What is NPS?

If you’ve read any material on marketing fundamentals, you may have seen the acronym NPS. NPS is short for Net Promoter Score, a metric in the business world that helps companies measure loyalty and satisfaction. In this article, we’ll look into the background, value, and process of NPS measurement, helping you unlock its potential for your business.

What is NPS (Net Promoter Score)?

The concept behind this measurement is quite simple, and based on the belief that customers willing to promote a company are more likely to remain loyal and generate positive word-of-mouth, which will aid you in increasing your customer acquisition. It assesses customer satisfaction and loyalty based on a single question: “On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?”

The NPS concept and process was initially developed by Fred Reichheld, Bain & Company, and Satmetrix in 2003. Since then, NPS has gained widespread adoption, serving as a compass for businesses seeking to enhance their customer relationships and, in turn, boost their bottom line.

What can you measure using NPS? 

The simplicity of NPS means that it can be easily implemented and used to measure a wide range of critical aspects within your business. It is a valuable tool for assessing customer satisfaction and loyalty at various stages of the customer journey. Internally, it can even be used to measure employee satisfaction, helping you assess the health of your team and your company culture. Let’s look at these key areas where NPS can be applied in more detail.

Measure customer experience at every touchpoint

NPS allows you to capture feedback at different customer touchpoints. Whether it’s the first interaction with your website, a call with customer support, the ease of the purchase process, or even the post-purchase follow-up, NPS can provide insights into how satisfied customers are at every step of their customer journey with your brand. Implementing NPS at different steps can help you identify specific pain points or moments of delight in the customer journey, enabling you to fine-tune your strategy and enhance customer satisfaction.

Employee satisfaction

Beyond assessing the customer experience, NPS can also be used to measure employee satisfaction. Happy and engaged employees are more likely to provide excellent work and stay with your company for a longer time. Happy employees who provide excellent customer service can in turn lead to higher NPS scores from customers.

By conducting internal NPS surveys among employees, you can gauge your team’s loyalty, engagement, and overall workplace satisfaction. This feedback can be invaluable for improving company culture and reducing turnover.

How to calculate NPS 

Part of NPS’ appeal has been its easy-to-understand methodology, so calculating your Net Promoter Score (NPS) is not too complicated to figure out.

First, it’s useful to know that NPS surveys operate on a scale from 0 to 10, meaning that respondents can leave a score anywhere from 0 to 10, with 0 being the poorest and 10 being the highest score you can give.

Respondents are then categorised by the score they provided. There are three categories:

• Those who select 9-10 are categorised as ‘promoters.’ These are the most positive and loyal customers.
• ‘Passives’ are those who respond 7-8. These might be customers who are satisfied with their product but not necessarily enthusiastic about it.
• ‘Detractors’ are those who give a score anywhere from 0-6. These customers are likely dissatisfied with the product or service they purchased and could go as far as giving bad word of mouth to your company.   

Once you have completed and closed up your NPS survey, categorise all the respondents using these groupings. Identify the percentage of respondents that fall into each category.

Once you have the percentage of respondents in each category, subtract the percentage of ‘Detractors’ from the percentage of ‘Promoters’. The resulting figure will fall on a scale from -100 to +100.

For example, if 50% of your respondents are ‘promoters’ and 10% are ‘detractors’, your NPS score is 40.

Conversely, if 50% of your respondents are ‘detractors’ and 10% are ‘promoters’, your NPS score is -40.

This formula gives you an insight into overall respondent sentiment.

What is a good NPS?

As you saw from the examples above, NPS scores fall on a scale that ranges from -100 to +100. Let’s look at what ranges are generally considered excellent, average, and poor:

• Excellent: score of 70 and above
• Great: 30-69
• Good: 0-29
• Needs improvement: 0 and below

Higher scores indicate that a large portion of your customer base is made up of promoters and that you are on the right track when it comes to customer experience, while lower scores mean there is work to do in building up your customers’ happiness and trust.

Keep in mind that what determines a ‘good’ score can vary by industry and region, so when working with NPS, you should benchmark against your competitors and industry standards to get an even clearer evaluation of your performance.

How to collect NPS data

Collecting Net Promoter Score (NPS) data is straightforward and important for understanding and improving customer experience. To gather this valuable information, you need to develop a strategy for data collection.

NPS survey questions

As mentioned previously, at the core of the NPS is a single essential question, namely, “On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?” Respondents rate their likelihood, with 0 being the least likely and 10 being the most likely to recommend. For this reason, NPS data collection is based on surveys with your audience.

