Net promoter score is essentially a metric that is widely used in experience programs to measure customer loyalty and satisfaction. It is measured using a single question and usually ranges from a scale of -100 to +100. But the score to this one question can speak volumes about your company. Read further and find out how.
NPS aka net promoter score is something that you cannot afford to ignore, especially if you give value to customer experience. This particular metric is incredulously popular and is used by millions of businesses today. It is ubiquitous! The reason is that it gives you answer to the 4 most pressing questions.
‘Are your customers happy?’ ‘How many of your customers are satisfied with your product or service?’ ‘How many of them are dissatisfied?’ ‘How do you measure the satisfaction level of your customers?’
Now, you know what great potential NPS holds. So, let’s explore the net promoter score and see how you can incorporate it into your business.
What is Net Promoter Score?
Net Promoter Score (NPS) is a widely accepted benchmark to measure the satisfaction and loyalty level of your customers. This metric is highly reliable and can be used by companies of all sizes across various industries. The net promoter score revolves around one basic question and the score given to that:
‘On a scale of 0 - 10, how likely are you to recommend our product/service to your friends and family’
Your customer will rate you on the given scale. You can then calculate the overall net promoter score accordingly through a dedicated formula which we will explain shortly.
Why should you Measure NPS?
NPS is critical for all customer-centric businesses. When you make the most of your NPS surveys and improve the score, you reap a lot of benefits. Over a period of time, you will observe a reduction in churn, increase in referrals, and higher retention rate which ultimately leads to higher revenue.
In short, we can coin NPS as a predictor of business growth.
If you procure a good NPS score, then your business is bound to grow, and you know you are going on the right track.
However, if you get a low score then it’s time to up your game by following up with customers and identifying the issues in your business. All these are associated with business growth.
How do you categorize NPS Respondents?
Firstly, you gather individual NPS scores, analyze them, and then categorize them. As per the score given, the respondents will be divided into:
Promoters: Promoters are the ones who chose 9 or 10 for the NPS question. These customers are the happiest ones with your product or service. They are loyal to your brand and are most likely to share your brand with their network. They not only stay longer and buy more but also refer others to your business.
Passives: Passives are the ones who have rated 7 or 8 for the NPS question. These customers are neutral in their outlook towards your brand. They may neither recommend your brand to someone nor talk bad about you. As a business, your goal should be to convert as many people in this bucket by delighting them.
Detractors: Detractors are those respondents who have chosen 6 or lower (0 to 6). Detractors have most likely faced issues with your product/service. They are least likely to refer anyone to your brand. Moreover, they may talk negatively about your brand within their network and post bad reviews on the review sites. So, it is very important to find out their issues, address and resolve them immediately.
How to calculate NPS?
Net Promoter Score is simple on all fronts, be it the surveys or the NPS calculation, everything can be done so quickly. So, what is this simple procedure of NPS calculation?
In simple words, NPS is calculated by subtracting the percentage of detractors from that of the promoters.
NPS Calculation Formula : Promoter% - Detractor%
Let’s say you have 100 responses. Out of them, 60 are Promoters (score of either 9 or 10). 30 are Passives (score of either 7 or 8). And 10 are Detractors (score between 0 and 6).
In the above example: Percentage Promoters = 60% Percentage Passives = 30% Percentage Detractors = 10%
The NPS is (60 - 10) = 50
Tip: If you notice, the NPS is represented as a whole number rather than a percentage. Also, the passives are not taken into account for the calculation.
Transactional vs Relational NPS
There are two ways of procuring NPS, namely; relational and transactional NPS. Let’s dive deeper.
What is Relational NPS?
Relational NPS helps you in obtaining a high-level view of customer loyalty and satisfaction. When it comes to relational NPS you just need to ask customers whether they would recommend your brand as a whole to their friends/family. This gives you an overall idea about your brand’s health and helps you in benchmarking NPS with the industry standards.
What is Transactional NPS?
As opposed to relational NPS, transactional NPS helps you in getting a fine-grained view of customer satisfaction and loyalty. Transaction NPS is given after a specific interaction with a customer. For example, when the customer uses your product for the first time, you can send a transactional NPS survey, and know what they feel about the experience. In short, transactional NPS helps you to improve various touchpoints of your customer journey.
How to Implement NPS in your Organization?
Step - 1: Design the NPS Survey
Start with the NPS question The Main NPS question (also known as the “ultimate question”) asks the respondent on his/her/their likelihood to recommend business/product/brand to the friends/family/colleague. The choice is an 11 point scale ranging from 0 to 10. You can frame your question according to your objective.
To get feedback on why the respondent selected that score, typically an open-ended follow-up question is asked. This question can be free-form text to capture the thought of the respondent behind the response. This response can then be analyzed either manually or automatically to identify the key improvement areas.
Follow-up question for free text response:
Additional questions You can ask 2-4 additional questions apart from the 2 questions asked above. But it’s recommended to keep the number of questions around 4-6 to get maximum response.
Step - 2: Send the NPS Survey
Once you decide on the survey questions, it’s time to send the NPS survey to your respondents. There are multiple ways to send the survey. You can send the survey link via Email, SMS, WhatsApp, etc. An NPS tool like Affiniv lets you send the survey embedded inside the email. You can also embed the survey in your web pages to get a better response rate.
