How do your customers really feel about your company?
To find out, you could train employees to ask for feedback after each transaction, then feed those responses into a database. You could subject customers to a lengthy survey. You might also host periodic focus group meetings.
Or you could ask customers one simple question — and use their answers to determine your Net Promoter Score (NPS).
Over the past 15 years, NPS has evolved into a powerful way to measure the satisfaction of your customers, or lack thereof. Knowing your NPS can help your business turn detractors into "Promoters," increasing customer loyalty while reducing customer acquisition costs.
"NPS does three things amazingly well," says Thibaut Davoult, Growth Engineer for webinar software developer Livestorm. "It measures customer satisfaction, gathers feedback on what to improve or change, and helps you find opportunities to create success stories with customers for the world to see."
Here’s what you need to know about NPS.
What is a Net Promoter Score?
At a high level, NPS is a measure of how your customers feel about your company. NPS scores range from -100, which means absolutely every customer surveyed loathes you, to +100, which suggests every customer loves you unconditionally. Any score above 0 is considered good, while 50 and over is excellent. The closer you get to an NPS of 100, the better.
How Do You Calculate NPS?
"How likely is it you would recommend us to a friend or colleague?"
That’s the one simple question you ask customers. For their response to that question, you ask customers to choose a number from 0 ("Not at all Likely") to 10 ("Extremely Likely"). Those who respond with a number between 0 and 6 are considered "Detractors," in NPS parlance. Customers choosing a score of 7 or 8 are ‘Passives,’ meaning they’re neutral about you. Those who pick either 9 or 10 as their response are your ‘Promoters.’
Thus, your ‘Net Promoter Score’ is the percentage of Promoters minus the percentage of Detractors. Passives count toward your total number of respondents. The calculations to get your NPS are a little complicated.
SurveyMonkey and Promoter.io are among the websites offering step-by-step explanations of how to tally your NPS. You can also use Quicksearch’s free NPS calculator and compare your NPS against others in your industry using Delighted’s NPS benchmark tool.
Who Invented NPS?
The concept of NPS was introduced in 2003 in a Harvard Business Review article entitled "The One Number You Need to Grow." In that article, Frederick F. Reichheld, a partner at Bain & Company, wrote: "The only path to profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department."
Keep in mind that this was written before the advent of social media — which has enabled practically everyone on the planet to act as unofficial marketers for brands they love. Facebook wasn’t founded until a year later, and Twitter came along three years later.
Thus, Reichheld’s theory was insightful as well as prescient. And it formed the basis of a movement — not to mention some best-selling books he authored on customer loyalty such as "The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World" (2011).
Not surprisingly, there are NPS-related products and services available to brands. For example, Satmetrix, a co-developer of the NPS concept, offers Satmetrix NPX, customer experience software that promises to help you get a complete view of the customer journey. And most recently, Appcues announced Appcues for NPS, software that developers can incorporate that encourages users to complete an NPS survey, among other features.
Which Companies Use NPS?
Many companies in retail, transportation, consumer products, healthcare and other verticals use NPS to measure customer loyalty. A few examples include Best Buy, Chick-fil-A, JetBlue, Hertz, Charles Schwab, Dell, HP, and Comcast.
Customer Guru is a resource for NPS benchmarks, as is Satmetri's annual NPS benchmarks infographic.
What are Some Advantages of NPS?
NPS Helps Focus on Improving the Customer Experience
With NPS, you can get a better sense of how your products and services are perceived. In that, that information can help managers rally teams around making improvements if scores are disappointing.
Answering Only One Question Requires Minimal Effort From Customers
As a result, they may be more likely to participate, compared to other forms of customer input that are more time-consuming, such as filling out a multi-question survey.
NPS Can Reduce Customer Acquisition Costs
NPS helps reduce the costs of customer acquisition, says Roman Rabinovich, VP of Business Development for Eventige, a digital marketing and advertising agency. "The high-scoring NPS clients are always sharing word of mouth about their satisfaction. We nurture lower-scoring NPS clients to make sure they remain a client in the future, and that we don’t need to replace them with a new customer. That helps us keep customer acquisition costs low."
NPS Can Help Your Branding
A strong NPS gives brands a powerful data point to leverage for customer testimonials, quotes, and referrals, says Dexter Siglin, Senior Vice President of Marketing and Business Development for NET(net), an IT spend optimization firm.
NPS Can Measure Employee Satisfaction, too
An employee Net Promoter Score (eNPS) is sometimes used to gauge how employees feel about their experience. With low unemployment and high competition for talent, eNPS can help you keep employees engaged and satisfied. Bain & Company offers more details on eNPS.
What are Some Disadvantages of NPS?
Some Customers May Misunderstand the Scoring
Answering the recommendation question with a score of 7 may seem positive to a customer. But on the NPS spectrum, 7 is considered neutral, notes Davoult. That misunderstanding can skew your results. "It takes a very small difference to completely change an NPS score one way or another," he adds. Because of how NPS is calculated, a 1-point difference in a customer’s answer can result in a plus or minus 20-point difference in your overall NPS.
NPS Doesn’t Give The Whole Story
"While you want happy customers, the customer isn’t always right," says Patrick Turner, Chief Technology Officer and Principal of custom software developer Small Footprint, Inc. Consequently, by overly relying on NPS as a customer satisfaction benchmark, you might get a distorted view of the customer experience.
Also, be aware that NPS measures past performance. "It isn’t a great indicator of future performance or satisfaction," says Kristine Hyman, Associate Director of Client Services for
Hanapin Marketing, a PPC marketing agency. "If you don’t get more detailed feedback at a client level, you can lull yourself into a false sense of security."
NPS Tips and Best Practices
Be Careful When and How Often You Ask for Feedback
"Don’t ask too early," says Davoult. "Customers need to have already used and possibly mastered your product before they rate it. And don’t ask too often. We’ve all used apps or services that beg us for feedback every time we open them. It’s annoying. And customers will tend to rate you lower, just to punish you for the annoyance."
Monitor Feedback Over Time
At Eventige, NPS scores are monitored every quarter. The agency uses statistical analysis to identify significant changes up or down the scoring spectrum over time, says Rabinovich. "If a client rates our service as a 10, and then the next time they rate it a 9, we want to know what happened. Although an NPS score of 9 is great, monitoring the change will help us know what’s happening before it gets serious and the score goes down further."
Once you’ve collected feedback, do something with it. Custom software developer Gunner Technology uses Google Forms to ask clients the NPS question once a quarter. Initially, its NPS metrics were high, "but we weren’t hitting those 9s and 10s that comprise the juicy bullseye of NPS," says Cody Swann, CEO.
The company began following up with survey respondents to find out how it could improve. As a result, Gunner Technology increased its percentage of respondents who are Promoters by 97%, Swann says. "In turn, we saw our client roster double, and our revenue nearly tripled in less than 18 months. "Since implementing NPS in 2011, we’ve had no less than 35% annual revenue growth each year," he adds.
Get Executives Involved
"The most important part of NPS is getting good samplings from your customers," says Turner. "We always have the survey requests go out from an executive, and we try to make the messaging feel as personal as possible, even though it’s sent out bulk."
Ask For Feedback From Customers Who Identify Themselves
Initially, Small Footprint gave customers the ability to anonymously respond to three short survey questions about their experience. "But we decided that if customers weren’t willing to share their identify with us, we didn’t really want their feedback," he says.
Hyman also suggests not allowing customer satisfaction survey respondents to remain anonymous, and to have a mandatory field for comments. "That way, you can follow up with specific customers about their specific comments," she says. "This follow up has led to the most productive conversations generated by the surveys."