. So, in order to stay consistent with your original conviction, you maintain a strong bias and keep referring the brand.
However, what would be the case, if you rented the car? Switching barriers would be relatively low since you can easily rent a different one to see how it performs.
That’s exactly the kind of problem that SaaS businesses face. Usually, SaaS companies have an inherently low entry and exit barrier, thus, making it difficult to retain customers and build loyalty. That’s also one of the major reasons why NPS for most SaaS companies is in the mid-tier range.
NPS as a driver for feedback
Ask yourself, if you find out in your benchmarking process that your score is lower than your competitors’ will you stop attempting to improve it? And on the flip side, if you find out that you are doing better than your competition, will you stop then?
While most businesses are obsessed with growing their score, NPS is not really a quantifiable metric to merely grow, but mostly a qualitative metric to reflect, analyze and react.
The most important aspect of NPS that many companies miss is that the number is just a metric, what’s more important is the qualitative feedback you get from it and what you do with it to make sure you’re improving your customer experience.
The main purpose of Net Promoter Score lies in helping you track and maintain the relationship you’ve created with your customers. And your main goal should always be to listen to the Voice of a Customer and act on it.
Instead of asking “What is a good Net Promoter Score?”, focus on understanding what drives the score and how to improve it day in day out, month in month out to produce long-term customer success.
Start measuring your Net Promoter Score today and look into what the score discloses, instead of interpreting it at its face-value.
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