Net Promoter Score (NPS) – A Measure of Customer Loyalty and Satisfaction
Net Promoter Score (NPS) is a powerful metric used to gauge customer loyalty, satisfaction, and enthusiasm towards a company. It is calculated by asking customers a single question: “On a scale from 0 to 10, how likely are you to recommend this product/company to a friend or colleague?” The aggregated NPS scores help businesses identify areas for improvement in service, customer support, and delivery, ultimately leading to increased customer loyalty.
As a business metric, NPS plays a vital role in helping companies of all sizes align their efforts towards a mission-critical goal – earning more enthusiastic customers. This goal can be easily tracked and quantified over time.
The Importance of NPS
NPS serves as a predictor of business growth. A high NPS score, especially when surpassing the industry average, indicates a healthy customer relationship. Such satisfied customers are likely to become brand evangelists, driving word-of-mouth marketing and fostering a positive growth cycle.
However, the NPS score alone is not sufficient to gain valuable insights. The overall NPS system allows businesses to:
- Ask follow-up questions in the standard NPS survey to understand areas of strength and improvement.
- Track and quantify NPS over time to establish internal benchmarks.
- Rally all employees around the mission-critical objective of earning more enthusiastic customers.
How to Calculate NPS
Calculating NPS is straightforward. It involves subtracting the percentage of customers who are detractors (rated 0 to 6) from the percentage of customers who are promoters (rated 9 or 10).
Net Promoter Score Scale: Detractors, Passives, and Promoters
In the Net Promoter system, customers are categorized into three groups based on their responses to the question on recommending the company:
- Promoters (score of 9 and 10) are enthusiastic and loyal customers who act as brand ambassadors, enhancing the company’s reputation and contributing to its growth.
- Detractors (score of 0 to 6) are unlikely to recommend the company, and they may even discourage others from engaging with it.
- Passives (score of 7 or 8) are satisfied but not actively recommending the brand. While they are not included in the NPS calculation, it is beneficial to win them over as they are close to becoming promoters.
Interpreting Net Promoter Score
NPS is expressed as a number ranging from -100 to 100. A negative score indicates more detractors than promoters, while a positive score suggests the opposite.
Average NPS scores vary significantly between industries. Understanding industry averages helps businesses evaluate their performance and set meaningful benchmarks.
What is a Good NPS Score?
Any NPS score above 0 is considered good, as it indicates more promoters than detractors. Top-notch companies typically have NPS scores of 70 or higher. Notably, achieving a perfect score of 100, where every respondent recommends the company, is exceedingly rare.
What is a Bad NPS Score?
An NPS score below 0 indicates more detractors than promoters. The perception of a score as “bad” depends on industry benchmarks. A negative NPS signals the need for improvement and generating more promoters.
How to Run Surveys and Collect NPS Feedback
To calculate and track NPS, businesses can run NPS surveys to collect customer feedback. Two main methods are commonly used:
- Website Survey: This involves on-page or website pop-up surveys to capture feedback while customers are still on the website. Follow-up questions help gather additional insights.
- Email Survey: Sending NPS surveys via email after a purchase or key interaction with the business allows customers time to experience the product or service before providing feedback.
How to Read NPS Results
NPS is a reliable predictor of future business growth or decline. It helps businesses spot potential issues and opportunities at both the individual and macro customer level. By analyzing data segments and tracking performance over time, businesses can gain deeper insights and continuously improve customer experience.
Conclusion
Net Promoter Score (NPS) is an essential metric for measuring customer loyalty and satisfaction. By focusing on earning more enthusiastic customers, businesses can fuel growth through positive word-of-mouth and brand advocacy. To utilize NPS effectively, businesses should not only consider the score itself but also delve into the follow-up questions to uncover valuable customer insights.
FAQs About Net Promoter Score (NPS)
What industries have the highest NPS scores?
NPS scores can vary significantly by industry. Some industries, like department/specialty stores, tend to have higher average NPS scores, while others, like internet service providers, may have lower scores.
Can a small business benefit from using NPS?
Absolutely! NPS is a valuable tool for businesses of all sizes. It helps small businesses understand customer loyalty and identify areas for improvement, leading to enhanced customer satisfaction and growth.
How often should businesses run NPS surveys?
The frequency of running NPS surveys depends on the business’s needs and resources. Some companies conduct surveys quarterly or annually, while others may run them more frequently for real-time insights.
Are there other customer satisfaction metrics besides NPS?
Yes, there are other customer satisfaction metrics like Customer Satisfaction Score (CSAT) and Customer Effort Score (CES). Each metric offers unique insights into different aspects of the customer experience.
Is NPS suitable for B2B companies?
Yes, NPS is applicable to both B2B and B2C companies. B2B companies can use NPS to gauge customer loyalty, identify brand advocates, and enhance their products or services to meet client needs.
Net Promoter, Net Promoter System, Net Promoter Score, NPS, and the NPS-related emoticons are registered trademarks owned by Bain & Company, Inc., Fred Reichheld, and Satmetrix Systems, Inc.
