Everything You Need to Know About NPS (Net Promoter Score)
What does NPS stand for?
Net Promoter Score, or NPS, measures customer experience and predicts business growth. This proven metric has had a profound effect in the business world and provides the core measurement for customer experience management programs around the globe.
Customers are surveyed on a single question. They are asked to rate on a 10-point scale the likelihood of recommending a specific company or brand to a friend or colleague. For example: “On a scale of 0 to 10, how likely are you to recommend this company’s product or service to a friend or colleague?” Based on their rating, customers are then classified into 3 categories:
- The Promoters (rating of 9 or 10): enthusiastic and loyal clients who will continue to purchase your products or services and recommend such to others.
- The Passives (7 or 8): satisfied clients who are less content and could be persuaded to shop at competing brands.
- The Detractors (0 to 6): unsatisfied clients who can harm your brand’s image.
1 – How to use NPS to improve your product or service offering?
The NPS methodology can be extremely useful in the context of consumer culture, an area that is evolving very fast. In order to keep up with top competitors, buyer profiles and the use of new technologies, a company must be reactive.
NPS is a globally recognized system, which makes it easier for your organization to benchmark against competitors and track your progress compared to the rest of your industry. Finding benchmarks within your local geographic region is also a straightforward matter. In comparison, while the Customer Effort Score (CES) is an effective tool to measure how much effort a customer has to go through to have their needs met, it does not have the same level of consumer insights as NPS, and therefore benchmark data is harder to come by. This is especially true if you wish to see how you fare against competitors, go into industry-specific benchmarks, or analyze the regional benchmarks of smaller countries.
Furthermore, the Net Promoter Score is rather easy to calculate and intuitive: it is a clear number and is understandable to everyone within a company, from upper management to junior employees.
An interesting NPS case study is Taylor & Hart: a London, UK-based jeweler specializing in bespoke engagement rings, designed and set with ethically-sourced diamonds. The company has used NPS to improve its consumer insights, confirm its growth strategy, transform its manufacturing process, and double annual revenues as of February 2019. Now convinced that “you can’t grow revenue without growing NPS,” Taylor & Hart settled on NPS as its core metric. This proved to be a wise decision, as it very quickly became obvious that many customers were reluctant to buy a ring from an online-only retailer, which Taylor and Hart was at the time, without seeing it in person first. By measuring NPS and ensuring that each of its jewelry consultants focused on superior service, the company wanted to turn reluctant visitors into one-time buyers, and one-time buyers into lifelong customers. This customer experience mindset would eventually ensure business growth at a very high rate.
2 – How to use NPS to improve your marketing strategy?
A Net Promoter Score system can highly benefit your marketing strategy, providing crucial consumer insights.
One of the key benefits of the NPS is that you see instantly how satisfied customers are with the products or services you provide. Most companies want all their customers to be happy and NPS gives you the opportunity to measure such effectively. When you notice that the “ball has dropped”, you can intervene right away and ensure actions are taken to address the issue at hand before it lingers. It’s also good to note a well-built NPS campaign can regularly achieve a response rate of 40% or more, compared to a 3% average for a conventional marketing survey.
The NPS system goes beyond measuring customer satisfaction and actually determines how many of these customers are loyal to your brand. Satisfaction is not necessarily relevant if these individuals are not coming back and your NPS is the best way to identify true customer loyalty. There is no better display of loyalty than one who is prepared to share their experience with you to their closest interpersonal networks. You can measure your initial NPS, and later reevaluate your score to see if your strategies are getting results. Such allows you to measure if what you are doing is upping loyalty and if it isn’t then you can make changes to drive this sentiment going forward.
One thing that goes hand-in-hand with customer loyalty is customer advocates, meaning those who are actively recommending your brand to friends, family and colleagues using word-of-mouth. Your NPS can give you a clearer idea of which of your customers are most likely to recommend you and therefore whom you can ask to do so on your behalf.
While it is crucial to focus on how well your business is doing in creating promoters, it is also critical to focus on your level of customer churn. Promoters are understandably much less likely to churn and knowing your NPS means you can invest more into creating a superior customer experience (being aware of your passive and detractor audience).
Net Promoter System can be a great tool for your organization, providing measurement and insights for customer experience management programs. But remember NPS is a long-term endeavour and needs to be implemented, monitored, maintained and updated with such in mind.
