What is NPS? Net Promoter Score Explained
How much do customers value your organisation? Are they likely to refer you to others? These are the key questions that the Net Promoter Score can help.
- What is an NPS survey
- What is an NPS Score
- What are NPS survey questions
- How to calculate your NPS score
- Why Your NPS Matters
- NPS survey best practices
- How to improve your NPS
What is an NPS survey
NPS surveys provide a reliable measurement of customer satisfaction and loyalty, as well as its inverse: dissatisfaction and detraction. This instrument lets companies take the pulse of their client base—quickly and in real time.
Since the NPS’ inception in 2003, measuring and improving upon this score has marked the difference between failing and success.
Its ease of use, coupled with the accuracy of its predictive power, have made the NPS the most widely used method for measuring CX and customer satisfaction, globally, today.
What is an NPS Score
An NPS results from surveying your clients to measure how likely they are to either promote, or disparage, your business. Every company or organisation’s NPS is a barometer of public opinion.
What are NPS survey questions
NPS surveys involve asking your customers to rate, on a scale of 0 to 10:
The responses to this simple benchmark of loyalty are then calculated:
- Promoters: These customers rated you between 9 to 10. They are loyal, enthusiastic, and most likely to recommend your organisation. These are the clients you want to cultivate and keep engaged.
- Passives: These customers rated you 7 to 8. They are lukewarm, unengaged, and largely indifferent. This group is also somewhat positive and pliable, easily able to convince to become loyal clients rather than turning to competitors.
- Detractors: These clients gave you a rating of 0 to 6. They are the customers your company is at risk of alienating and losing. They are also most likely to share negative experiences—online and at home—damaging your brand.
Depending on the response to the above NPS survey question example, you then ask a qualitative, open-ended question to qualify their answers further:
- If they gave you a great score, thank them and ask: What’s the main reason for your score?
- If your score is awful, consider apologising and ask them: What can we do to improve our business, value or score?
Since the survey format is typically limited to two questions, customers are far more likely to provide their immediate feedback. Then, thorough analyses of aggregate data is key.
Asking clients and visitors for honest opinions provides critical insight. It also allows those visitors with negative experiences to vent, giving your team the chance to troubleshoot, respond and resolve pending issues—before they escalate.
How to calculate your NPS score
To arrive at your company’s NPS, client responses are aggregated, and the number of detractors are subtracted from your promoters. This will give your brand a score between -100 to +100.
Promoters % – Detractors % = NPS
- A score of -100 would mean every single client rated you between 0 to 6.
- A score of +100 indicates every client surveyed would recommend you to others.
If your NPS score is between 0 and 30, this is considered a good score. If your brand receives a score between 30 and 70, consider this a great score. Anything above that is legendary.
Why Your NPS Matters
Improving one’s NPS can translate directly into greater customer retention, brand loyalty and profits. But there are far more important reasons to take this measurement into account.
Tracking and improving upon one’s NPS directly correlates with the ability to predict company growth. According to one of the original designers of the NPS, Fred Reichheld, this simple but vital measurement of customer loyalty has predicted the future solvency of major companies.
The path to sustainable, profitable growth begins with creating more promoters and fewer detractors, and making your net-promoter number transparent throughout your organisation. This number is the one number you need to grow. It’s that simple and that profound.Frederick F. Reichheld of Bain & Co., Harvard Business Review
For those familiar with Tolkien, think of the NPS as the one score to rule them all.
Sink or Swim: This New Normal
As marketing executives everywhere can attest, it takes a great deal of capital to drum up every new client. Sadly for businesses today: as formal advertising costs grew, their ROI fell.
Here’s why. Surveying 28,000 respondents in 56 countries, Nielsen’s 2012 Global Trust in Advertising Survey found that public confidence in formal, paid advertisements declined by 25%.
Instead, as Nielsen discovered, 92% of consumers said they believed suggestions from their friends and family far more than they do television, magazine, and newspaper ads.
The second-most trusted source: online consumer reviews, with 70% of global consumers indicating they trusted consumer reviews over formal ads. This is why your NPS matters.
Smart Adaptation: Turning Crisis into Opportunity
Smart businesses need satisfied customers to ‘promote’ them. This means not only retaining current clients, but growing through referral marketing. Reicheld underscores this trend.
True loyalty clearly affects profitability. While regular customers aren’t always profitable, their choice to stick with a product or service typically reduces a company’s customer acquisition costs. Loyalty also drives top-line growth… the tremendous marketing costs of acquiring each new customer through advertising and other promotions make it hard to grow profitably. In fact, the only path to profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department.Frederick F. Reichheld of Bain & Co., Harvard Business Review
Adapting to this new normal requires adopting new strategies for client engagement, quickly.
NPS survey best practices
The timing and strategy behind conducting NPS surveys depends entirely on your enterprise. Each company will have individual needs, for which a consultation with digital survey experts is a must.
However, there are some general guidelines on the hows and whens of NPS surveys.
- Point of Sale: While not useful for product evaluation at POS, the NPS survey is used extensively for measuring customer satisfaction of employee interactions at POS. For museums and those receiving visitors, the NPS is recommended at the conclusion of a visit.
- Website Visit: Since it is so brief, the NPS survey can safely be used for measuring client satisfaction at the conclusion of a website visit.
- Timed Email: Those whose customers need time to try a product, or receive a service, will need a proactive surveying strategy in place to follow up on recent purchases or visits.
Though knowing when to send NPS surveys is more intuitive, how to send NPS surveys can be a bit more challenging,
Choosing the Right Distribution Channel
We recommend, when possible, using the platform your customer is already comfortable with. Though preferences will vary with individuals, there are a variety of survey distribution methods in use today for administering the NPS—and all other surveys. These include:
- Messaging apps
- Mobile apps
- Push notifications
- Snail mail
How to improve your NPS
The key to growing a high NPS depends entirely on having far more promoters than detractors. Business leaders understand the law of averages.
It also requires resolving issues and being attentive to problem or bottleneck areas. In our competitive climate, the need for improving one’s NPS cannot be understated.
Even industry giants are making huge efforts to stay ahead by tracking and growing their Net Promoter Scores.
NPS benchmarks and Market Comparisons
A company’s true NPS score is incredibly sensitive and valuable as it provides insight into how well they are serving their market. This means that finding true NPS benchmarks is incredibly hard. Market research companies conduct surveys to capture insights and benchmark scores by industry.
From Comparably.com, the following are the latest NPS ratings of some industry leaders:
- Amazon has a 54 NPS; is valued at $1.64 trillion
- Apple also has a 54 NPS; is valued at $2.11 trillion
- Google has a 50 NPS; is valued at $1.42 trillion
- Walmart has a 20 NPS; is valued at $382.64 billion
Net Promoter, Net Promoter System, Net Promoter Score, and NPS are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.
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