Measuring your Net Promoter Score (NPS) is the most effective way to gauge customer satisfaction. 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.
If you’re unfamiliar with NPS, this guide will help you understand what NPS means and how you can use NPS for your business growth and to improve customer satisfaction.
What is Net Promoter Score?
NPS or Net Promoter Score is a market research metric used to gauge the likelihood of a customer recommending your product/ service/ brand to a friend.
It 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 this question, customers are required to submit a rating on a scale from 0 to 10. and the respondents get divided into 3 groups based on their answers.
Group 1: Detractors
Detractors are respondents who give a 6 or lower rating on the NPS survey. These customers are less likely to recommend your products/ services.
Group 2: Passive
The passive ones are customers who answer with a 7 or 8 on the NPS survey. These respondents may be loyal 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.
Group 3: 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.
How is Net Promoter Score calculated?
NPS calculation is fairly simple. You can calculate it 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 rated your business 0-6, 25 rated it 7 or 8, and 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.
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. So, is NPS a percentage? 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 measured using standard percentages.
What are the 3 NPS scores?
According to the creators of NPS, any score above 0 is good since it denotes a higher number of promoters for your brand. Bain & Company shares the categorization for NPS data as follows.
- >20 is favorable
- >50 is excellent
- >80 is world-class
However, it is important to note that NPS varies by industry. Here are the latest scores recorded by Retently for B2B and B2C industries.
Remember: If you’re in an industry with a low NPS, it doesn’t mean you should settle for a low score.
Why is NPS important?
Here’s why NPS is important for your business.
- Gauge real-time sentiment and collect customer feedback on the go.
- Analyze your survey responses to derive insights into concerns cited by unhappy customers.
- Use the responses to personalize experiences across touchpoints in the customer journey.
- Metrics like this ensure that your brand consistently provides a great customer experience.
- Get insights on how to improve customer relationships, thereby encouraging customer retention.
- The net promoter system can help benchmark your business against your competitors.
- If you’re below the industry average, monitor your overall NPS to set an ideal NPS benchmark for teams.
Now that you know how you can use NPS to drive your business, let’s understand how it differs from CSAT.
How is the Net Promoter Score (NPS) different from Customer Satisfaction (CSAT)?
The Customer Satisfaction metric (CSAT) is another way to measure customer sentiment, but it differs from NPS because of the insights it provides. While CSAT surveys tell you how satisfied your customers are with particular aspects of your business, NPS is a more precise indicator of customer satisfaction. This way, you can gauge how your customer base feels about your business and then dig into more granular data to learn how to improve.
On one hand, you can measure NPS using a single question to determine customer loyalty and satisfaction towards a brand. On the other hand, you can measure CSAT to
- 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 example, a particular product may garner a low CSAT score for a retail brand, while the brand may account for relatively strong customer satisfaction. If you’re interested in learning how customers feel about specific aspects of your company, a CSAT score may come in handy. However, comparing your CSAT for a particular product line against a competitor’s CSAT for their entire brand 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.
How to use NPS surveys?
NPS is an extremely popular metric for measuring customer satisfaction. However, when it comes down to it, your NPS results 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, you might consider adding an optional follow-up question in your NPS survey to learn why they rated you that way. Here are a few ways to make the most of your NPS survey.
- Include a simple, open-ended question so the customer has more room to elaborate on their expectations.
- 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.
- The NPS survey can provide feedback for a specific product or service. You can ask your customers: “How likely are you to recommend (product name) to a friend or colleague?” Responses to this question 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.
NPS for the win
Your NPS can be clubbed with responses from open-ended questions about why people recommend or discredit a brand, which can provide crucial insights to companies.
For example, 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, when given a chance to elaborate, the customer 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 be enough to capture actionable insights like this. That’s why we recommend using an NPS survey as an integral tool for gauging customer experience.
What are some interesting insights you got from your NPS survey? Let us know in the comments below.
Updated on January 17, 2023.