3 – A brief history of the NPS
Global management consultancy Bain & Company found out that conventional customer-satisfaction surveys often do not work for measuring what customers are feeling and establishing accountability for the customer experience. This is primarily due to the fact results don’t make it back to the “front line” in a timely and individualized manner to actually create behavior change.
In the early 2000’s, Fred Reichheld and a Bain team launched a research project to determine if a different approach would prove more productive. Utilizing data provided by software company Satmetrix, they tested a number of diverse questions to see how well the answers correlated with customer behavior.
One question turned out to work best for most mature, competitive industries:
“What is the likelihood that you would recommend Company X to a friend or colleague?”
High scores on this question highly correlated with repurchases, referrals and other actions that typically contribute to a company’s growth. In 11 of the 14 industry case studies that the team arranged, none of the other questions were as powerful in predicting behavior. In two of the remaining three cases, other questions won out, but the likelihood-to-recommend question was so close to the top that it could serve as a proxy for the leaders. The answers to the question became the basis for calculating a company’s Net Promoter Score.
To test the link between Net Promoter Scores and growth, research teams at Bain compiled scores for leading companies in a wide range of industries. Though the scores themselves somewhat varied by industry, “Net Promoter leaders” on average grew at more than twice the rate of competitors.
Reichheld introduced the NPS concept in his 2003 Harvard Business Review article “One Number You Need to Grow”. Net Promoter Score methodology has since been widely adopted by roughly two-thirds of Fortune 1000 companies.
4 – How to calculate your NPS
Net Promoter Score is then calculated as follows: NPS = % of promoters – % of detractors
All NPS scores can go from -100 (where all the clients are detractors) to +100 (where all the clients are promoters). Basically, the more satisfied your clients, the higher your NPS score. Based on global NPS standards, a positive score or NPS above 0 is considered “good”, +50 is “excellent,” and above 70 is considered “world class.”
When calculating a NPS score, one simply ignores the mean values (the passives). The passives, contrary to the other categories, have a weak level of engagement on both sides of the scale and are neither good or bad ambassadors.
5 – How to run your Net Promoter Scoring by yourself?
The mechanism behind the Net Promoter Score is quite simple, hence is absolutely possible to run an NPS campaign via your email list, CRM or tools like Google Forms, Typeform or Survey Monkey.
In late 2018, Retently, a Palo Alto, California-based software company specialized in market analysis gave a detailed example as to how a DIY campaign can be implemented. In a blog post, the company went through 8 different steps:
- Designing and Creating a Survey Template
This is the easiest step. There are numerous survey builder applications available, from free tools like Google Forms to paid survey tools like Wufoo that are more customizable.
- Sending the Survey to Your Respondents
For this step, you will need an email marketing service. There are various email marketing tools available, yet their free plans typically limit your reach to a few hundred users a month and sometimes add an unwanted branding message to your emails. You may also need to be able to schedule survey emails several months ahead of time based on the way your user base behaves, hence you’ll probably get more from a marketing automation platform than a standard email tool. Assuming you have 2,500+ free trial users or customers at any one time, you will likely pay $41 to $49 (USD) per month for the email side of the DIY survey system alone.
- Collecting the Survey Data in a Spreadsheet or Database
This is another simple step. If you use Google Forms to send your in-house NPS survey, you can automatically export the data to a spreadsheet. Other survey software allows you to export it as a CSV file or save it to the many cloud-based storage systems available on the market. Once your data is stored in a spreadsheet, you have access to a number of tools to view and analyze your customer feedback.
- Closing the loop with your respondents
A simple way to close the feedback loop is to ask open-ended questions and explain how you plan to act on the valuable information your respondents share. Such will confirm that you understand their point and will do your best to provide the best customer experience. You should also let your customers know when the changes they’ve asked for will be implemented or solved.
Though you can automate for the most part the feedback loop with Promoters, every Detractor and Passive response should be rigorously analyzed and processed manually, over email, phone or during a planned quarterly business review session. Tracking customer reported issues and their resolution can be done by exporting the feedback into a task management service like Zapier.
- Analyzing the received feedback
Sorting and manually processing all the received responses can be a laborious task. Furthermore, a manual analysis would imply multiple errors caused by a lack of consistent criteria and granularity. Customer feedback can then become time-consuming and costly to analyze, interpret, and sort through. A solution would be to use a text-analytics service such as MonkeyLearn, which offers up to 300 queries per month for free. Assuming your survey response rate is 10%, having 2,500 – 3,000 respondents can fit you into the free MonkeyLearn plan. Otherwise, you can expect to pay another $299 or $999 (USD) per month.
