What is Net Promoter Score?
Net Promoter Score (NPS) is the standard for measuring customer loyalty. Customer loyalty is gauged by their likelihood to recommend your product, service or brand to a friend or colleague.
It is the correlation between a customer’s advocacy (i.e. positive word of mouth) and revenue growth that has made NPS a key metric in driving business development.
To measure customer loyalty, you need to ask one simple question:
On a scale of 0 to 10, how likely are you to recommend this product to a friend or colleague?
0 would be labelled with ‘Not At All Likely’ and 10 with ‘Extremely Likely’.
Your NPS question does not have to ask for a recommendation of a product, it can concern any aspect of your business. E.g. services, brand, websites, events or customer service.
The Net Promoter Score scale usually consists of 11 response options; from 0 – 10.
Fred Reichheld, who developed the NPS system, thought it necessary to have 11 points in the scale so respondents would not mistake 1 as the highest point.
However, some businesses also use 10 point and 5 point scales to determine their score. A study from MeasuringU on changing NPS scales found that:
- Scores from the same respondent varied across different scales (although only a little)
- 10 point scales reduced the number of detractors, increasing overall score
- 5 point scales reduced both detractors and promoters
- Not using an 11 point scale risks losing external benchmarks, as it’s the industry standard.
The biggest take away from the study was to remain consistent with the number of points in your scale. I.e. don’t use a scale of 0 – 11 for one survey and then a 5 point scale for another.
This will result in discrepancies between data sets, meaning they will be incomparable.
How is NPS calculated?
NPS ratings are split into three categories: Promoters, Passives and Detractors. The ratings associated with each category are based on the standard 11 point scale.
Before calculating your score, you must determine the percentage of customers for each category.
Detractors (those who select 0 – 6)
Detractors are unhappy customers who’ve had a bad experience with your organization at a touch-point. They’re the most likely to jump to a competitor or even impact your reputation through negative word of mouth.
Passives (those who select 7 – 8)
Passive customers are somewhat happy with your business but are not likely to recommend you to others. You shouldn’t be complacent with passives, they’re also likely to defer to a competitor if left unchecked.
Promoters (those who select 9 – 10)
These are the customers most satisfied with your product or service. These are advocates for your organization, actively recommending you to friends and colleagues.
Net promoter score calculation
To calculate your net promoter score, subtract the percentage of Detractors from the percentage of Promoters. The number you’re left with is your NPS, it’s as simple as that.
The final score is not expressed as a percentage, but as a number between -100 and +100.
What is a good Net Promoter Score?
Benefits of Net Promoter Score
1. It can be calculated with a single data point
This saves time for survey respondents (reducing the chance of survey fatigue) and for those performing the NPS data analysis.
2. Your score is a sign of business growth
If your customers are referring your product/service to friends and colleagues, they have entered the final stage of the customer journey; advocacy.
3. Conducting an NPS survey is effortless
With a host of online tools available to create, distribute and analyze NPS research, it’s never been easier to measure customer loyalty.
As long as the question is standardized for your organization, it can be used across all customer contact points. For example, at an event, as part of a website feedback form or following a recent purchase.
4. NPS is malleable
You can calculate an NPS rating for any of your organizations output. Whether it’s your overall brand, a product or customer service. In this way, you can determine which aspects of your business need the most attention and where you’re already doing well.
5. Measure change over time
Conducting NPS research at regular intervals is paramount to improving customer relationships. It’s suggested you calculate your score around twice a year, to measure the impact of changes you make and identify seasonal discrepancies.
6. Benchmark against competitors
Average NPS scores vary from industry to industry. Performing some research into the average score for your industry can provide valuable context to your own score. HubSpot has accumulated a list of NPS Benchmarks by industry.
Disadvantages of Net Promoter Score
1. A single data source can be limiting
Without open ended feedback to provide context, NPS scores can often be ambiguous. Because of this, it’s difficult to identify which area of your organziation needs improving and where you’re already succeeding.
2. You need a large survey sample
The opinions of a few customers isn’t representative of the whole. Which segment of your audience, or what aspect of your business your NPS survey concerns, can also affect what your score will be.
For example, if you calculate NPS for a product that’s doing well, your score will likely be high. But you can’t generalize these results, as they aren’t representative of customers who’re unhappy with other elements of your business.
3. Results don’t always lead to instant action
As mentioned above, collecting data from such a large audience can take time. The consequence of this is; any customers who’re unhappy at the time of rating will remain unhappy until action is taken.
4. NPS ratings don’t account for the influence of individual customers
If a well known CEO or celebrity is a detractor, they”ll have the ability to influence the decisions of other customers.
5. Solicited feedback may create response bias
The time and manner of feedback requests may influence the way customers respond. The best feedback is unsolicited, as it’ll likely be devoid of any bias created by the researchers. Learn more about Response Bias.
6. It’s possible to manipulate NPs
Whether it is intentional or not, staff may only send NPS surveys to happy customers. This would lead to an artificially high NPS score.
Tips for improving NPS
1. Personalize NPS surveys
Improving customer relationships is the end goal of NPS. Addressing customers by name will strengthen your relationship and encourage unbiased feedback.
2. Collect reviews regularly
Your score is not be a one-off calculation, it’s a benchmark for development. Make a habit of collecting NPS at customer touch-points or through email campaigns.
3. Ask for open ended customer feedback
By asking for additional comments, you’ll gain more insight into your strengths and weaknesses as an organization. However, don’t overload customers with open text boxes. That beauty of NPS is its usability and efficiency.
4. Open a dialogue
At the end of your survey, create a contact field for those customers who wish for you to contact them regarding their response. This creates another opportunity for relationship management and insight.
For a full perspective on your customer relationships, couple NPS with other forms of market and customer research. E.g. Customer Satisfaction Surveys (CSAT) and Customer Effort Score (CES).
This isn’t to say that conducting NPS isn’t a worthwhile pursuit. It is essential to identifying those in the final stage of the customer journey (advocacy). But in compiling data from multiple feedback sources, you give more context to your NPS score.
Net Promoter, Net Promoter Score, Net Promoter System, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.