The term NPS is often bandied about in service and marketing circles, and while these three letters may be small, the impact of NPS can be mighty.
Knowing your NPS score is one of the most important measures any business can hold. But how can you find out your NPS score and what can keep it as high as the competition? We take a closer look at NPS and give you the tools you’ll need to get in the know.
What is NPS?
NPS stands for Net Promoter Score and is an overall measurement of customer satisfaction and loyalty. It is now one of the most widely used market research metrics in the world, likely due to its simplicity, with only one survey question needed.
Created in the noughties by marketer and Harvard Business School graduate Fred Reichheld, an NPS survey asks respondents simply “how likely are you to recommend us?” The answer to this question is then measured on a scale of 1-10, with one being unlikely and 10 being very likely.
A business takes a customer’s response and puts this on a scale. Those consumers scoring between 9-10 are considered to be ‘promoters’ of your brand, product and/or service. These people are likely to rave about your company and encourage new business from their friends and family. Those scoring 7-8 are considered ‘passives’, people who perhaps don’t have brand loyalty but could be persuaded either way. Those scoring 6 or below are called ‘detractors’ and are likely to have a bad opinion of your brand.
Sometimes the typical, short-and-sweet NPS question is followed by an open-ended question box with room for respondents to free-write their thoughts, opinions and experiences. The data collated from this comment box is considered as an aside from core NPS scoring but is still helpful for those looking to source customer feedback.
How to calculate your business’ NPS score
Once the NPS survey has been sent out and the business has enough responses, you can then collate the results.
NPS is scored from -100 through 0 to +100. Anything 0 or above should be considered a good starting point, as anything below this demonstrates that detractors (those who wouldn’t recommend a brand, product and/or service) outweigh those who feel passively about a business and those who would recommend it.
But how do you calculate NPS score from customer surveys? Feefo has created an automated NPS score calculator, which calculates this for you quickly and simply.
However, you can also calculate your score manually, and here’s how:
- Calculate the percentage of people who are detractors and promoters. Divide the number of promoters by the total number of survey respondents, and then the number of detractors by the total number of respondents. It’s important to remember that you unless you have zero passive responses (which is unlikely), these two numbers will not add up to 100. For example, if you survey 100 people and 65 are promoters, 10 are passives and 25 are detractors, 65% are promoters and 25% are detractors.
- After this, you can discount all passive responses.
- From here, subtract the percentage of detractors from the percentage of promoters. In this example, this would mean 65% - 25% = 40%, giving you an NPS score of +40.
What is considered a ‘good’ NPS score?
The average NPS score varies hugely between industries and business niches, so benchmarking should be done with care and only against similar and relevant companies. This means that what is thought of as a good score in one sector may not be in another – but Feefo’s NPS system offers benchmarking tools to ensure your company is on track for the appropriate industry.
It also must be considered that an NPS score is not static and will move and develop as a business does. Businesses using the NPS metric should always be aiming to improve their score, and encouraging scores upward gets more difficult the higher the baseline gets. Nobody has ever achieved a +100 score – and nor should they, as businesses should be looking to continually improve.
What is considered a ‘Bad’ NPS score?
An NPS score in minus figures suggests that those using the business are likely to not purchase again and that they may even detract value from the brand by sharing their negative perception and experiences with others. A score lower than 0 means that a business has a lot of work to do to improve their product and/or service offering to meet their customer expectations.
A low NPS score can be indicative of a serious issue or miscommunication between consumer and business. If the cause or theme of this is not known, you can ask your customers to elaborate in an NPS survey using additional comment fields, to gather further information and help to resolve this.
Who uses NPS?
NPS is used as a customer satisfaction and loyalty measurement across almost every industry in the world. Household names who use the NPS metric include Qantas, British Gas, Lego, Procter and Gamble, Virgin, Porsche, eBay, AXA, the BBC, Facebook, and Phillips.
Although this is seen as a standard customer experience tool for many of the biggest businesses in the world, their scores are perhaps not as high as observers may expect. In 2018, Apple had an NPS score of 49, Google of 53, Amazon of 54 and Netflix of 64.
How is NPS helpful?
NPS is an easy-to-understand customer satisfaction metric that is quick for respondents to fill out and easy for businesses to push out. An aggregate NPS score is a good indication of current brand perception amongst customers, and as a predictor of business growth.
When an NPS score is higher than average for its industry, a business can assume it maintains a healthy relationship with its customer base and is likely to experience growth as a result of word-of-mouth marketing. If your NPS score is lower than the industry average, the business knows it has significant work to do on its brand perception and offering, as it’s likely that those purchasing from or working with them are likely to detract value from them in the long term rather than add it.
That’s not to say that those with poor NPS scores aren’t able to take important information from the metric; indeed, combined with additional comment fields for further information, low NPS scores can often provide interesting insights into how your business can make small changes to improve its service.
Over time, an NPS score can be tracked and worked into your marketing or customer experience strategy to create targets for your team to work towards. This will result in valuable business improvement and will allow your employees to work toward clear mission-critical objectives, earning more customers, generating more value, and advancing your business’ growth and development.
NPS score calculated. Now what?
Once an NPS score has been worked out, it’s time to contextualise it.
You can benchmark this score against your business’ internal targets and other relevant companies in the industry to understand your NPS compared with the rest of your sector. This gives a baseline indication of performance, which can then be investigated more thoroughly.
What is really important for NPS is to use business insights in order to best comprehend why the score is what it is and how to improve it. Sifting through additional comments to identify individual issues as well as common product and/or service themes can provide immediate areas for attention, but anything that reoccurs regularly should be addressed immediately to help you improve your service.
NPS should also be used to help inform forecasting and growth policy. Business decisions can be made using your NPS to inform growth in such as service improvement, tech, marketing communications, and financial policy. You can also reduce churn through the proactive management of NPS, helping to retain customers and even convert passive customers to promoters!
Keeping customers informed
Communicating changes and improvements made because of your NPS is also important. Letting your customers know about key business decisions shows a real dedication to customer care and could even result in new clients. Don’t be afraid to apologise or admit that your business got something a bit wrong – but always explain how things are being made better and how you are listening to your customers’ advice.
Integrating NPS into continual business improvement should be a standard part of your brand, so all staff should be able to say what your NPS score is at any time. Including a specific NPS target or named metric within your employees’ roles gives everyone a common objective and helps them understand how they fit into wider business goals.
Today, NPS is one of the most used customer satisfaction measurements in the world. How it feeds into a business truly depends on the way the company chooses to work with it and implement its influence; but, if done properly and a business takes the right insights from their score, NPS can work wonders in advancing your business’ reach. Combined with Feefo’s business intelligence and insight tools, all bases can be covered – and you can start work on doing and being better.