Net Promoter Score 101: A Comprehensive Guide for Beginners
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 NPS® score — 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 topic 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 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 score. For example, Apple has a score of 63 (2018), indicating that its customers are very loyal and are more likely to recommend its products to their friends.
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 scores 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.
Measure and Improve Your Net Promoter Score
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Net Promoter Score advantages
1. NPS Provides Actionable Customer Feedback
NPS data is originally meant to drive action. It gives you the tools to understand what is driving the score. The collected feedback shall help you define which NPS feedback needs an immediate attention, as in the case of Detractors, so that the negative value is closed with a positive outcome as soon as possible.
2. NPS Predicts and Drives Future Business Growth
Net Promoter Score became a standard for predicting business growth, measuring the likelihood of new and repeated business. Since NPS surveys make an assessment of the overall customer satisfaction, you can get an idea of how many customers are likely to purchase from you again. The generated data will enable you to make more accurate predictions of future development, and better reallocate resources and manpower within your company.
NPS can also point to new business growth by means of clients who are willing to recommend your business.
3. Indicates Overall Business Health
The NPS metric is an efficient health indicator of your business through the customer lenses. It reveals customer sentiment towards the quality of your product or service, the promptness of the customer support, the ease-of-use your application, the efficiency of particular business processes, etc. NPS can be very helpful in this respect as it gives a constant view of customer satisfaction.
4. NPS Gives Direction for Improvement
Change for the sake of change is ineffective that is why asking follow-up questions and looking into the received feedback is the way to go forward. Understanding the needs and expectations of their audience is what should guide the direction of changes and improvements. NPS is an excellent source of feedback regarding how you can make your product or service better. Spotting bugs and avoiding common errors at an early stage of the product roadmap, prioritizing tasks, coming up with additional feature ideas – are among the valuable insights you will get hold of.
5. NPS is the Best Customer Relationship KPI
NPS acts as a key performance indicator of customer loyalty. Being widely used to improve the overall customer experience with a brand, NPS is thus the one tool that always keeps a pulse on customer sentiment and endows you with the ability to positively affect it.
A high NPS means that every link in the chain is performing well and customers are willing to reward you with their loyalty. A low NPS score could indicate that there are things that still need improvement. This is the moment where follow-up actions are needed so that churn or negative word-of-mouth is avoided.
6. NPS is Affordable and Easy to Implement
Among the advantages of the Net Promoter System is that it is easy to understand and calculate, making it simple for your staff to digest and follow-up.
As there is only one question envisaged and the survey can be taken by various channels like email, in-app or text message, the time and cost investment is greatly reduced since it does not need any field or phone interactions, no endless paper questionnaires and spreadsheets of data to be manually introduced. If you have a specialized NPS software, you have it all displayed on your dashboard with analytics and reporting features available for a more efficient data interpretation.
7. NPS Tracks Change Over Time
Transactional NPS helps getting a feeling of the customer sentiment after particular interactions. Relationship NPS data would be helpful for surfacing trends and tracking business performance over time, by regularly surveying customers on a quarterly, or bi-annual basis. Such recurrent reach-outs shall allow you to keep a pulse on customer satisfaction and enable you to take action before a customer decides to leave or spread negative word-of-mouth.
8. NPS has the Highest Response Rates in CX Metrics
While the average survey showcases a response rate of just over 3 percent, the NPS surveys score much over the norm, with an average survey response rate of 20 to 40% for an effective campaign. It’s mainly due to the fact that it involves one single question which is easy to understand and respond to without significant time investment. It means that even a small survey audience can produce valuable data to be further used in your company’s quest to improve retention and bring in more business.
9. NPS is Easy to Benchmark Against Competitors
NPS is a customer satisfaction metric successfully implemented by companies all around the world. Hence, thanks to its standardized value, the NPS score can be easily benchmarked against competitors within the same industry or country. This practice will help you get a better understanding of your score, as it gets more accurate when regarded in the context of your competitive landscape.
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.
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