What is Net Promoter Score?
Net Promoter Score®, or NPS®, is a metric used in customer experience programs. NPS measures loyalty of customers to a brand. Since its inception in 2003 by Bain and Company, Net Promoter Score has been used by millions of companies and has helped measure customer satisfaction and the potential for growth. This is done by asking current customers how likely they are to recommend their products or services to their friends, colleagues and network.
How Do You Calculate Net Promoter Score?
In order to calculate Net Promoter Score, customers are asked one simple question. That question is, “How likely are you to recommend (product/service/company) to a friend or colleague?” Customers are given the option of choosing a number between 1 and 10. 1 being the least likely and 10 being the most likely.
Depending on their response they are grouped into the following 3 categories:
Those who respond with a 9 or 10 are considered Promoters. These are typically your most engaged and loyal customers.
Those who respond with a 7 or 8 are considered Passives. These customers tend to be satisfied, but lack the enthusiasm to share your product/service/customer with others.
Customers who respond with a 6 or lower are considered Detractors. These customers are unsatisfied and are likely to not buy from or use your services again. They may even be the ones who voice their opinion publicly and discourage others from buying your product or using your service.
Calculating your NPS Score
In order to find a company’s Net Promoter Score or NPS you can use a simple equation. Subtract the percentage of Detractors from the percentage of Promoters.
For example, if 5 percent of your respondents are Detractors and 80 percent are Promoters your NPS would be 75.
What is considered a good NPS score?
Net Promoter Scores can range from -100 where every customer is a detractor, to 100 where everyone is a Promoter. Finding a company with a NPS score of 100 is just not realistic. It’s simply not possible to satisfy every single customer, but looking at averages is a healthy way of comparing your company to others in your industry.
Nice | Satmetrix have compiled a nice list of industry Net Promoter Score averages.
You may be looking at this chart and thinking, “wowza, these seem low”, but there are a few factors to consider. In a study done by Colloquy, 75% of the general population said they would share a negative customer experience with friends and family, but only 42% would recommend a product or service with which they had a positive experience.
So what does that say? Potentially that those who have had a less than stellar experience are more likely to fill out surveys like the NPS and those with a positive experience aren’t sharing their experiences? Sure. That’s definitely possible. While that seems bleak, companies that use these scores and work on their customer experience will certainly be the ones benefiting.
How do you use Net Promoter Score (NPS)?
According to Gartner, 80% of future revenue comes from 20% of existing customers. So how can companies use this knowledge and combine that with their Net Promoter Score data? There are 2 ways. The first would be to focus on your raving fans. Using a tool like the NPS, find the customers that score your company at a 9 or 10. These are likely the customers who will vouch for you, participate in customer case studies and are more likely to spread the love to their friends and colleagues about their experience with your product or service. Focus on these folks, keep them happy and nurture their experience.
The second would be to focus on those that gave your product or service a less than stellar score. Talk to these customers, if they are willing, and see what you can do to change their experience. Maybe they need more training, more individual attention or a different product that suits their needs.
The data collected from the Net Promoter Score is a powerful tool for all companies. Whether you are looking to maximize your customer experience, create raving fans, or prevent churn, evaluating feedback from your customers is always the right answer.