Satisfied clients don’t just help your company generate more leads and acquire more business; they also enable you to increase the customer lifetime value, reduce your churn rate and finally bring in more revenue.
How likely are your customers to recommend you to their friends, colleagues and work acquaintances? Wouldn’t it be convenient if there was a metric that you could use to assess that?
Luckily, there is. In this article we’re going to dive into the basics of Net Promoter Score® (NPS®) — a metric used to assess how loyal your customers are and how likely they are to recommend your company to their personal and professional network. While this is meant to provide an introductory overview to the ones who are new to the NPS framework, you can further explore this methodology on our blog.
What is NPS score?
Net Promoter Score was first developed by Fred Reichheld, Bain & Company and Satmetrix in 2003 (later acquired by NICE in 2017). Since then it has been heavily used by Fortune 5000 companies to assess customer satisfaction and has become an important metric for growth-driven businesses.
The Net Promoter Score methodology measures the chance of a customer recommending your business, product or service to their friends, colleagues and work acquaintances.
Think of it as a numerical value assigned to how loyal your customers are. It’s a really simple metric that can either be negative (every single customer has a negative opinion) or positive (every client has a positive sentiment).
A positive Net Promoter Score means your customers are loyal and likely to promote your brand to their personal and professional network. A negative score indicates you’ve got customer experience issues that should be rectified as quickly as possible.
Companies offering an amazing customer experience usually have a higher NPS. For example, Apple has a Net Promoter Score of 72, indicating that its customers are very loyal and are more likely to recommend its products to their friends.
NPS survey example
NPS survey example
Ask the right NPS questions to get a constant pulse on customer satisfaction and you will have a clear understanding of how your brand is perceived. Start the process by determining the suitable question for the specific NPS survey you plan on launching and the impact will be crucial.
The NPS survey consists of a two-part questionnaire. The first (rating question) asks your customers to rate your business, product or service on a scale of 0 to 10. The second one is a follow-up, open-ended question as to why the specific score was given. Both the rating and the open-ended questions have a standard format that nearly all NPS services provide.
Most of the companies rely on Net Promoter Score to elicit insights able to drive further action. The default questions will certainly work for this purpose in most of the cases, but wouldn’t a more personalized approach increase the response rate and the value of the collected feedback?
The way you address a question has a huge impact over the usefulness of the received insights. Experiment with the rating question to change the focus from company to product or workspace and measure the loyalty to your business. Deviate from the standard “why” question. Tailor it to fit your product offering and to invite for specific feedback for a better understanding of your audience.
Most of the existent survey software will allow personalization of this follow-up process so make sure your surveys are true to your brand and deliver the right questions at the appropriate time. Thus, you will be able to elicit data that is most useful for your customer satisfaction improvement or benefit of a bunch of excellent testimonials.
Calculating the NPS score
Net Promoter Score groups your customers into one of these three categories by asking them a simple question:
“On a scale from 0 to 10, how likely are you to recommend [brand] to a friend or colleague?”
The customers who answer 0 to 6 are Detractors. The ones scoring 7 or 8 are Passives and the 9s and 10s are your Promoters.
Promoters are happy, loyal customers who love your brand. They’re likely to share positive word of mouth and recommend your company to their friends, colleagues, and connections. They should be encouraged to spread their positive feedback about your business to others.
Passives are clients who usually feel satisfied with your business but aren’t especially enthusiastic. They’re unlikely to spread negative word of mouth about your brand, but there’s also a risk of them leaving for a competitor with a slightly better offering, once the chance arises.
Detractors are unhappy, unsatisfied customers who dislike your business. They’re far more likely to spread negative word of mouth and hurt your growth rate than they are to recommend you to anyone.
As a business, your goal should always be to maximize the number of Promoters, all while keeping the number of Detractors and Passives as low as possible.
From here, working out your Net Promoter Score is just a matter of calculating the percentage of your business’ customers who are Promoters, then subtracting the percentage of the ones who are Detractors.
After this, you’re left with a positive or negative score ranging between -100 and 100.
What is a good NPS score?
The higher your Net Promoter Score, the more loyal and satisfied your clients are. A company with an NPS of -100 has only unhappy customers and is unlikely to grow (or even continue operating for long), whereas a business with an NPS score of 60 to 100 has an entire army of loyal and extremely satisfied customers.
As a general rule, a barely positive NPS indicates that your business has a lot of work to do in order to improve its customer experience. An NPS score of 50+ means that your company is doing well and has far more happy than unhappy clients.
With an NPS of 75 or more, you’re likely to be generating a significant amount of growth from customer referrals. The higher your score is, the more likely it is that customer referrals will become a major source of new leads and drive more revenue for your business.
However, what counts as a good NPS score depends on the industry your business belongs to, the applied methodology and survey channel (email, in-app, SMS). A score of 10 might not seem like a good one at first, but if you have one of the highest score among your competitors, the reverse is true.
If you approach NPS from a quantitative perspective, your expectations will most probably not be met. Instead, look at NPS as a way to read the minds of your clients and implement advisable practices to boost customer satisfaction.
NPS is an extremely useful methodology; the trick is when and how to use it to get the most out of it. It’s about how to generate actionable data and transpose it into a viable customer-centered strategy.
While many think of Net Promoter Score surveys as orbiting around a simple 0 to 10 NPS scale, the reality is that there are two sides to it — the quantitative (the rating) and the qualitative one (the feedback).
Few things are as discouraging for a customer success manager as sending an NPS survey and receiving a score without any qualitative feedback. While an effective customer satisfaction survey can get a 40% response rate, many of these responses are purely quantitative and lack any useful user feedback.
Qualitative feedback, or text feedback, is part of what makes NPS such an effective framework for measuring customer satisfaction. It provides an extra layer of insight, allowing you to act on a client’s feedback rather than simply getting an opinion.
The open-ended responses add context to the received scores. Thus, the unlocked data is what will allow you to drive growth by means of key insights at various customer lifecycle stages. Based on the received feedback you will be able to spot disturbing but avoidable errors, get hold of new ideas to implement in the further product updates, uncover new marketing opportunities and as a result breed happy customers by offering a personalized high-quality customer-experience.
It is, however, hard to efficiently keep track of that feedback over time or to effectively implement actions. Segment the collected responses either manually or by using some sort of verbatim text-analysis. Track them and take action, to meet the needs of your customers and achieve your business goals.
Delivering Customer Success
Understanding how clients feel about your business is vital for a long-term, sustainable growth.
Besides, measuring NPS is no longer about the score itself. It’s the first step towards building a culture of customer success, which found widespread recognition among businesses.
Whether you’re a small startup or a big corporation, NPS along with other customer engagement data is the minimal combo required for customer success. If properly exploited, NPS shall serve as the perfect instrument for paving the path to a long-lasting relationship with your customers and handling better their expectations.