• Category
  • >Marketing

What is the Net Promoter Score (NPS)?

  • Bhumika Dutta
  • May 11, 2022
What is the Net Promoter Score (NPS)? title banner

For customer-centric businesses, customer loyalty and satisfaction play a major role in the growth of the company. If your customers recommend your product or service to others, your company is going to experience an increase in sales. There is a system called the “Net Promoter System” which determines the customer experience of any organization. 

 

In this article, we are going to talk about the Net Promoter Score that determines how likely your customer is going to recommend your product to someone else.


 

What is the Net Promoter Score (NPS)?

 

The Net Promoter Score (NPS) is a metric for determining a company's customer loyalty, contentment, and excitement. It's derived by asking consumers one question: "On a scale of 0 to 10, how likely are you to suggest this product/company to a friend or colleague?" 

 

Aggregate NPS ratings assist firms in improving service, customer support, delivery, and other aspects of their operations to boost customer loyalty. Customers who give you a score of 6 or less are known as Detractors, while those who give you a score of 7 or 8 are known as Passives, and those who give you a score of 9 or 10 are known as Promoters.

 

Measuring your Net Promoter Score provides you with a figure that you can measure regularly, not just for your company as a whole, but also for each business, product, shop, or customer service team. Customer segments, geographic units, and functional groupings can all be tracked. It assists everyone by focusing on the twin objectives of increasing promoters and decreasing detractors. Simply put, it's your customer balance sheet.

 

Some of the questions that can be asked to survey NPS: 

 

  • How likely are you to suggest our company to a friend or colleague on a scale of 0 to 10?

  • How likely are you to suggest (product/service name) to a friend or colleague on a scale of 0-10?

  • How likely are you to suggest (business name) as a possible workplace to your friends on a scale of 0-10?

  • What is the most important factor that contributed to your score?

  • What can we do to make your experience better?

  • Which characteristics of a product/service do you appreciate and utilize the most?

  • What did you find lacking or frustrating about your time with us?

  • Is there anything we can do to make you a happier customer?

 

Calculating NPS is very important for any company as it can be used to predict business growth. When your company's NPS is high, you know you have a healthy relationship with consumers who are more likely to serve as brand ambassadors, spread the word, and drive a positive growth cycle. On a strategic level, NPS is a helpful statistic, but it isn't enough to be meaningful or portray a whole picture by itself. 


 

Here’s how you can calculate your Net Promoter Score:

 

Simply subtract the proportion of Detractors from the percentage of Promoters to get your final NPS score. If ten percent of respondents are Detractors, twenty percent are Passives, and seventy percent are Promoters, your NPS score will be 70-10 = 60.


The formula of NPS

The formula of NPS (Source: www.hotjar.com)


According to Retently's NPS data from the last four years, the average Net Promoter Score for Healthcare is in the range of 31, with the lowest value being 20, while the average NPS for Communication & Media is in the range of 15, with the lowest number being -6. It says that you can't tell a lot about a firm merely by looking at their absolute NPS without taking into account their industry performance. While an NPS of 30 may be considered the worst in the industry for certain organizations, it may be considered among the market leaders for others.


 

What is a good and a bad NPS score?

 

Any score above 0 is considered 'excellent' in the -100 to +100 range since it implies that a company has more promoters than critics. Top-tier organizations often have an NPS of 70 or above, but if you believe this is exclusively for huge, worldwide corporations, think again: Netflix had an NPS of 64 in 2018, PayPal had a score of 63, Amazon had a score of 54, Google had a score of 53, and Apple had a score of 49.

 

A score of 0 shows that there are more detractors than proponents in a company. Here's where industry NPS standards like the ones stated above come in handy: while a score of -3 may appear poor on its own, it's difficult to evaluate without comparing it to ratings from significant industry players—if the industry average was -10, the score would suddenly appear less negative. Even if the threshold is set low, a negative NPS indicates that a company has to improve its condition, lower the number of disgruntled customers, and increase the number of promoters.


 

How do organizations conduct surveys and get NPS data?

 

If you want to calculate and track NPS for your company, the first step is to conduct an NPS survey to get input from customers. Here are a few ways to run surveys:

 

  1. Website survey:

 

On-page/website pop-up surveys allow you to get feedback from clients while they are still on your website. You may have the NPS survey display on your primary conversion pages (for example, the thank you page that visitors view after making a purchase) or you can have an exit survey appear immediately before they leave your website. 

 

To conduct this survey, start by asking the typical NPS question: "How likely are you to suggest the business to a friend/colleague on a scale of 0 to 10?". Now, according to the score, the company can determine if the customer is a detractor, promoter, or passive.

 

  1. Email survey:

 

Rather than using a website pop-up, you may gather NPS data by emailing consumers and encouraging them to complete a survey following a purchase or other significant encounter with your company. 

 

Email surveys need a little more effort on the side of the consumer, and there is a noticeable time gap between sending the survey and receiving the answers. On the bright side, giving your consumers more time to try the product/service they acquired from you (for example, 15 or 30 days) may help them make a more informed decision about whether or not they would recommend it to others.


