What is Net Promoter Score?
What is Net Promoter Score?
NPS is a customer experience management tool used to determine the strength of a customer's loyalty to a business. Customers are presented with a survey – the results of which are scored on a scale ranging from -100 on the low end to +100 on the high end. It’s goal is ultimately to predict business growth and improve customer relationships.
The Foundations of Net Promoter Score
Customer surveys have long been a part of the marketing and retail landscape. When Net Promoter Score (NPS) arrived in 2003 it introduced a simple but brilliant inquiry:
“How likely are you to recommend this company to a friend or colleague?”
This question highlights the importance of informal referral systems – a.k.a. word-of-mouth. Recent studies reinforce the high stakes involved in social referrals (and bad reviews).
Consider these statistics:
- Nearly half of shoppers who've had a bad brand experience told 10 or more people about it.
- Businesses report a 71% higher conversion rate when a shopper has been referred to them by a friend
NPS provides a simple, accessible metric to track this data for any company. Fred Reichheld, the visionary behind NPS, designed NPS with a mind toward value. He was interested in ways that businesses could 'enrich the lives we touch.' These days, in an increasingly competitive retail landscape, the ability to provide value for customers is one of the most effective and reliable marketing strategies.
This explainer will walk you through the basics of Net Promoter Score, its applications, and the opportunities it can create for your business.
Net Promoter Score: Breaking Down The Basics
The Net Promoter Score process has two main steps:
- The NPS Survey: data collection
- The NPS Score: data analysis
The Anatomy of A Net Promoter Score
As a shopper, you've probably been presented with the basic NPS survey question many times online. It goes like this:
"How likely are you to refer [BRAND/SERVICE] to a friend?"
The respondent chooses their numerical response, from 1 to 10, on a linear chart. Many of these simple NPS surveys will also include an open-text portion with a simple question like, "Why?" or "What Is the Primary Reason For Your Score?" This is an opportunity for qualitative data.
How NPS Respondents Are Categorized
Based on the numerical score they provide, a respondent will be identified in one of three categories:
- Detractor (Score 0 to 6): A detractor is likely to tell their friends how terrible your customer service is.
- Passive (Score 7 or 8): A passive is probably not going to say anything to anybody.
- Promoter (Score 9 or 10): A promoter is likely to spread the good word about you.
Once you've split all of your respondents up into each category, count up the number of respondents that are in each category.
The Net Promoter Score Formula
Calculating your Net Promoter Score is a wonderfully simple subtraction equation:
[Percentage of Promoters] – [Percentage of Detractors] = NPS Score.
One key thing to understand is that passives are not included in the final NPS calculation, because the purpose of the score is to determine who is interested in word-of-mouth promotion. Passives are considered relatively happy customers who are going to mention your business one way or another.
How to Calculate Your Net Promoter Score
Let's say you've received 50 total survey responses, with 8 Promoters, 35 Passives, and 7 Detractors. You would subtract the percentage of detractors (34%) from the percentage of promoters (16%) to arrive at your final NPS score:
16 – 34 = -18
An NPS score of –18 isn't great – as a reference point, the NPS score scaling system works like so:
- -100 to 0 = Poor. Now is the time to make some serious changes.
- 1 to 40 = Good. You're doing alright, and still have lots of room for improvement.
- 41 to 70 = Great. You're entering the upper echelons of customer experience.
- 71 to 100 = Excellent. This is rarefied air. Many world-class businesses struggle to get an NPS score in this range.
Relational NPS vs. Transactional NPS
Based on the wording of your questions and when you send it to the customer, there are two types of NPS surveys and scores: Relational and Transactional.
- Sent to customers on a scheduled basis – for example, every three months.
- Designed to gauge overall customer relationship.
- Sample question: 'Considering your experience so far, how likely are you to refer our brand to a friend?'
- Triggered by a specific interaction and sent immediately afterwards the interaction.
- Designed to gauge satisfaction with a particular element of your business.
- Sample question, triggered by a customer support phone call: 'How likely are you to refer our customer support to a family member or friend?'
The Major Benefits of Using Net Promoter Score
After nearly twenty years, why does NPS remain a popular metric for businesses big and small?
One question, one basic equation – this consistency has resulted in a reliable and accessible data exercise for everyone involved. It's easy for your shoppers to understand and respond, and It's also easy for your customer support staff to create, customize, and implement.
It’s easily shared across the office.
The NPS offers a very clear bottom-line that everyone in your office can engage: are customers excited about your brand? It's a broad goal, and one that every team member can apply to their work, from the sales team to Accounts Receivable. Similarly, it provides a clear benchmark by which you can compare your performance to your competitors. For example: if your closest industrial competitor's NPS score is five points ahead of yours, you've now got a new, clear goal for your team to achieve.