The first question should, of course, be the 0-10 scale rating, but it’s valuable to include a space for respondents to add more feedback. You should include an open-ended question such as “Why did you give that score?” This open text response helps you get a qualitative insight into your customers’ numerical feedback.

If you’re using NPS as a starting point for more extensive research, or if you want deeper insights into a specific component of your customer journey, you can include additional follow-up questions specific to your business objectives.

Survey setup

Once you’ve designed your NPS survey, you need to decide how and when to administer it. Here are a couple of ways you can get your survey out there.

Email Surveys

Sending NPS surveys via email is a common and effective method. Send surveys to your customers after specific touchpoints, such as after a purchase, following customer support interactions, or schedule a survey to be sent at regular intervals to measure overall satisfaction on a more continuous basis. Ensure your emails are well-timed and personalised for better response rates.

Website pop-up

Adding a pop-up survey to your website is another option, often used to capture feedback from visitors during their online experience. You can trigger these pop-ups based on visitor behaviour, such as time spent on a page or specific actions taken on your site.

Tools for surveys

Many online survey tools and software platforms are available to help you design, distribute, and analyse NPS surveys. Popular options include SurveyMonkey, Survicate, and Qualtrics, among others. Choose a tool that aligns with your needs and integrates seamlessly with your website and other services.

Frequency and Duration

How frequently you send NPS surveys depends on your business objectives and customer touchpoints. For example, you might send them quarterly, after significant interactions, or choose to send them regularly to have a continuous feedback loop. Do keep in mind that you should keep surveys open long enough to allow enough respondents time to provide their feedback. A typical survey period is one to two weeks, but it can vary based on your specific use case and audience.

Effective data collection and survey setup are crucial for obtaining accurate NPS scores and actionable customer insights. These elements ensure that you can make informed decisions and improvements to enhance customer loyalty and satisfaction.

Why NPS is important to measure

Net Promoter Score (NPS) is a critical metric for businesses seeking to enhance customer relationships and, in turn, improve their bottom line. There are several compelling reasons why NPS holds such significance:

• Helps you spot customers at risk of churn: NPS can serve as an early warning system by helping you identify customers who are dissatisfied or at risk of churning. By monitoring NPS scores, you can quickly spot trends and take proactive measures to retain these customers and improve retention.
  
• Get insights on a wider range of customers: NPS surveys are short and to-the-point. They are designed to gather feedback not just from those who actively reach out to customer support or have issues but from a broader spectrum of customers. This inclusivity provides a more complete understanding of your customer base’s experiences and feelings, making it easier to address their needs and preferences.
  
• Can be implemented throughout the customer journey: NPS is flexible and can be added throughout the customer journey to help you collect a larger amount of feedback. This depth of information helps you find where exactly improvements are needed, leading to more informed decision-making and a better overall customer experience.

Whether it’s after the first interaction, after purchase, or during ongoing support, NPS empowers you to fine-tune your strategies for maximum impact.

Next steps

As you measure and work with NPS for your business, here are some essential next steps you can consider:

• Collect data regularly: To always have your finger on the pulse of customer loyalty and satisfaction, ensure you are regularly collecting NPS data at the most important touchpoints of your customer journey. Regular data collection ensures you have the most up-to-date insights, helping you adapt to changing customer expectations.
  
• Assess feedback and reach out after surveys: The true value of NPS lies in the feedback provided. After conducting NPS surveys, take the time to analyse the qualitative responses. Reach out to respondents, including detractors, to better understand their concerns and show that you’re committed to improving their experience.
  
• Improve by communicating: Adopt a proactive approach to customer communication. Listen to all feedback, even from detractors, and use it as a catalyst for improving your product or service. Use the insights gained from NPS to keep refining your customer experience and develop strategies to foster long-lasting loyalty.
  
• Keep limitations in mind: It’s important to recognise that NPS, like any metric, has limitations. One such limitation is potential bias in responses, as you’re more likely to hear from detractors or customers facing difficulties. Regardless, NPS remains a valuable tool when combined with other feedback metrics and customer research.

In conclusion, Net Promoter Score reflects the health of your customer relationships. By regularly collecting and interpreting NPS data, communicating with your customers, and using the feedback you receive to improve, you can take meaningful steps toward building stronger customer loyalty and ensuring the growth and success of your business.

Disclaimer: Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.