Step - 3: Calculate your NPS
As mentioned earlier, for NPS calculation, you need to use the formula:
[%Promoters - % Detractors]
or this can be further simplified to
You can definitely use these formulas and calculate your NPS manually if your customer base consists of only 5 - 10 members. However, if the number exceeds (which will) you will have to resort to automation. We’d definitely suggest a highly responsive tool like Affiniv for the purpose to help you delve deeper into the numbers.
Anyhow, here’s a free NPS calculator to make the calculation easier for you. Give it a try.
Is your NPS score good enough?
NPS ranges between -100 to 100. So, the lower the number, the poorer the customer experience. A higher number indicates that you have a healthier business with happier customers. A business with a high NPS score would typically see 2 things that help them grow.
- Customers buy more and stay with the business for a longer-term. Resulting in higher revenue from existing customers.
- Their customers refer new customers to the business.
So, what is a good NPS score?
Inventors of the NPS system (Consulting firm Bain & Co.) suggest the following -
- Less than 0 (Negative NPS) - Not good (More detractors than promoters)
- NPS > 0 - Good
- NPS > 25 - Favorable
- NPS > 50 - Excellent
- NPS > 80 - World class
Yet, these numbers can change according to the industry. For eg. 2 or 3 is actually a good score for the cable TV industry since the industry average is 1. So, there are various aspects to consider.
While the above-mentioned ranges for NPS can be used as guidance, there is no one-size-fits-all number for NPS. NPS varies widely across industries. For example, in the 2020 XMI customer ratings, report, Streaming Media and Retail industries had an average NPS of 28 and 25 respectively. Whereas airlines, car rental businesses have an average negative NPS. For software companies, the highest NPS captured in the study was 38 with an average of 14.
NPS industry benchmarking
From the above picture, it’s clear that within the industry there is a good deal of variation. This can be due to several reasons - the number of suppliers, competitive dynamics, industry-specific factors, geographical regions, etc.
In the case of software companies, for example, there are more options to choose from than before. This results in higher expectations from a Software vendor and consequently a lower NPS.
There are also cultural biases to keep in mind. For example in some countries, it may be considered impolite to provide bad ratings. As a result, you may see more passives than detractors. In some industries like financial services, a loan denial may result in bad customer feedback. It’s important to benchmark yourself against your best-in-class peers as opposed to chasing a number.
Step - 4: What to do next? Analyze & Improve
Ok. Now you have a score! How do you know whether it’s good or bad? And what should you do next? Measuring and benchmarking your NPS is only the beginning. The real business lift comes from using customer feedback to truly improve your business.
Analyze the Why The score is important, but the text feedback that you collect in the survey is the real goldmine. The descriptive feedback contains the “why” behind the score. This feedback must be shared across the team (both operating as well as executive) on a regular basis. An NPS tool like Affiniv has the option to tag each response and identify the important areas of improvement. You can analyze the feedback manually or use automated text analysis to discover the most common issues.
Analyze score and feedback for each segment To further analyze, you can segment responses by key attributes. For example, an eCommerce business may analyze NPS by city, product type, user demographic, etc. A software/SaaS business can analyze NPS by attributes like country, language, industry, plan type, user role, etc. If you find that customers in a certain city or industry giving you a low score, then you can further analyze the issue and plan the action accordingly.
Beat your own scores This is a valuable point. As they say - ‘a good NPS score is the one that is better than your last score.’ Collecting NPS should be a continuous exercise - should be done at least every month across your customer base. Every customer should be surveyed at least every 3 months to understand their feedback. You should compare your scores month-on-month or quarter-on-quarter to see how the scores are changing and take appropriate action.
Step - 5: Take actions, Close the Loop and Improve Continuously
Companies that see success with their customer success program are generally committed to action. That is - measure NPS continuously, gather feedback, analyze them and act on it to close the feedback loop. This is where many companies lack. Just conducting NPS surveys is not going to take you anywhere. You need to close the loop. Here’s what Rob Markey, the leader of Bain & Company’s Global Customer Strategy has to say about closing the loop
Closing the loop
Your NPS programs should be a continuous exercise to improve customer experience. Conducting NPS surveys once in a blue moon won’t bring the desired results. It’d be just a waste of time.
So, here’s what you should keep in mind when dealing with feedback from NPS.
Gather, Analyze, Respond, Act, Improve. REPEAT.
How to Improve NPS [Proven Strategies]?
As we mentioned before, NPS improvement starts with closing the loop. And the strategies mentioned below are more or less part of it.
Boost the Brand Image
Involve in powerful strategies to promote your brand. The best way would be to ask your customers, especially promoters to facilitate your campaign through word of mouth, online reviews, and referrals. You can also encourage them to do so by giving them offers and incentives as a token of gratitude for participation.
Follow-up with Detractors and Passives
Follow-up with detractors and passives by sending them personalized messages and finding the reason behind their score. Address them and provide instant solutions. Make sure you let them know of this. Also, engage with them often but don’t go overboard with it. You need to give them their space as well. All this will help you build a good relationship and convert them into your loyal promoters.
Engage with Promoters
You shouldn’t forget the promoters, your loyal customers who took the time to give a great rating and convey the desire to recommend your brand. So, engage with them regularly, offer them incentives and make them feel cared for.
Bring down the average resolution time
Prompt solutions are always preferred by customers. So, your team as a whole should put in the effort in handling issues quickly and reduce the average resolution time. If it takes time to solve the issues, then provide the customers at least with a temporary solution but do let them know of it.
Customer excellence demands the right level of commitment at all levels - front-line operators to executives. Sometimes it requires a mindset change for a business, which may be a little challenging but highly rewarding at the same time.