NPS, which stands for Net Promoter Score, is an important customer success metric that measures customer loyalty and satisfaction on a scale of -100 to +100. The closer your company scores to +100 on this scale, the better.
The NPS metric was created and introduced by Bain and Company in 2003. It's now used by millions of businesses around the world to better assess their customer support efforts.
How Do You Calculate NPS?
It's very straightforward: to calculate NPS, simply ask your customers one simple question:
"On a scale of 0 - 10, how likely is it that you'll recommend this organization to others?"
Then divide the responses you receive into one of three categories: Detractors, Passives, and Promoters. Let's take a closer look at each of these groups.
- Detractors: People in the "Detractor" category respond with a score between 0 and 6. These folks are highly unlikely to recommend your company to others. They may even encourage their friends and family NOT to do business with you.
- Passives: Those who respond with a score of 7 or 8 fall into the "Passives" category. They fall just short of being promoters. As such, they're often happy with the company in question, but not so happy that they feel the need to actively promote it.
- Promoters: Finally, we have "Promoters". These people respond with a score of 9 or 10 and are your company's most loyal customers. They're also the people most likely to tell others about their positive experience with your brand.
Once your customers have been sorted into their respective categories, you can calculate your company's net promoter score. To do this, eliminate the Passives. Then subtract your percentage of Detractors from your percentage of Promoters.
NPS = (% of Promoters) - (% of Detractors)
For example, let's pretend you sent the NPS survey to 200 people. 140 of them responded with a score of 9 or 10, making them Promoters; 40 responded with a score of 7 or 8, making them Passives; and 20 responded with a score of 0 - 6, making them Detractors.
We eliminate the 40 Passives, and are left with 140 Promoters (70%) and 20 Detractors (10%). We then subtract 10 from 70 and get an NPS of +60.
Why is NPS a Valuable Metric?
There are many reasons why NPS is a valuable metric. For instance, the one-question survey is easy for customers to answer. The results of these surveys are also easy for companies to interpret. But the importance of NPS goes deeper than user-friendliness.
Here are three key reasons why you should start calculating net promoter score immediately:
Net promoter score measures customer happiness. By tracking your company's NPS over time, you'll be able to tell how satisfied your customers are with your offerings. You can then use this information to determine your brand's next steps.
For example, if your score is lower than average, you know that you need to improve customer satisfaction and can start brainstorming ways to do so.
Greater Customer Loyalty
Happy customers are loyal customers. Why would they buy from another brand when they're satisfied with the price and service you already offer them?
Since tracking NPS helps create happier customers, it will naturally help you build a more loyal customer base as well. This is important because studies show that it's 5x more expensive to acquire a new customer than it is to retain an existing one.
Higher Company Profits
Customer loyalty always leads to higher company profits. Take a look at these stats:
- 57% of consumers spend more with brands they're loyal to.
- 39% of loyal customers will spend more money on a product sold by their favorite brand, even if there are less expensive options available to them.
- Brands with high customer loyalty grow revenue 2.5x quicker than competing brands.
By tracking your company's NPS score and working to improve it on a daily basis, you'll create happier customers that are loyal to your brand. This has significant monetary benefits as the above stats show. Want to boost company profits? Jump on the NPS bandwagon!
Are There Any Cons to NPS?
Most people agree that the NPS metric is valuable. But that doesn't mean it's the only customer success KPI you should track for your business. Why not? Because the one major con of NPS is it doesn't tell you why customers answered the way they did.
To learn this important information, you need to follow up with additional survey questions.
It's not enough to know that 20% of your customers don't like the products and/or service you provide. You need to know why they feel this way so you can fix the problem.
This fact doesn't erase the value of NPS surveys. It just reminds us that NPS is one of the metrics you should use to improve customer satisfaction, not the only metric.
What's a Good Net Promoter Score?
Now that we know what NPS is, how to calculate it, and why it's a valuable customer success metric, let's answer the question that's been on your mind since the beginning of this article:
What's a good net promoter score?
Of course, "good" is a relative term—what's good for one company might be absolutely abysmal for another. But in general, a positive score (AKA a score above zero) is "good" because it means your organization has more Promoters than Detractors.
But let's dive into the data a bit more…
- The average NPS for auto dealers is 48
- The average NPS for software companies is 41
- The average NPS for supermarkets is 39
- The average NPS for airlines is 37
- The average NPS for retailers is 35
- The average NPS for TV service is 11
Here's the takeaway: you should always aim for a positive NPS. But to really know if your company's score is "good" or not, you need to compare it to other brands in your industry.
For example, Company X in the TV service industry might have an NPS of 20, while Company Y in the auto dealership industry has an NPS of 40. On the surface, it may seem like Company Y kills Company X when it comes to customer satisfaction and loyalty.
But since the average NPS is 11 in the TV services industry and 48 in the auto dealership industry, Company X is actually in a much better position, relatively speaking.
3 Ways to Boost Your Net Promoter Score
You took the time to send out surveys and calculate your company's NPS. Uh oh, your score is lower than you thought it would be! In fact, it's lower than your competitors. What gives?
First off, don't panic. While a low NPS isn't ideal, there are definitely things you can do to raise your score over time. Here's a three-step process to follow:
1. Prioritize NPS
You'll never improve your net promoter score if you don't prioritize it. Make sure your team knows that improving NPS is an important company objective.
More than that, schedule meetings to discuss where your company's score is, tactics you're implementing to improve it, etc. These meetings don't need to be long, but they should be hosted on a regular basis so that you and your team are always on the same page.
Finally, commit to experimentation. The NPS survey will tell you how satisfied and loyal your customers are. But it won't tell you why they feel this way. So don't be afraid to try new things and adopt new tools in an attempt to see what your customers connect with.
2. Close the Loop
Since the NPS survey won't tell you why customers scored your company the way they did, we encourage you to follow up with customers in order to "close the loop." You can do this by sending follow-up emails, conducting post-survey interviews, asking for video messages, etc.
This is especially important when it comes to Detractors.
If you can find out why these people aren't happy with your company, you can implement a new strategy to remedy the situation. Which leads us to...
3. Act on NPS Data
Don't collect NPS data for the sake of it; act on the information you receive.
It doesn't do your company any good to learn its net promoter score is 52 if you don't plan to devise and deploy a strategy that will get you to 53 and beyond.
Plus, the simple act of asking your customers how you can improve and then implementing their suggestions will go a long way towards improving their satisfaction. Your customers want to be heard. Show them you care by acting on their feedback.
NPS is an important customer success metric that your company can use to improve customer happiness and loyalty, as well as boost company profits.
Fortunately, it's an easy metric to calculate and interpret. Simply subtract your company's percentage of Detractors from it's percentage of Promoters. Then compare the result to other brands in your industry to see how your company fares.
If your score isn't where you want it to be, don't worry. There are plenty of things you can do to improve your NPS. One of which is to invest in high quality customer support tools.
CloudApp is a visual communication app that combines screen recording, GIF creation, and screen annotation features into one convenient solution. Get CloudApp for free and use it to improve customer satisfaction and quickly boost your net promoter score.