Have you ever wondered what a single question could reveal about your customer's loyalty? Welcome to the world of the Net Promoter Score (NPS), a simple yet powerful tool for measuring customer satisfaction and loyalty.
So what is it? And how do you not only get NPS scores but also improve them? We’ll dive into a step-by-step guide on how to not only calculate your score and make it part of your business growth strategy with an NPS survey and beyond.
What is a Net Promoter Score?
A net promoter score (NPS) is a rating between 1 and 10 that customers give to a brand based on how likely they are to recommend it. It’s usually asked for after an experience with the brand and is a great way to see who’s a brand advocate and who might not be as impressed.
Where Does a Net Promoter Score Come From?
The Net Promoter Score is a customer loyalty metric developed by Fred Reichheld, Bain & Company, and Satmetrix in 2003. It's based on one straightforward question: “On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?”
An NPS survey is usually sent out at the end of an interaction with your customer, whether post-purchase or post-experience. It is a major metric for any brand prioritizing its loyalty measurement. Then, when you calculate net promoter score results, you can effectively gauge your relationships with your customers.
Why is a Net Promoter Score Important?
Your overall NPS score is important to understand your relationship with your customers. It puts a number on customer perception. Your NPS data, from what it is now to what it was and what it could be in the future, are a map that tracks how effective your marketing efforts are on your customers.
In fact, it’s one-half of a brand conversion rate or how your brand experience impacted the customer’s perception of you. When you measure the “golden ratio”, you’re gauging your customer relationships in a way that just the NPS score itself couldn’t equip you to know.
Customer Loyalty
Your NPS survey is vital for measuring customer loyalty, a key factor in any business's success. After all, loyal customers are more likely to make repeat purchases and spread positive word-of-mouth about your brand.
An NPS calculation also measures customer retention. Between survey responses and ratings over time, you can gauge any drops in scores and track how they correspond with revenue trends.
Business Growth
A high NPS score indicates that your customers are happy with your products or services, which can lead to business growth. When you combine the NPS survey results with open-ended customer feedback, you can make more informed business decisions about improving the score.
That can mean simpler booking pages, easier-to-find information, or a more personalized experience. Anything that can be done to improve your customer experience, even in small, lower lift ways.
How is NPS calculated?
Let's now dive into how you can calculate NPS. The process begins with the net promoter score (NPS) question we mentioned earlier from your NPS survey. This question prompts respondents to rate their likelihood of recommending your business on a scale of 1 to 10.
After that, you can gather feedback as a follow-up screen. This piece is optional since, at the end of the day, the NPS survey is the priority to get more information on the customer experience.
Classification of Respondents
Based on their responses, customers are classified into three of the following categories:
- Promoters
- Passives
- Detractors
You can sort and hone in on the customer experience based on the average score of collected responses. Measuring the trends of your overall score over time helps you understand how customers feel about your brand.
So what does each classification mean? And how do you improve their experience to get a high score?
Promoters (9-10)
Promoters are loyal enthusiasts who will keep buying from you and refer others, fueling your business growth. These are the loyalists who had a blast at your brand’s experience and will continue to be buyers for a long time after. They may even bring in a friend or colleague to your brand.
Observe the number of responses that make up your promoters. Are they the overwhelming majority? If so, you’re doing fantastic work and should focus on repeat purchases. But if they’re in the minority, you can still use that to your advantage.
When you have advocates in your customer base, they are more likely to give you open-ended feedback that you can use to double down on what you’re doing right.
That way, you can see what’s working in your customer journey that can be expanded for more happy customers. You can also offer discounts for customer referrals and grow your revenue naturally. Who knows, they might even boost your total number for NPS.
Passives (7-8)
Passives are satisfied but unenthusiastic customers whose opinion could sway. While they don't harm your brand, they don't promote it. This is a great opportunity to grow and transform these apathetic groups into fans, boosting your number of promoters.
