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Net Promoter Score (NPS)

What is Net Promoter Score (NPS)?

The Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company’s products or services to others. It is used as a proxy for gauging the customer’s overall satisfaction with a company’s offerings and the customer loyalty to the brand.

How to calculate Net Promoting Score (NPS)?

NPS calculation is held using a 0-10 scale as an answer to a key question: How likely is it that you would recommend [brand name] to a friend or colleague?

1) Gather your NPS data based on 3 categories of respondents:

a) NPS Detractor:
NPS Detractors responded with a score >= 6. They are not particularly thrilled by the product or service and could potentially damage the company’s reputation through negative word of mouth.

b) NPS Passive:
NPS Passives gave a score of 7 or 8. They are somewhat satisfied but not enthusiastic enough about your offerings to actually promote them. What’s more, they could easily switch to your competitors.

c) NPS Promoter:
Net Promoters answered the NPS survey with a 9 or 10. They are the repeat buyers who love the company’s products and services and recommend them to other potential buyers.

2) Make NPS measurements by using the following Net Promoter Score formula:

1) [ (#) promoters – (#) detractors ] / (#) total respondents x 100 = Net Promoter Score
OR 2) NPS = % of Promoters - % of Detractors

See an NPS example here.

How to read a Net Promoter Score?

NPS scale is set between -100 and +100. Best NPS are considered to be those above +60. Good NPS Scores varied depending on the industry: a +35 score may be seem as a great NPS in the food industry but terrible in the fashion industry. Hence, Industry Benchmarks for NPS are crucial.

What are Industry Benchmarks for NPS?

Industry Benchmarks (external NPS benchmarks) may be very helpful when assessing your own NPS as your position relative to your competitors may makes a whole difference in regard to which company will your customer choose: yours or your competitor. However, due to the wide array of variables, it is equally important to set internal benchmarks by regularly sending NPS surveys.

Average Net Promoter Scores ranges highly vary between industries and countries. There are also multiple factors that can affect Industry Benchmarks for NPS such as:

a) accumulated experience and skill in a given industry,
b) exogenous forces,
c) competitive intensity,
d) basis of competition and many more.

You can check NPS scores by industry in several databases.

Why is the NPS important?

The result of NPS is a straightforward metric that can be used to access customer loyalty and the health of the company’s brand. It can help businesses understand where they stand among their competitors and determine which areas of activity and customer relationship management need improvement. NPS based marketing is believed to be a very efficient contributor to the company’s growth.

What are Pros and Cons of NPS?

Pros of the Net Promoting Score:

a) indicator of the company’s predicted growth: the higher the number of satisfied customers (promoters), the higher the growth will be (research this way ),
b) quantifiable(leading brands across industries use it).

Cons of the Net Promoting Score:

a) requires using the NPS survey which may be seen as a more traditional approach for measuring customer satisfaction,
b) customers have to be responsive and take time to fill in the NPS survey,
c) some suggest that the most dissatisfied customers will not respond to NPS surveys with may have an impact on the accuracy of results,
d) chances that unhappy customers stay with the company due to “switching barriers” (in such cases, it might be crucial to focus on improving experience for detractors).

What to do to get a higher NPS score? 4 steps

1) Ask 4 NPS survey questions instead of 1:

go beyond the standard NPS question ‘How likely are you to recommend this product/company to friend or colleague?’ and follow up with such questions as ‘What could we do better?’ or ‘Why did your likelihood increase or decrease’ (at relevant stages of your customer journey).

2) Follow up with unhappy customers:

engage your unhappy customer in a dialogue. It gives you a chance to repair the relationship, understand what needs fixing and show empathy to your customers.

3) Train your employees:

use information obtained thanks to NPS surveys to help your front-line employees improve the overall customer experience and develop NPS-based customer service.

4) Follow up with those who set the policy:

offer to take your customers’ complaints to the decision-makers at your company – it will show your customers that the issues they rise are taken seriously.

Read more on the topic of Net Promoter Score:

Net Promoter Score: The Growth Marketer’s Secret Weapon
What is a Net Promoter Score (NPS)? A simple metric to gauge customer loyalty
The new marketing metric: Net Promoter Score

Check NPS Calculators Category to discover NPS Survey Best Practices

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