10 Min
Did you know that one bad customer experience can cost you new business? This shows the power of customer satisfaction and its impact on a business. This is where Net Promoter Score (NPS) comes in.
Net Promoter Score is a metric that measures the likelihood of customers recommending your products and services to their friends and family. The NPS system helps you better understand customer sentiment, increase loyalty, and drive business growth.
Table of contents
What is the Net Promoter Score?
The Net Promoter Score (NPS) is a metric for measuring customer satisfaction and loyalty.
It is built on this question: “How likely are you to recommend our product or service to your friends and family?”. Customers rate their chance of recommending the product/service on a scale of 0 to 10, with 10 representing the most favorable score.
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How to Calculate Net Promoter Score?
Begin by surveying your customers to determine how likely they are to recommend your product or service to friends and family.
1. Promoters (score of 9 or 10):
Happy customers who are likely to recommend your product/service to others.
2. Passives (score of 7 or 8):
These customers are happy with your product/service but may or may not recommend it to others.
3. Detractors (score of 0 to 6):
These are dissatisfied customers who can spread negative word-of-mouth about your product/service.
Based on the NPS survey ratings, customers are typically classified into:
Once you have your customers classified under suitable categories
NPS = Percentage of Promoters – Percentage of Detractors
For example, if 30% of customers are promoters and 10% are detractors, the NPS score will be 20 (30% – 10% = 20).
NPS can range from -100 to 100. The higher the NPS, the more likely your customers are to recommend your product or service to others.
Why is Measuring Net Promoter Score Important?
1. Measuring Customer Loyalty
One of the critical advantages of NPS measurement is its ability to reveal a customer’s propensity to refer a good or service to others. This helps you to measure customer loyalty and identify areas for improvement.
2. Monitoring Customer Satisfaction
Monitoring the Net Promoter Score (NPS) allows you to swiftly gauge customer satisfaction with your products and services. To enhance your customer experience, this data can be utilized to spot trends and make data-driven decisions.
3. Identifying Areas for Improvement
A low NPS gives a timely warning signal to improve your customer satisfaction and prevent churn. Areas for improvement activities can then be prioritized using this information.
4. Increasing Customer Advocacy
A company with a high NPS has a loyal and satisfied customer base, encouraging more customer advocacy. Loyal and satisfied consumers are more inclined to spread the word about their great experiences, which boosts sales.
5. Benchmarking Performance
NPS provides a benchmark for your business to measure your performance against competitors. This can be useful in identifying areas where your company may be falling behind and areas where it may have a competitive advantage.
6. Encouraging Employee Buy-In
Measuring NPS can help encourage employee buy-in to customer experience initiatives. When employees see the impact of their efforts on customer satisfaction and loyalty, they are motivated to deliver the best experiences to customers.
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What is a Good Net Promoter Score?
A Net Promoter Score (NPS) that is considered good usually ranges from 50 to 70, though industry-specific variations occur. NPS is a metric that ranges from -100 to 100. A company with a score above 70 is seen to have excellent promoters who are likely to recommend the product or service to others.
A score of less than 50 suggests areas needing improvement, indicating most customers are dissatisfied with your product or service.
However, consider NPS differs for different businesses, so for a more realistic evaluation, compare your score to your competitors and industry norms.
What is a Bad Net Promoter Score?
When a company’s Net Promoter Score (NPS) is low, it means that most of its customers are detractors—that is, dissatisfied customers who are likely to spread negative word-of-mouth.
Any NPS score below zero indicates serious problems with customer loyalty and satisfaction, requiring immediate attention. However, the severity of a “bad” NPS score changes based on the situation and industry standards.
How to collect NPS feedback?
There are several ways to collect NPS feedback, including the following:
1. Surveys
The most common method to collect NPS feedback involves surveys sent through email, SMS, or in-app notifications. Customers are asked to respond to a single question: ‘How likely are you to recommend our company to a friend or colleague?’ They provide their rating on a scale from 0 to 10, which helps gauge their satisfaction with your product or service.
2. Website Embedded Surveys
Another option is to embed survey widgets directly on your website. This enables automated collection of NPS feedback from visitors
3. Phone Interviews
Some companies choose to conduct phone interviews to collect NPS feedback. Collecting NPS feedback in person through customer service interactions or at the point of sale is also an option.
Regardless of the approach, collect, analyze, and act on the feedback. Incorporate open-ended questions in surveys so you can identify nuances of customer feedback.
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See NPS as more than a Number
The NPS score is just a number unless you break it down and evaluate the customer feedback deeply. Bad or subpar NPS results are like a wake-up call that can help you devise concrete plans for customer retention, while good NPS scores confirm that you are moving forward in the right direction and can think of even better ways to improve customer satisfaction.
