A step-by-step guide to collecting and analyzing Net Promoter Score (NPS)

What is net promoter score? Why it is important for you? How to measure and analyze?

What is Net Promoter Score and why should you care?
Are your customers happy? How many of your customers are satisfied with your product or service? How many of them are disatisfied? How do you measure the satisfaction level of your customers?

Net Promoter Score (NPS) is a widely accepted benchmark to measure the satisfaction level of your customers. It's reliable metrics to measure the loyalty, used by companies of all sizes across the industries. Today NPS growth is a critical metrics tracked by many customer-centric businesses. A growing NPS over a period of time leads to retention, referral and ultimately higher revenue for your business.



Here is a step-by-step guide on how to implement NPS in your organization.



Step - 1: Design the NPS Survey

Main NPS question

Main NPS question (also known as the "ultimate question") asks the respondent on her likelihood to recommend friends/family/colleague to the business/product/brand. The choice is an 11 point scale ranging from 0 to 10.

NPS Question
How likely are you to recommend [Your business/Product/Brand] to your friends and family?
0
1
2
3
4
5
6
7
8
9
10
Follow-on question
To get feedback on why the respondent selected that score, typically a follow-on 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-on question for free text response:
Long Answer Question
Please tell us the main reason behind your response.
Or:
Why did you choose [Response to NPS question]? Please let us know.

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 Survey

Once you decide on the survey questions, it's the time to send the Survey to your respondents. There are multiple ways you can send the NPS 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 better response rate.

Embed NPS survey in email Survey embedded in the email improves the response rate
Embed survey in website Survey embedded in the website.



Step - 3: Calculate NPS

Based on the survey score, the responses are divided into 3 buckets
sentiment_satisfied

Who are 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.

sentiment_neutral

Who are 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.

sentiment_satisfied

Who are Detractors?

Detractors are those respondents who have chosen 6 or lower (0 to 6). Detractors have most likely faced issue with your product/service. They are least likely to refer anyone to your brand. Moreover, they may talk negativitely about your brand within their network and post bad reviews on the review sites.

The NPS Formula

Now that we have categorized respondents into multiple buckets, it's time to dive into the NPS formula.

Net Promoter Score = (Percentage of Promoters - Percentage of Detractors). 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 passives are not taken into account for the calculation.

NPS Formula
Number of Promoters - Number of Detractors
Number of Responses
close
100
NPS ranges between -100 to 100

Lower the number, the poorer the customer experience. Higher number indicates that you have a healthier business with happier customers. A business with high NPS score would typically see 2 things that help them grow.
1. Customers buy more and stay with the business for a longer term. Resulting in higher revenue from existing customers.
2. Their customers refer new customers to the business.

What's a good NPS?
Inventors of 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

Read on for more details on how to analyze the score, NPS benchmarks and how to act based on the score.



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 the customer feedback to truly improve your business.

What is a good Net Promoter Score? (Continued...)

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. Where as airlines, car rental businesses have average negative NPS. For software companies, the highest NPS captured in the study was 38 with the 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 - number of suppliers, competitive dynamics, industry specific factors, geographical regions etc.

In case of software companies, for example, there are more options to choose from than it used be earlier. 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 rating. As a result you may see more passives than detractors. 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.
Benchmark against your industry's best (Not average)

It sounds obvious, but you should benchmark yourself with the best in your industry segment. And not the average score. For example, if you are a software company, you should aim for close to 40 NPS. Not the industry average, which is 14.

Analyze the Why

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 low score, then you can further analyze the issue and plan the action accordingly.

Beat your own scores

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: Act and improve continuously

Companies which see success with their customer success program are generally committed to action. That is - measure NPS continuously and act on making your customer experience better by identifying insights. Customer excellence demands the right level of commitment at all levels - front line operators to executive. Sometimes it requires a mindset change for a business, which may be a little challenging but highly rewarding at the same time.

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