Net Promoter Score (NPS) is one of the key metrics to predict business growth by measuring customer experience.
The NPS metric is the central measure for customer experience management and has transformed the world of business since Bain and Company first developed it in 2003. As a result, NPS is considered the gold standard in customer experience metrics. NPS scores range between -100 and +100. A higher score indicates more customer loyalty, and millions of businesses use this metric to track customer perception.
How is NPS calculated?
The central question in ascertaining NPS is simple:
How likely would you recommend Organization X/Product Y/Service Z to a friend or colleague?
Customer responses are recorded on a scale of 0, which indicates not at all likely, to 10, which is highly probable. Based on customer responses, customers fall into one of the following categories:
- Promoters (score 9-10): These are customers who fuel company growth by repeat purchases and recommendations.
- Passives (score 7-8): These are satisfied customers that are also somewhat unenthusiastic. They are not as loyal as promoters and may switch to competitors.
- Detractors (score 0-6): Customers unhappy with your product or offer fall in this category. They often make negative comments, which can slow down your growth by damaging your brand.
Calculation of the Net Promoter Score metric is simple. Subtract the percentage of detractors from that of promoters. For example, if we have 80% promoters and 10% detractors, your NPS is 80-10 = 70.
CEM And Net Promoter Score
The NPS metric is key to the success of our customer experience management (CEM) program. NPS can accurately estimate business growth by showing how customers perceive our brand.
Furthermore, the NPS metric is a great anchor for your CEM program. A business can use NPS with other customer experience insights along the purchase journey to arrive at a detailed and actionable understanding of customer experience performance.
If you are worried about improving your NPS score, then check Konnect Insights’ social listening tool that will give you valuable insights to enhance and track this metric.
Read Also – What is Social Listening?
Importance Of The Net Promoter Score Metric
NPS stands out among other metrics because it can predict business growth. A high NPS metric means my customers will spread positive word-of-mouth, which could mean higher business growth. Although NPS is important as a metric for tracking, it doesn’t reflect a complete picture of a business’s future.
However, NPS enables the following
- Ask follow-up questions that will allow you to define what you are doing well and how to improve.
- Create internal benchmarks by tracking and quantifying a score over time.
- Create a buzz among employees around the objective of earning enthusiastic customers.
Creating A Net Promoter Score Survey
Creating an NPS survey is simple. The method of administering this survey depends on how we intend to use the data in the long term. Survey software could be used, but it limits actionability since it measures only one metric. CEM platforms and NPS software are recommended. These allow us to understand customers comprehensively. NPS data can show which touchpoints have high and low NPS scores.
The questions we ask in our net promoter survey should include the following:
1) Questions on demographics
Surveyors often start NPS surveys with demographic questions like income, age, and gender. These help to segment data for analysis. If these questions are irrelevant, they can be skipped. Sometimes this data is available in social CRMs and customer databases. A good rule of thumb is to ask as few questions as possible.
2) The Central NPS Question
The core question is, How likely are you to recommend us to a friend or colleague? The query forms the core of NPS data. The other questions facilitate analysis and allow follow-ups.
3) The Reason Behind The Scoring
The customer is asked why he gave the score to the central NPS question. This helps understand the drivers for promoters and detractors. The process is time-consuming, but a text analysis tool like TextIQ helps shorten that time.
4) What Should We Do To Enhance Your Experience
This question collects customer responses on what enhances the customer experience. This is a critical question if we are doing customer ticketing and closing the loop on follow-up. The third and fourth questions are closely related.
5) Can We Follow Up With You?
It is excellent practice to ask for permission to follow up. Sometimes we already have the contact details from databases, while at other times, they may have to be obtained anew.
Net Promoter Score: The Metric’s Interpretation
Net promoter scores range from -100 to +100. When a company has fewer promoters than detractors, the score is negative. On the other hand, when the number of promoters is higher than the number of detractors, the score is positive. NPS varies on the industry.
For example, the car retail, internet service provider, and department store segments have different average NPSs. Knowing industry averages for NPS helps define a firm’s performance relative to its competitors.
What Makes A Good NPS?
Broadly, a positive score is regarded as good. This is because it indicates a business has more promoters than detractors. The best-performing companies have NPS metrics above 70. In 2018, the NPS of the following Fortune 100 companies was: Apple – 49, Google – 53, Paypal – 63, and Netflix – 64. Nobody has ever achieved the perfect NPS score of 100 to date.
What Makes A Bad NPS?
A negative score is regarded as bad. However, this has to be seen in the context of the industry average. If the industry average NPS is -20 and ours is -3, our score isn’t that bad. However, even with a low bar, a negative NPS indicates that the firm must work to improve its image and performance.
How To Collect Net Promoter Score Metric Data?
The first step in using NPS metrics for business is collecting data. Customer feedback is contained in one of two primary ways. You can collect current feedback or feedback after a period of product experience. You can also trigger a survey when the customer demonstrates exit behaviour.
1) Online Survey Using A Website
We can use on-page surveys or website pop-ups to collect data while the customer is on our website. A common trend is to survey customers on thank-you pages. Begin by using the traditional NPS question. Also, follow up with a couple of other questions.
- For detractors and passives, apologize and ask what can be done to improve their experience.
- For promoters, ask them the main reason for their score.
- Also, ask them for product/service ideas if required.
2) Survey Via Email
An alternative survey method is an email survey. After a critical interaction or purchase, email clients for NPS data. Email surveys involve a time delay and more effort from the customer. However, giving the customers time to experience the product lets them answer questions more authentically.
Reading The Net Promoter Score Metric
NPS metrics have been shown to reliably predict business growth or decline. It helps alert businesses to potential problems – just like sonar helps keep ships from sinking by alerting them of dangers – like icebergs. According to the Temkin Group, customer experience leaders demonstrate an NPS of 21 points higher than customer experience laggards.
1) Analyse data segments
Different data segments may show other NPS data. NPS metrics may vary over age, gender, and type of customer. However, just the essential NPS data is needed when beginning an NPS analysis. As our NPS needs and systems advance, we will have to implement advanced techniques to understand how to deal with different customers.
2) Track Performance Over Time
We could track NPS metrics day after day. NPS data is most potent when followed over a more extended period. It reveals fluctuations and trends, which allow for more intelligent business planning. Some NPS surveys invite more significant responses than others. Use these as benchmarks for what to do and what not to do.
3) Arrive At the Closure
NPS is not just another number. It is an asset for companies to improve. Crucial to the process is follow-up with customers to find reasons for their scores. We can make our business customer-centric by understanding areas for improvement and specific issues.
Taylor And Hart: Successful NPS Example
London-based Taylor and Hart are jewellers for bespoke engagement rings. Their NPS is 80+, which is among the highest in their industry. They used NPS metrics to grow fast by securing repeat customers and expanding their product offerings.
Tesla: An Example of High NPS
Tesla has very high customer retention, which is a testament to the power of the NPS metric. 91% of Tesla owners say they would “buy again” from the company. Further, 25% of Tesla customers say they aren’t considering doing business with another brand.
Summing Up: The Net Promoter Score Metric
To sum up, the primary takeaways from this article are as follows:
- The net promoter score is the best among the metrics that measure customer loyalty.
- Net promoter scores vary from -100 to +100.
- The higher the NPS, the greater the customer loyalty.
- The primary NPS question is: How likely are you to recommend this
business/product/service to a friend or colleague?
- The NPS helps you understand the success potential of your business.
- The more promoters you have, the greater the chance of organic growth
- Follow-up questions add crucial value to the NPS survey by helping us understand how to increase customer satisfaction.