These will be the average amount of promoter scores you’ll see unless you’re focusing on the customer experience from the get-go. Focus on feedback trends, especially qualitative feedback, that gives you an idea of moments that need improvement.
The most common areas and solutions that can improve your detractor percentage are:
- Staff training
- Experience layout and ease of use/accessibility
- Tour/experience attendee size
- Outside factors like nearby construction
Detractors (0-6)
Detractors are unhappy customers who can potentially damage your brand through negative word-of-mouth. These people leave bad reviews, which are more harmful to your brand. Hopefully, this is a lower percentage of promoters, but if not, you have a lot of improvement to consider.
These detractor scores are a blessing in disguise. When you look at the key drivers behind that score, you can note what changes need to be made to increase the score of your total responses.
Here are some ways you can boost your detractors’ net promoter score:
- Improve booking experience through better software or reduced friction
- Cleanliness or transaction speed
- Staff training
- Accessibility
What Does My NPS Percentage Mean?
The NPS is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. The score can range from -100 (if every customer is a Detractor) to +100 (if every customer is a Promoter).
NPS Formula
The NPS calculation formula is:
% of Detractors - % of Promoters = Net Promoter Score
Interpreting Your NPS
Understanding your NPS can provide invaluable insights into customer satisfaction and loyalty. Generally, a positive NPS (>0) is good, an NPS of >50 is excellent, and an NPS of >70 is considered world-class.
Improving Your NPS
Improving your NPS starts with listening to your customers. Consider the feedback from Detractors to identify areas for improvement. Remember, every criticism is an opportunity for growth!
If you’re worried about making it easy to get more feedback, consider a follow-up optional survey after the NPS request, and you can even offer incentives like discounts.
Limitations of NPS
While NPS is a powerful tool, it's essential to remember it's not a catch-all solution. One limitation is that it doesn't explain why customers give a specific score. Are they unhappy with your service, or is something more specific at play? Furthermore, the NPS doesn't account for cultural differences in scoring, as people from different regions may perceive the rating scale differently.
This can be helped with tracking where your customers are coming from. Most companies track on a region or location basis to notice emerging trends or patterns. Having the ability to track effectiveness and analytics outside of NPS can give you background information into the why.
Conclusion
Calculating NPS is relatively simple, but understanding and utilizing its insights can drive your business's growth. By improving customer satisfaction and loyalty, you can increase your promoters and your NPS.
Net Promoter Score FAQs
1. What is a good NPS score?
A good NPS score is considered positive (>0), excellent above 50, and world-class if above 70.
2. How often should I calculate NPS?
This can depend on your business size and type, but most companies calculate their NPS score quarterly or annually.
3. Can a negative NPS score be improved?
Absolutely! A negative NPS score indicates more Detractors than Promoters, but it also provides an opportunity for improvement. By understanding and acting on customer feedback, you can turn Detractors into Promoters and improve your NPS.
4. Does NPS work for all types of businesses?
While NPS surveys are versatile, they may not suit all businesses. It works best for businesses and brands where repeat purchases or word-of-mouth play a significant role.
5. What should I do after calculating my NPS?
The next step is to understand the reasons behind the net promoter score. This could involve a more detailed relationship survey, customer interviews, or other methods of gathering customer feedback. Use this information to make improvements and increase customer satisfaction.
How Can I Collect a Net Promoter Score?
It’s not enough to just calculate NPS; you need to have a way to not only ask your customers for a score but also to pull together the number of responses and what they mean for your business.
A free survey tool, like Google Forms, can do this easily, but at the end of the day lacks an NPS report that’s reliable and gives you a fuller picture. Many more sophisticated tools act as booking pages and can calculate your score automatically, saving you time and allowing you to track trends without extra work.
For example, with AnyRoad, you can find various details about your survey respondents. Your net promoter score is on an out-of-the-box dashboard that allows you to track your marketing and operations' real-time effects on customer perception.