- Calculating Your Net Promoter Score Using Collected Data
This is another straightforward step. Firstly, split your respondents into three groups: Promoters, Passives and Detractors based on their survey rating. Secondly, subtract the percentage of Detractors from the percentage of Promoters. A few quick calculations can give you a working Net Promoter Score out of your survey data utilizing a free NPS calculator.
- Scheduling a New Survey to Be Delivered Every 3 to 6 Months
This step is more challenging. Due to the fact that measuring customer satisfaction through NPS is an ongoing process, you will need to resend your NPS survey every three to six months to keep track of changes and view long-haul progress. There are several ways to achieve this. If you use a conventional email marketing software, you can send out the survey manually via an email broadcast. If you use marketing automation software, you can set up a scheduled email to go out precisely three months after the last completed NPS survey. One problem with this approach is that you will need to ensure the new responses are accurately recorded alongside the old ones in your spreadsheet or database. Without doing this, you are able to calculate your NPS, but you will not be able to view trends on a per-customer level.
- Collating the Survey Data Into a Long-Term Report and Trend Line
This last step is straightforward if you have access to a database or spreadsheet application. For the spreadsheet option, tracking your NPS is a simple process that you can complete by generating a line chart from your survey data. If you’d rather store survey responses in a database, you’ll need to either create a custom system or use an existing code (Google Forms comes with such feature) to turn your database entries into a visible trend line. When it comes to reporting, this is something you will need to do manually after reviewing the data from your survey and the charts it produces.
6 – Using an outside firm to run your NPS surveys
That being said, the DIY option can be quite resource intensive as it requires someone to manage the ongoing surveying process and data analysis. This is especially true if you are looking to implement a multi-channel NPS survey strategy via SMS, phone, email, in-app and other channels. Also DIY will also offer less expertise on optimizing and maximizing NPS.
A number of service providers exist to help you execute NPS for your business with various degrees of complexity and cost. Here is a snapshot of these different options:
This is a newer service in the area of Net Promoter Score tools in the Software as a Service (SaaS) economy. The automated choice removes the manual surveying and reporting from the NPS equation. Everything from who and when you sample to dashboard scoring and trend analysis is handled for you and available in “the cloud”. The DIY aspect that remains is how you activate the tool and how you handle the feedback you receive to drive your business.
Measuring NPS in-product can be an attractive NPS option for online businesses with a subscription base or mobile apps: SaaS companies with end users that are regularly engaging with their platform, e-commerce businesses which rely on optimizing each touchpoint of the online consumer experience, and marketplaces that depend on regular engagement of their end users to drive business. These are relatively easy to implement and scale.
These options, tend to be more focused on optimizing for NPS, hence the level of expertise embedded in the tool can be higher than DIY approaches. In the long run, you can determine how and whether you’ll wish to connect your automated Net Promoter Score tool to other customer experience mechanisms in place: customer service tickets, CRM, and user research. Businesses with customers that spend little time on their website might consider a tool such as AskNicely that automates NPS surveys via email.
NPS as an “Add-on” Service
A number of companies including market research firms sell customer experience services. They offer a variety of products to help with customer success or customer service. Some of these companies may also offer Net Promoter Score tracking as part of a one-stop bundled offering. POTLOC, the company behind this article, can manage NPS surveys using its geolocalized technology.
If you are already using one of these services it could be an interesting option to enhance your contract to include NPS measurement, especially if it will be connected to other user metrics of value to your business. One thing to consider: if the base service which offers the “NPS addition” is only used by the customer service team, then that data may not easily reach marketing or product teams. You could need a “champion” to create awareness on the importance of NPS within your organization.
Full Service NPS
The full service option can be the right choice for companies that are looking to fully implement NPS as a system in their organizations with outside support. This option can include hands on consulting and advanced measurement tools. A major player in the Full Service NPS area is Satmetrix, which, as previously mentioned, created the Net Promoter Score more than 15 years ago alongside Fred Reichheld and Brain & Company.
The full service approach usually requires more deployment time and commitment to dedicated resources to ensure ongoing success of the program. It is typically more suited to sizable (and often more traditional) organizations with larger budgets and bigger cross-functional implementation needs.