What Is NPS? How To Understand, Measure & Utilize Net Promoter Score
August 2, 2019
Making your customers happy is the best way to grow a business.
One happy customer spreads the word to approximately 11 people, while dissatisfied customers share their negative experience with an average of 15 people.
And while you might think you’re doing everything right, until there’s data to prove it, you’re just guessing.
This is why tracking customer satisfaction is so important, and the most popular way to track customer satisfaction in 2019 is with Net Promoter Score (NPS).
In this guide, we’ll break down everything you need to know about NPS: we’ll cover what it is, how it will help your business, how to measure it, and how to use the analysis it provides to improve customer satisfaction.
Let’s get started!
What Is Net Promoter Score?
Net Promoter Score (NPS) is a straightforward metric that measures your brand’s customer satisfaction.
NPS ranges from -100 to 100, and is calculated using customer feedback to a straightforward question:
A positive score indicates good levels of customer satisfaction, while a negative score is a red flag that something needs to be changed or addressed.
NPS is a versatile tool, as it can serve as an internal benchmark to track your customer service efforts, as well as an external benchmark to measure your customer satisfaction and loyalty compared to your competition.
6 Reasons You Should Be Measuring NPS
There are quite a few options out there for measuring customer satisfaction, including Customer Satisfaction Score (CSAT), Customer Effort Score (CES), social listening scores and custom-built surveys.
While each of these can be beneficial, there are a few reasons NPS is the most common measurement type used today and one we at Thermostat recommend all businesses measure, track, and leverage.
1. It’s a predictor of future growth.
NPS focuses on one key question: how likely are your customers to repurchase or recommend your brand?
Ultimately, this is the key to your future growth. Retention, lifetime value, churn rate, and even acquisition are closely tied to this question, making it an ideal lens through which to evaluate how your customers feel.
It’s one thing to have customers who feel that your product or service was adequate, but if you can get them to the point where they would happily recommend your brand to people they know, they are going to be an ongoing asset to your business.
NPS makes it really easy to focus on this critical goal. There are no other questions to distract either you or your customers from the main point. It’s one question. Either you are good enough to create evangelists or you aren’t.
Either way is a win. Either you are nailing a metric that actually matters, or you aren’t, and now you know you aren’t, and you can begin making adjustments to get there.
2. It’s fast and straightforward for customers to answer.
The average survey response rate is somewhere around 10% and 30%, and response rates are directly correlated to the length of the survey, with rates dropping by 17% if a survey takes over 5 minutes to complete.
In other words, customers aren’t willing to invest a notable amount of time telling you how to improve your business. If they see a survey with a long list of questions, chances are they’ll hit the close button, and you’re left with no data to work with.
This is where the NPS shines. It’s one, straightforward question that customers can quickly answer without a huge time investment. As a result, businesses tend to see response rates closer to 60% when running NPS surveys, greatly increasing the overall survey data they have to work with.
3. It’s easy for your team to understand.
Acquisition rates, cost per click, SEO ranking, engagement levels—there are a lot of marketing metrics to wrap your head around these days, and even when you know what they are, they can be hard to really understand at a deep level. Sometimes, they can even be misleading.
NPS is easy to understand, and it’s easy for everyone on your team to understand, regardless of role or department.
This means everyone is on the same page, everyone understands where the business is currently, and everyone is sharing the same "North Star" metric of improving the NPS score and increasing overall customer satisfaction.
4. It’s surprisingly versatile.
NPS is primarily used to track overall customer satisfaction and loyalty, but it’s actually an incredibly flexible tool that can be tailored to a variety of needs. You can use NPS to measure satisfaction for:
a specific product (i.e. how likely are you to recommend [product name] to a friend?)
user experience (i.e. considering your experience with us so far, how likely are you to recommend us to a friend?)
employee engagement (i.e. how likely are you to recommend [company name] as a place to work?)
"Would you recommend this?" is a universally effective metric that can be applied to a wide number of subjects depending on your needs.
