There are many ways to measure customer satisfaction but the most effective way of doing so is by measuring your Net Promoter Score (NPS).
You may already be using a few simple metrics such as Customer Satisfaction (CSAT) to monitor how happy your customers are. These metrics can play an integral role in ensuring that your brand consistently provides a great customer experience.
But if you’re looking to gauge real-time sentiment and collect customer feedback on the go, NPS surveys can yield valuable insights. Let’s now take a moment to understand what NPS means for your business growth and your customers.
If you’re unfamiliar with NPS, let us assure you that it’s not only one of the simplest measures of customer satisfaction but one of the most popular. NPS dates back to 2003, when Fred Reichheld, a partner at Bain & Company, introduced a novel way of measuring how pleased your customers are with the products and services you deliver.
The Net Promoter Score utilizes an index ranging from -100 to 100, based on the key question asked in the NPS survey, “How likely are you to recommend this company?”
As an answer to the above question, customers are required to submit a rating on a scale from 0 to 10. These numbers aren’t just used to create an average. Instead, respondents get divided into 3 groups1 based on their answers.
Detractors
- Detractors are customers who answer with a 6 or lower rating. These customers are less likely to recommend your products/ services and their responses can be analyzed to optimize solutions and improve the customer journey.
Passive
- The passive ones are customers who answer with a 7 or 8 on the NPS survey. These respondents may be loyal customers to your brand but are more likely to be influenced by competitors, or unlikely to recommend your brand to their peer group, as compared to the people who submit a higher score on the NPS scale.
Promoters
- Promoters are the customers who answer with a 9 or 10. These customers are a true testament to customer loyalty and they happily accept their role as brand advocates. They are likely to stay associated with your brand in the long run, act as a referral, and bring in new customers with them.
Based on the scores shared on the NPS survey tools, you may even gauge overall sentiment, and account for the overall customer satisfaction for the services provided.
Remember, the net promoter score is not an average of the received responses. In fact, “passive” customers who rate your business a 7 or 8 aren’t even considered a part of this calculation. With that in mind, it’s essential to address a question around this metric: Is NPS a percentage?
And the answer is NO.
The NPS scale ranges from -100 to 100. So as you calculate and evaluate your score, remember that anything above 0 means your company has more promoters than detractors and that you shouldn’t compare it to metrics that are measured using standard percentages. Let’s make it easier for you to understand.
How to calculate your Net Promoter Score?
As we’ve established, NPS isn’t merely a percentage. But at this point, you’re probably wondering, “What’s the formula?” Fortunately, it’s a simple one.
You can calculate the Net Promoter Score for your brand by subtracting your percentage of detractors from your percentage of promoters. Passive respondents have no impact on your score. For example, let’s say you survey 100 customers. According to the NPS survey, 15 of them rated your business 0-6, 25 rated it 7 or 8, and the remaining 60 gave you a 9 or 10. Since the sample size in this example is 100, each group represents a percentage. So to calculate your score, you’d subtract 15 from 60 which will get an NPS=45.
Even for the ones who aren’t particularly good at number crunching, NPS calculation is fairly simple. The more challenging part of calculating NPS is data collection. If you don’t have a process in place for collecting customer feedback, it can take time to create one.
If you are new to customer surveys, you can collect the customer data using email surveys, or by leveraging Customer Feedback Software. Here’s your guide to creating detailed and multilingual Customer Satisfaction Surveys.
What is a Good Net Promoter Score?
If you’re hoping to use this metric as a benchmark of your performance, you might be wondering what a “good” NPS is. According to the creators of NPS, Bain & Company shares the categorization for NPS data:
- >0 is good,
- >20 is favorable,
- >50 is excellent, and
- >80 is world-class.
That said, it is important to note that NPS varies by industry. Here are the latest scores recorded by Retently2.
You should remember that if you’re in an industry with a low NPS, it doesn’t mean that you should settle for a low score. The net promoter system can be helpful for benchmarking your business with respect to your competitors. You can further monitor your overall NPS to set an NPS benchmark for you to work towards if you’re currently below the industry average. Analyzing your survey responses can help you with insights that you can use to personalize the customer experience across touchpoints.
