Net Promoter Score: How to Use It to Measure Customer Satisfaction
Net Promoter Score: How to Use It to Measure Customer Satisfaction
Emily Rivers
Marketing & Product
Jul 25, 2024
6m
TABLE OF CONTENTS
TL;DR: Net Promoter Score (NPS) is a metric that gauges customer loyalty and satisfaction by asking customers how likely they are to recommend a business on a scale from 0 to 10. Respondents are categorized into Promoters (9-10), Passives (7-8), and Detractors (0-6). The NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. A good NPS varies by industry but generally, scores above 20 are strong, and scores above 50 are excellent. To improve NPS, businesses should listen to feedback, enhance customer experiences, engage with Detractors, reward Promoters, and continuously refine their processes. Regular tracking and using CRM tools can help maintain high NPS and drive business growth.
What is Net Promoter Score?
Net Promoter Score (NPS) measures customer loyalty and satisfaction. Developed by Fred Reichheld, Bain & Company, and Satmetrix in 2003, NPS is based on one question: "How likely are you to recommend our company/product/service to a friend or colleague?" Customers respond using a scale from 0 to 10, and their answers help businesses understand their overall customer experience and loyalty.
When you use NPS scores correctly, it can help improve business growth. Net Promoter Score is a reliable predictor for customer loyalty, so improving your NPS score is a great goal. When you follow up with survey respondents, you can get a complete picture of where your brand needs to improve. Increase your competitive offerings and work on your customer support, and you should see your Net Promoter Score improve.
The Net Promoter Score scale
The NPS scale classifies respondents into three categories based on their scores:
Promoters (9-10): Loyal enthusiasts of your brand who are likely to recommend it to others. They are your most valuable customers and can drive growth through positive word-of-mouth.
Passives (7-8): Satisfied but unenthusiastic customers. They are vulnerable to competitive offers and may switch to another brand if they see a better deal or think they will get a better experience.
Detractors (0-6): Unhappy customers who may spread negative feedback about your brand. They pose a risk to your reputation and can impede growth.
Of course, you want most of your customers to sit in the Promoters category, with some in the Passives who you can work to turn into enthusiastic customers by making improvements to weaker areas of your product or service.
So how do you go about collecting this data?
How to collect NPS data
The first step to determining your Net Promoter Score is conducting an NPS survey. This is where you ask your customers the key question of whether they would recommend your company to a friend or colleague.
You can conduct NPS surveys in several ways. You could use email, SMS, website pop-ups or in-app notifications. Consider how your customers most like to interact with you. You want to get a large number of respondents to ensure that your score accurately measures your customer experience.
There are a few ways to ensure that you get responses from different segments of your customers to get a good picture of how satisfied they are with your service:
Consider the timing: Choose the right moment to send the survey, such as after a purchase or a customer service interaction (transactional NPS surveys), or at regular intervals to gauge ongoing satisfaction (relational NPS surveys).
Ask follow-up questions: Include an open-ended question to gather qualitative insights, such as "What is the primary reason for your score?" or "How can we make your experience better?" This helps understand the reasons behind the scores and provides actionable feedback. However, you may find that follow-up questions can reduce the number of responses you get. Instead, you could send an additional survey to customers who agree to be contacted again to find out more about their scores.
Assure anonymity: Ensure that customers know that their responses are confidential to encourage honest and candid feedback. If you don't need to collect demographic details from them, you shouldn't - this could reduce the number of answers you get.
Once you've sent out your NPS survey, you'll need to calculate your overall NPS score.
How to calculate Net Promoter Score
Calculating NPS is a straightforward process:
Collect responses from your NPS survey.
Categorize the responses into Promoters, Passives, and Detractors.
Calculate the percentage of respondents in each category.
Subtract the percentage of Detractors from the percentage of Promoters.
The NPS calculation is pretty simple:
NPS score = %Promoters - %Detractors
For example, if 60% of respondents are Promoters and 10% are Detractors, your NPS would be 50.
What is a good Net Promoter Score?
A good NPS varies by industry, but generally, an NPS above 0 is considered good because it means you have more Promoters than Detractors. Scores above 20 are great and indicate strong customer loyalty, while scores above 50 are excellent and typically achieved by companies renowned for their customer-centric approach. No businesses have ever achieved 100, as that means 100% of respondents say that they would recommend their brand - almost impossible!
It's important to benchmark your score against industry standards and your historical data to set realistic and meaningful targets. That means using the absolute and relative approach:
The absolute approach means comparing your NPS score to the loosely agreed-upon standard of what a good score is across all industries.
The relative NPS approach means comparing your score against competitors and other organizations in your industry. This could range anywhere from 0 to 40+.
How to improve your Net Promoter Score
While it's great to measure your NPS, you need to act on what it tells you to improve your customer experience and achieve business growth. Improving your NPS involves several strategies:
Listen to feedback: Act on the insights gained from the follow-up questions. Address common pain points and areas of dissatisfaction. Using tools like Productlane helps you to close the feedback loop by collecting all feedback from different sources into a feedback hub so you can act on it and follow up with customers quickly.
Enhance customer experience: Invest in improving the overall customer journey, from product quality to customer service. Use other metrics like Customer Effort Score (CES) to identify your customers' pain points.
Engage with Detractors: Reach out to unhappy customers to understand their issues and find solutions. Turning Detractors into Promoters can significantly boost your NPS.
Recognize and reward promoters: Acknowledge loyal customers through loyalty programs, special offers, or personalized communication to maintain their enthusiasm.
Research the competition: What are they doing that offers a great customer experience? What are they doing wrong? Learn from your competitors and benchmark yourself against them.
Continuous improvement: Regularly review and refine your processes, products, and services based on customer feedback to ensure ongoing improvement.
In conclusion, Net Promoter Score is a powerful tool for measuring and improving customer loyalty. By understanding your NPS and acting on customer feedback, you can enhance customer experience, build stronger relationships, and drive business growth. Regular tracking and continuous improvement are key to maintaining a high NPS and achieving long-term success.
FAQs on Net Promoter Score
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