NPS (Net Promoter Score)

What is the Net Promoter Score?

Net Promoter Score (NPS) is a metric used to measure customer loyalty and satisfaction in customer experience programs. This score is measured with a single “ultimate question” that asks customers to rate from 0 – 10 to know how likely they will recommend the product or service to others.

The NPS score ranges from -100 to +100. The higher the net promoter score survey, the organizations can assume that their customers are satisfied with the product or customer service.

Customer loyalty can be gauged by asking an NPS question like –

The respondents can click a score from 0 – 10 as per their sentiment towards the products and brand. Using this NPS data and insight, companies can categorize their customers into 3 groups to calculate their NPS scores.

What are the 3 Categories of Respondents?

1. Promoters

Customers who respond with a score of 9 – 10, are happy with the products/service and will recommend the products/services to others.

2. Passives

Respondents who rate with a score of 7 – 8, are satisfied with the products/services, but not likely to recommend the products/services to others.

3. Detractors

Customers who respond with a score of 0 – 6, and are unhappy with the products, and will even discourage others from buying them.

NPS survey is the quick and easiest way to do a customer survey to get their feedback. Based on the number of promoters and detractors, companies can decide where they are in the industry and what is their customer loyalty level.

Why is the Net Promoter Score important?

Net Promoter Score plays a crucial role in businesses assessing the quality of the products and services they offer. The key benefits of adopting an NPS system are as follows.

1. Addressing the Areas which Need Improvements

The main purpose of using NPS is to measure customer satisfaction. The NPS score is a direct reflection of your customers’ satisfaction. If your scores are low, you can take certain measures to solve the issues of your unhappy customers.

2. Tracking the Customer Loyalty Trends

NPS data also provides insights into the loyal customers of your brand. If a customer recommends your products/service to others, there is a high chance that they will stick to your brand in the future. Hence, NPS can also be used as a metric to measure customer happiness.

3. Improving the Advocacy

Recommending to others means, these loyal customers will be efficient word-of-mouth marketers for your brand. By analyzing the loyalty rate with NPS, you will get a clear idea of how to improve the advocacy of your brand.

4. Reducing Churn Rate and Improving Retention Rate

With NPS data, companies can understand what in their brand makes a customer promoter or detractor. Figuring out the root cause will help brands to reduce the churn rate and boost customer retention.

5. Growing Business by Creating more Promoters

Promoters advocate your brand, keep purchasing from you in the future, will be ready to try new products, and churn less. If you provide a customer experience that exceeds their expectations, more customers will reach your brand. This opens the door to growth.

How to Calculate Net Promoter Score?

It is quite easy to calculate the Net Promoter Score after gathering all customer responses.

The NPS Formula –

NPS Score = Percentage of Promoters – Percentage of Detractors

Example: If the % of Promoters is 60%, % of Passives is 20%, and % of Detractors is 10% –

NPS Score = 60% – 10% = 50%

What is a Good Net Promoter Score?

We cannot say a specific benchmark is a good NPS score. It will vary from industry to industry over time.

However, if we do a generic analysis, let’s consider the below points:

Less than 0

An NPS score less than 0 is an indication that your business requires a lot of improvements.

0 -30

A score of 0 – 30 can be considered a healthy score, but still, there is room for improvement.

31 – 70

An NPS of 31 -70 is an indication of a good customer satisfaction level. With this score, you can assume that you have more happy customers than unhappy customers.

More than 70

More than 70 means, your customers love your products/services and they are recommending the brand to others.

We can identify whether the NPS score is good enough or not by checking with Relative NPS and Absolute NPS methods.

1. Relative NPS

In this method, companies can set a score as their NPS benchmark and check against their competitors’ scores in the same industry. With a comparison, they can identify whether their score is good or not good.

2. Absolute NPS

Here, companies can use their score as a benchmark to check against the scores of organizations from all industries to find whether the score is good or not. It is hard for organizations to achieve a score of 100 as there is less probability of getting 100% loyal customers. But, the higher the score, we can assume that there are more satisfied customers.

How to Improve NPS Score?

After calculating the NPS score, companies will get an idea of their loyal customers, happy customers, and unhappy customers.

To improve the current NPS score and customer experience, companies can use NPS data to –

1. Connect

Connect with detractors and resolve the friction and pain points.

2. Engage

Engage with promoters to get insights on what makes the brand different from others and what they need to do to keep them more satisfied.

3. Reduce the Response Time

Cut down on the response time and Average Handling Time to improve customer satisfaction. Providing quick solutions will make them give you a good satisfaction score.

4. Buddy up Customer Service Executives

Assign customer service executives who gathered good NPS scores across all departments to let them work with agents with low scores. This will help to improve the overall customer satisfaction level across all departments in a firm.