Are your customers championing your products or services, or do they tend to talk their colleagues out of using them? You don’t know until you ask, and Net Promoter Score (NPS) is one of the best instruments to get a good perspective on it.
Net Promoter Score is a metric that gauges customer feedback through a straightforward scoring method. It revolves around a primary question that asks customers to rate their likelihood of recommending a service or product on a scale from 0 to 10, usually followed by additional questions to delve into the reasons behind their scores.
Based on the number between 0 and 10 that the customer gives, they belong to one of the three groups:
- Promoters (Score 9-10): These customers are loyal, enthusiastic, and are likely to actively promote your brand, thus positively impacting your bottom line.
- Passives (Score 7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (Score 0-6): Dissatisfied customers at risk of detracting others from your brand due to their negative experiences.
After you’ve collected the responses and divided the respondents into groups, calculating NPS is quite straightforward:
- Calculate the percentage of respondents in the Promoter and Detractor categories.
- Subtract the percentage of Detractors from the percentage of Promoters.
- The resulting figure, which ranges from -100 to 100, represents your NPS.
Originally developed in 2003, NPS was designed to provide a clear and concise measure of customer loyalty. It emerged from the need for a more straightforward, yet effective approach compared to traditional customer satisfaction surveys.
NPS is not just about scoring; it’s used to:
- Gain deeper understanding of customers.
- Address and reduce customer churn.
- Quantify the influence of word-of-mouth referrals.
- Benchmark your customer experience against competitors.
- Drive improvements in products and internal processes.
- Unite the organization around a single, customer-focused metric.
NPS vs CES vs CSAT
NPS is a widely used metric (or, you can say, a tool for analyzing customer feedback), it’s not the only one.
There’s also Customer Effort Score (CES), which focuses on the effort customers exert in interactions with a brand.
And then there’s Customer Satisfaction Score (CSAT), that’s calculated as an average score given by customers, when asked to rate their satisfaction with products or services on a scale from 1 to 5.
Each metric has its strengths and can be used in conjunction to provide a well-rounded view of the customer experience.
- Allianz Group uses NPS to measure broker sentiment towards their business and to benchmark their performance against competitors. Allianz has been putting a lot of effort into improving their NPS across its companies. Their position is that only by combining the voice of business and the voice of customer can business achieve significant growth.
- Their study of a hotel chain showed that a 10% increase in efforts to satisfy customers resulted in a 22% increase in customer spending per hotel visit.
- The ASDA app, focused on making shopping quicker and more convenient, led to a significant rise in loyal, repeat customers – according to their internal survey, ASDA app shoppers were twice as likely to become loyal customers.
- Triumph’s ‘Triumph Essence Fantasy Mirror’ in their ‘Fantasy Booth’ that allowed you to “try” lingerie without removing a single item of clothing is an example of how an interactive retail environment can enhance CX. It led to a 50% increase in sales in the first week after the campaign launched.
There are several best practices to follow if you want to get as much as possible from NPS surveys. Here are five of the most important ones:
- Place surveys strategically: Implement NPS surveys at critical touchpoints in the customer journey to gather relevant and timely feedback. It could be after a purchase or a customer service interaction, for example. Learn more about when and where to use surveys.
- Analyze NPS on a granular level: looking at NPS not just across the company, but per business branch, product, feature, etc., can help you identify specific areas for improvement, such as product features, customer service, or user experience.
- Segment and personalize: Use NPS data to segment customers and tailor experiences based on their feedback.
💡Expert tip: According to McKinsey, higher levels of personalization usually result in higher customer satisfaction.
- Analyze trends: Continuously track NPS over time to identify trends, measure the impact of changes, and adjust strategies for ongoing improvement. It should not be a one-off endeavor.
- Engage employees: Involve employees in understanding and using NPS feedback to build and improve a customer-centric culture within the organization.
NPS surveys can be a very useful tool for quantifying the impact customer experience optimization has on ROI. By paying enough attention to measuring, analyzing, and improving NPS, businesses can increase customer loyalty, drive growth, and make informed, data-driven decisions.