5. It lets you measure yourself against your competitors.
Companies who are unhappy with a brand’s customer service are more likely to switch to a competitor. 33% of customers will switch to a competitor after one negative experience. Almost two thirds will switch after two or three.
Because NPS is such a popular tool, there are a variety of benchmarks (such as the Bain Certified NPS Benchmarks and NICE Sametrix) to help you evaluate your NPS scores vs overall scores, industry-specific averages, and even your competitors’ NPS.
These benchmarks allow you to gauge how well your company is doing versus the competition, which might help you decide whether you can afford slower, progressive improvements or need a major overhaul, fast.
6. It provides tangible insights that can drive meaningful action.
Ultimately, it’s not your score that matters... it’s what you do with it. The best part about NPS is that it provides you with information you can harness and translate into actionable insights for your brand.
The London School of Economics found that for every 7 point increase in NPS, brands saw a 1% growth in revenue. If you focus your efforts on gathering, analyzing and improving your products and services based on your NPS scores, you can improve overall customer satisfaction and increase revenue as a result.
How To Measure NPS
As we mentioned earlier, NPS is measured using one simple question:
How likely are you to recommend [X] to a friend or colleague?
On this scale, respondents can select 0 (not likely at all) to 10 (extremely likely to recommend).
From these responses, customers can be grouped into one of three categories: Promoters, Detractors, and Passives.
Promoters (score between 9-10): As the name says, these are your brand’s best advocates. Promoters are loyal customers who are satisfied with your product and/or service, and are the most likely to recommend a friend. These are also the ones that are most likely to repurchase.
Passives (score between 7-8): Passives aren’t emotionally connected to your brand—yet. Perhaps they haven’t had enough exposure to your product or service to have a strong opinion, or they’re just indifferent about the experience they had. Given the right offers, feedback opportunities or incentives, Passives have the potential to become Promoters. However, because they’re not emotionally connected to your brand, they could also be swayed if a better product or offer comes along from your competition.
Detractors (score under 6): Detractors have the highest likelihood of damaging your brand reputation and affecting your churn. These customers are dissatisfied with their experience, and chances are you may lose them to your competition. However, left unchecked, detractors will also share their negative experiences and views with other people and hurt your acquisition efforts.
Once you have your scores for Promoters, Passives and Detractors, you can calculate your overall NPS using the following formula:
Net Promoter Score: % of Promoters - % of Detractors
With this score, you’ll either be left with a positive number or a negative number.
A positive score represents an increased chance that customers are happy with your brand and would recommend you to their friends.
A negative score shows that more of your customers are dissatisfied than satisfied, and you may have a greater likelihood of churn.
As you can see, Passives aren’t factored into the equation, because they can swing either way, and it’s difficult to predict their sentiment and actions.
What’s A Good NPS Score?
As you can probably tell, achieving a high NPS is hard. Your brand can only reach a high NPS when your promoters greatly outweigh your detractors. Even if 50% of your respondents score as Promoters, your overall NPS would be 10 if 40% score as detractors. If 20% are Promoters, 60% are Passives and 20% are detractors, then your overall NPS would be 0.
Unfortunately, there’s no one-size-fits-all benchmark for a ‘good’ NPS score. Industry benchmarks have massive amounts of variance depending on the industry. According to NICE Sametrix, the department store industry has an average NPS of 58, while the internet service industry has an average NPS of 2. The important thing here is to benchmark your scores externally against your industry, and internally against your previous NPS.
Also keep in mind that in order to have relevant results, you need to reach a level of minimum viable data. Again this depends on your customer base, but the general rule of thumb is that if you survey more customers, you’ll have more powerful and accurate results.
When And How Should I Survey Customers?
Your NPS score can be very different depending on when you ask customers for their feedback. The optimal time to send an NPS survey depends on the type of industry you’re in.
If your product requires a certain learning curve or degree of familiarity (i.e. software company, game company, ISP), then it’s a good idea to wait until your customers have enough time to experience the product. This is usually done through email.
