Net Promoter Score
What is Net Promoter Score?
Net Promoter Score (NPS) is a customer loyalty and satisfaction metric measured by asking your customers how likely they are to recommend your offering on a scale of 0 – 10. The subsequent answers are used to measure, evaluate, and improve customer loyalty.
NPS differs from other benchmark metrics such as Customer Satisfaction Score (CSAT) or Customer Retention Rate (CRR), by measuring a customer’s overall sentiment about a brand rather than their perception of a particular interaction.
Responses are typically categorized into three groups:
- NPS Promoter: Customers who answer with a score of 9-10 are referred to as promoters. These are loyal, satisfied customers who will endorse your business to others and bring in new customers. This level of brand evangelism demonstrates the pinnacle of customer loyalty and serves as a benchmark for all customers outside of this category.
- NPS Passive: Customers who answer with a score of 7-8 are labelled as passives. Passives have the potential to become promoters, but they’re also more likely to switch to a competitor due to higher levels of indifference to the brand.
- NPS Detractor: Customers who answer with a score of 0-6 are considered detractors. Detractors are unhappy customers that not only present the risk of leaving, but also negatively impacting future business by sharing their unpleasant experiences with others.
- Calculating NPS: To calculate Net Promoter Score, subtract the percentage of detractors from the percentage of promoters. This will equate to a score between -100 and 100. A score of 50 or above is considered excellent and any figure above 80 is seen as world class.
Net Promoter Score: Best Practices
NPS is one of the most effective metrics available to measure customer satisfaction and loyalty. Although it is a straightforward process, there are steps that can be taken to ensure any resulting data is actionable and accurate.
Here are some common practices that aid in optimizing the accuracy of NPS data.
Benchmarking Data
Check the NPS benchmarks for your industry, review competitor scores if possible and set an internal baseline to gauge progress over time.
Follow Up with Customers
NPS is best leveraged as a continuous process. Follow up with detractors as and when they’re identified to pinpoint the salient reasons for dissatisfaction, engage with passives to determine what action can be taken to progress them into promoters and maintain great relationships with promoters to create lifetime customers. Thank customers for their engagement, reward them for their feedback and share any relevant changes made with them.
Diversify Data Collection
NPS surveys derive high rates of engagement due to their simplicity and ease of completion, providing actionable quantitative data. However, including an optional open-ended question can provide valuable qualitative data. Detractors have a higher proclivity to share their discontent while promoters, conversely, are more likely to share their satisfaction.
Combine Metrics
While NPS is valuable for measuring loyalty and satisfaction, it works best alongside other metrics to gain a more comprehensive understanding of the customer experience. Combining NPS with relevant metrics such as Customer Satisfaction Score (CSAT), Customer Effort Score (CES) and Customer Lifetime Value (CLV) will often provide more insightful information to act on.
Regularly Review and Improve
Review NPS practices on a continuous basis to ensure they are effective. The use of NPS software to analyse data has become increasingly common practice in recent years. Ensure regular NPS conduction, adjust survey questions and channels and monitor trends in customer sentiment.
Benefits of Net Promoter Score
Net Promoter Score (NPS) provides a plethora of benefits, enabling organisations to enhance, maintain and reconcile the customer experience when necessary. Some key advantages include:
- Easy Implementation: Setting up an NPS survey is uncomplicated and time efficient compared to other metric processes.
- Cost Effectiveness: NPS can be conducted autonomously by organisations with little to no investment required. This enables independent customer research on a continuous basis, providing valuable and actionable feedback.
- Engagement: NPS surveys typically have higher response rates than other feedback metrics due to their brevity.
- Progress Tracking: Regularly monitoring NPS and comparing with prior scores facilitates clear and accurate performance data that can be used to increase customer satisfaction over time.
- Growth Metric: NPS can be applied as a merited growth metric by organisations. According to Gartner (and the Pareto Principle), 80% of future revenue can be attributed to 20% of existing customers. While the prevalence of this may vary across industries, NPS provides insight into the contentment of your current customers which is a strong indicator of future growth.
- Actionable Data: NPS provides direct feedback, allowing the segmentation of customers into promoters, passives, and detractors. Each segment can then be approached accordingly to increase satisfaction and loyalty.
- Internal Use: The NPS process can be used internally to understand the sentiment of employees. Using NPS to improve and maintain employee morale further mitigates the potential for unpleasant customer experiences.
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