 

Why is it important to calculate the Net Promoter Score (NPS)?

 

NPS is important to any organization for the following reason:

 

  1. It determines the customer loyalty of the company:

 

The first and most apparent reason is that NPS assists companies in determining consumer loyalty and the possibility of a friend recommending them. It also aids in determining the possibility of customers churning – canceling their subscriptions or refusing to repurchase and finding a product or service from a rival provider. 

 

While attracting and converting new consumers is important, keeping and empowering existing customers offers a better return on investment. Needless to say, recognizing consumers at risk of churning is a critical part of doing this, and evaluating customer NPS over time assists businesses in doing so.

 

Changes in the total NPS provide businesses an estimate of how likely a typical customer is to suggest them to a friend. Customer success teams may also use changes in the split of ratings — between promoters, passives, and detractors — to see which way the total NPS is heading. Changes in customer NPS might be an excellent signal — or red warning — of current customer contentment, as well as the danger of turnover.


 

  1. It helps in identifying changes in the NPS:

 

Customers may provide a low score, or even a zero, in response to the NPS inquiry. When this happens, it's difficult — especially if it happens again — but it also provides a chance to focus on consumer input and make product or service changes as a result. 

 

That's why we recommend using an NPS survey with extra area for consumers to explain why they gave the score they did. This allows you to assess qualitative input from consumers and identify specific changes you can make to improve their experience with your product or service. Sure, not all criticism will be constructive — there will always be trolls on the internet — but precise observations about bugs, poor user experience (UX), or a terrible contact with a customer success manager might be immediately forwarded to the appropriate team for resolution.


 

  1. It boosts referral marketing:

 

Customer NPS offers businesses a sense of how likely they are to receive positive customer recommendations, which, as it turns out, carry a lot of weight. Customers who rank a business's service as "good" are 38 percent more inclined to suggest it. Nearly 70% of respondents said they were more inclined to buy a product if a friend mentioned it on social media or via email.

 

Referral marketing may be a win-win situation for both businesses and customers, but you must first have satisfied customers, and NPS scores can help you find those satisfied customers. To entice prospective new consumers, businesses may use referral marketing by asking for client case studies, testimonials, and online reviews. Customer loyalty may be rewarded with gift cards, swag, or discounts through brand ambassador and incentive programs.


 

  1. It assists you in prioritizing your outreach to detractors.

 

Detractors are individuals who give your product or service a score of 0-6 on the NPS survey, suggesting that they are unlikely to recommend it to others. Investing in your promoters pays money, but concentrating on your detractors is just as crucial for your company's success. When you have your NPS data, break them into three groups and look into why people picked the answers they did. It's critical to follow up with your loyal consumers, especially if they report a problem or issue with your product or service.

 

It might be a simple misunderstanding or user error, or it could be a larger-scale issue that you can't handle on your own, but by following up with your critics, you can make them feel heard and respected, which will make them less likely to churn — or worse, advise others not to buy from you.


 

How to make your NPS reliable?

 

You can uncover weak places in the customer experience by assessing customer loyalty, but you'll need to know how to perform Net Promoter surveys  effectively to do so.

 

  1. Implement Relational and Transactional NPS surveys:

 

There are several significant differences between the two survey methods, and they should typically be used in tandem to provide the greatest results.

 

Relational surveys:

 

Relational surveys look at a customer's commitment to a company or brand. Customers are asked to examine their entire experience and satisfaction with a firm in these polls. They are usually performed on a regular basis.

 

Transactional surveys:

 

Transactional surveys look at a customer's experience with a given transaction or engagement (touchpoint). This poll is not intended to gauge client loyalty, but rather to gauge happiness with a certain corporate section in order to enhance it.


 

  1. Keep the Net Promoter Survey short:

 

The Net Promoter Score is a method of determining customer loyalty and the factors that influence it the most. Other questions are required to add significance to the Net Promoter question, but your Net Promoter survey should be kept brief. 

 

The Net Promoter Score's strength is that it not only evaluates customer loyalty, but it also offers you a larger picture of your customer loyalty because it is quick and has high response rates. Limit your survey to four or five questions at most. This will also help you prevent survey fatigue, which can lead to erroneous responses, and guarantee that your data is still usable right away.


 

  1. Use important customer touchpoints:

 

Start by mapping out the customer journey to identify customer touchpoints and selecting the ones with the most traffic for your first relationship survey.


 

  1. Add a comment box:

 

Your survey will never be able to capture all of the touchpoints, as well as all of the company's strengths and problems. A total of 44% of survey participants write a remark. To keep the survey as brief as possible and to show that you care about their views, frame the question as voluntary.


 

Conclusion:

 

The survey on which your Net Promoter Score is based is only as good as the survey on which it is based. Surveys with a lot of questions reduce response rates, confuse respondents, and leave staff unsure how to interpret the data. In this article, we have learnt about the net promoter score, ways to calculate it, and its importance.

Comments