If you don’t own the end-product and you’re an aggregator (such as Expedia or eBay), it’s best to ask customers for their experience immediately after they’ve completed their interaction on your site. This is the best way to accurately measure their feedback to your brand without being impacted by their experience with your partners. This can be done either by sending an email immediately after purchase, by embedding a survey on your post-purchase page, or through a pop-up.
5 Proven Ways To Improve Your NPS
We’ve said it before and we’ll say it again. The score itself doesn’t matter. What you do with your score matters. NPS is a statistic that you can use to understand your customer sentiment and make informed business decisions.
1. Implement NPS As An ‘Always-On’ Tool For Measuring Satisfaction
NPS is most valuable when it’s tracked at the right time and when you can identify trends in the data. There’s no use blasting out one NPS survey to your entire customer database every year, regardless of when they purchased your product. Your NPS is best understood as a living, breathing score that needs to be measured and reviewed regularly so you have an accurate gage of where your customer satisfaction and loyalty levels are.
Be consistent with when and how you track and measure your NPS. Keep an eye on your NPS every day, and set regular times to review your NPS on a weekly, monthly, quarterly, or annual basis. Doing this allows you to be agile in your approach, in order to quickly identify and resolve to any challenges in customer satisfaction.
2. Set NPS As A KPI For Customer Satisfaction
As we mentioned previously, NPS is a simple metric that you can use to rally your entire team around creating great customer experiences. By setting NPS as a key KPI for your company, you can focus your entire team, including marketing, sales, customer service and operations, on one goal: providing great customer experiences.
3. Ask Your Detractors, "Why?"
Promoters are some of your biggest assets, but your Detractors are equally beneficial. Leverage your detractors well, and they can reveal important insights into any gaps in your customer journey or issues with your product.
Identify your Detractors and target them with a follow-up survey or call to understand where you may have fallen short of expectations, then address these issues either on a micro or macro scale. Asking your detractors for more information will make them feel valued and appreciated, and with the right actions; you could even convert them to a Promoter.
4. Turn Passives Into Promoters
Even though they’re called Passives, you shouldn’t be passive when it comes to interacting with them. In fact, Passives are the best ones to target to improve your repurchase rates and your customer churn.
Passives are indifferent for a reason. Maybe they haven’t repurchased because they feel the price isn’t right, they lack an incentive, or they haven’t had enough experience with your brand to build an emotional connection to it. Target Passive customers with dedicated offers or promotions to encourage repurchase or implement a loyalty program that incentivizes them to become more engaged with your brand. Given the right marketing actions, your Passives can be converted into Promoters.
5. Leverage Promoters As Brand Advocates
92% of customers trust earned media more than owned media. Put simply, word-of-mouth marketing is one of the most powerful forms of marketing for any brand—and who better to leverage than your best brand advocates?
Your Promoters can serve as a marketing asset, so it’s important to identify and leverage them to the fullest. Target your Promoters with CRM campaigns that incentivize them to leave a review in exchange for a Gift With Purchase or a discount on future purchases. You can also provide perks for referring a friend (i.e. a gift with purchase for the referrer and the referee). These actions can either be done as an always-on campaign or integrated into your existing loyalty program to improve engagement.
Is NPS Enough?
NPS is a great tool to measure customer satisfaction and loyalty, but NPS alone isn’t enough. Your NPS should form part of a holistic customer experience strategy that puts customer satisfaction at the heart of your business. This means having a strong vision and objectives for your customer experience, an omnichannel approach, a consistent brand experience, a strong customer service team backed by the right technology—and maybe even a random act of kindness or two.
On top of this, it’s a good idea to track your Customer Satisfaction Score (CSAT) in tandem with NPS for a comprehensive view of customer satisfaction. CSAT is used to measure customer feedback for specific interactions with your brand and is usually scored on a scale of 1-10. CSAT can identify short-term insights into customer satisfaction and pinpoint exactly where issues arise during the customer journey (for example, during interactions with your customer service team or while using your website), while your NPS is best used as an indicator of long-term customer satisfaction trends.
If you’re looking to supercharge your customer experience with a holistic strategy, take a look at The Complete Guide To Customer Satisfaction.
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