So how does a net promoter system differ from customer satisfaction?
How is the Net Promoter Score (NPS) different from Customer Satisfaction (CSAT)?
You must be well acquainted with the Customer Satisfaction metric, popularly termed CSAT. CSAT is another way to measure customer sentiment but it differs from NPS on account of the insights they provide.
While NPS is measured using a single question to determine the customer loyalty and satisfaction towards a brand, CSAT can be used to measure the following:
- Understand pain points and bottlenecks
- Benchmark for goal setting and company growth
- Monitor customer satisfaction provided by customer support agents
- Promote customer loyalty and reduce customer churn
For a retail brand, a particular product may garner a low CSAT score, while the brand as a whole may account for a relatively strong Customer Satisfaction. If you’re interested in learning how customers feel about specific aspects of their experience with your company, A CSAT score may come in handy. But it’s not intended to serve as a comprehensive measurement of customer satisfaction. It also won’t help you analyze your performance in relation to your competitors.
Comparing your CSAT for a particular product line against a competitor’s CSAT for their brand as a whole, for example, wouldn’t yield the results you need to grow your business. So if you’re serious about monitoring customer satisfaction levels, it’s a good idea to use both NPS and CSAT.
NPS is a more precise indicator of customer satisfaction, and CSAT scores can tell you how satisfied those customers are with particular aspects of your business. This way, you can gauge how your customer base as a whole feels about your business — then dig into more granular data to learn how to improve.
NPS is an extremely popular metric for measuring customer satisfaction. However, when it comes down to it, your score alone won’t necessarily help you improve how well you serve your customers. That’s because the basic NPS question is simple. It only requires customers to provide a number ranging from 0 to 10. While this tells you whether they’re satisfied, it doesn’t tell you why.
If you want to extract more value from your NPS surveys, you might consider adding an optional follow-up question to learn the reason behind their score.
- Including a simple question that is open-ended so the customer has more room to elaborate their expectations is the right way to approach a customer for holistic feedback about your services. This will allow you to learn more about what your promoters love about your brand, as well as what your detractors dislike.
- Feedback for a specific product or service can also be obtained through the NPS survey. You can directly ask your customers: “How likely are you to recommend (product name) to a friend or colleague?” Insights from this approach can help you ascertain the success of a product/service that has been launched/ upgraded recently. You’ll also learn about features that can be removed, need improvement, or act as a key differentiator.
- You’ll also want to understand how the customer experience you delivered encouraged your promoters to give you a high NPS score. Thereafter, you can use the feedback from your detractors to address any issues arising from the services availed, any concerns likely to be reported by unhappy customers across social media, or any grievances communicated through negative word of mouth that may damage their perception of your brand.
Work towards preventing these issues from creating problems for other customers in the future. What if we told you we found a simpler way to achieve this?
According to Harvard Business Review3, companies just need a simple template that focuses on customers’ actual behavior. By taking the percentage of promoters and subtracting the percentage of detractors, brands can calculate an earned advocacy score, a methodology that helps provide a more-actionable data and is representative of the actual consumer behavior. It can be clubbed with insights from open-ended questions about why people recommend or discredit a brand, which can provide crucial insights to companies.
One of the survey respondents wasn’t quite a fan of Walmart, and the NPS data reported him as a detractor based on his rating on the NPS scale. However, the customer, when given a chance to elaborate, continued, “I recommended Walmart to a friend because they had an inexpensive desk that would be perfect for the friend’s room.”
This insight is pivotal to the success of a brand and a simple score can’t possibly be enough to capture actionable insights like this. That’s why we recommend that an NPS survey should be leveraged as an integral tool for gauging customer experience, understanding the nuances behind the encouragement and discouragement of product purchases, and improving customer support. Here are 6 exclusive resources to help you improve your customer support.
Originally published on July 11, 2018. Updated on November 10, 2021.
Source:
1. https://www.qualtrics.com/experience-management/customer/good-net-promoter-score/
2. https://www.retently.com/blog/good-net-promoter-score/
3. https://hbr.org/2019/10/where-net-promoter-score-goes-wrong
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