It shines a light on the customer journey.
By implementing more and more transactional surveys with precision, you'll get detailed understandings of the customer journey at every step. Perhaps customers love your products and customer support but your online shopping cart is driving people away. Transactional NPS can highlight the toughest steps in the journey.
By regularly collecting NPS surveys and charting data over time, you'll be able to track your brand's performance over time, paralleled to different campaigns and operational changes.
It closes the loop.
Net Promoter Score is a useful metric for lowering churn and improving customer retention. This is a huge financial benefit. Why? Repeat customers spend 300% more than new customers. It costs much more to acquire new customers than to keep old customers. And 93% of customers are likely to shop again with companies who offer excellent service.
Add to this the power of word-of-mouth marketing. Nielsen found that 83% of people trust the recommendations of family and friends more than any advertising format.
In a very real way, it pays to lift your NPS score.
Notable Brands Using Net Promoter Scores
C-suite executives for many of the world's leading brands are paying close attention to their Net Promoter Score. Here are a few of them.
The 'home of all things weddings' credits its success partly to being, in the words of one executive, 'hyperfocused on NPS.' In particular, Zola's NPS surveys focus on the customer journey. By triggering NPS surveys at an early stage of the journey and then again later on, Zola is collecting segmented data, enabling a more nuanced analysis.
They've become synonymous with smooth customer experience, and that is the product of concerted effort. Apple's NPS has increased considerably over the past decade, from an alright 58 in 2007 to a monumental peak of 89 in 2016. Looking at NPS score for individual product lines, you'll see that Apple's NPS varies a bit but is still consistently great.
After implementing a concerted series of leadership summits for flight attendants and other staff who interface most often with guests, JetBlue saw a six-point boost in its NPS. These days, JetBlue boasts one of the highest NPS scores in the airline industry, thanks to a revitalized customer service campaign. Executive salaries are now tied to the brand's NPS performance. (And they're not alone – home appliance juggernaut Phillips also started implementing a similar policy.
Best Practices For Using Net Promoter Score
The immediate objective for any NPS campaign is detailed data and actionable analysis. You can learn a lot about your customers and your own operations. To do this you need to generate a wealth of granular data. And to generate that wealth of data, you need people to actually fill out the NPS. A high response-rate is ideal, and can be a challenge to achieve in itself.
With those goals in mind, here are some best practices.
Optimize every survey
What is an optimized survey? It's compelling and easy for your customers to fill out. Keep the question short and the language simple. If possible, personalize and customize the survey for each customer: address them by name, speak to their specific journey.
You might optimize your survey design by A/B testing. Make slight tweaks in language and format and document any variations in response rate.
Set up survey triggers
Triggered surveys are a huge asset for generating transactional data. You can get a customer's thoughts about an exchange while it's still fresh in their mind. This can be great for accuracy and response-rates.
Plus, triggered surveys are automatic surveys – which means that your team doesn't have to spend any time sending them out. You can focus that energy on bigger tasks and let the data roll on in.
No matter how beautifully designed your survey is, people will still ignore it. People will get distracted midway through and forget to press Send. To overcome this inevitable factor, be proactive about sending surveys out.
Send them often – but not too often. (Timing is a delicate art.) When people abandon surveys, send them follow up emails. If the emails go ignored, try sending surveys out on your app.
Target and Segment
In order to get the fullest possible glimpse into your relationship with customers, make sure that you get plenty of responses from key demographics. Is a significant portion of your client base in the military? Or are they east coast medical professionals? Make sure to target people who fit those significant demographic profiles.
In order to understand their experience, segment their customer journey. Don't simply send them a quarterly relational survey, or one transactional survey after they've made a purchase (though these are both important). Do what Zola does and trigger surveys for key moments throughout the purchase process, from beginning to end.
Embrace Negative Reviews
The open-text portion of every survey question is a great place to get some praise – but some of the most important qualitative data you can ever get is from people who'll tell you what they hated about their experience.
These might be tough to look at, but they're tremendous assets, and they come from promoters and detractors alike. And if you start seeing the same grievances repeated over numerous respondents, you've got a prime opportunity to make some valuable change.
Net Promoter Score is a Simple Tool With Complex Applications
Net Promoter Score is a testament to the power of thoughtful, customer-focused outreach. NPS modernized the age-old survey by identifying the marketing power inherent to family and friend networks. Of course, just because NPS is a simple tool doesn’t mean that it’s an easy one to master. Getting the best data out of the NPS survey process requires fine-tuned strategy as well as some user-friendly tech.
That’s why AskNicely is here for you. Innovative NPS implementation is our specialty, and we love seeing clients succeed. Are you ready to bring more value to the lives of your customers?