What is the Net Promoter Score (NPS) and how best to use it?
CEO and Co-founder qrite | The Feedback Revolution
A couple of things to consider before we dive into it all:
- The Net Promoter Score (NPS) will not be able to provide in-depth insights. Rather, you can use your findings to create a customer satisfaction questionnaire if this is your goal.
- I don’t suggest that you use the NPS to generate direct sales as this will only generate distrust. Read more about the right feedback strategy in this blog here.
So, what is the Net Promoter Score (NPS)?
It is essentially a measure of customer satisfaction and loyalty. Over the past 10 years, the NPS has started to become an important Key Performance Indicator (KPI). Many people wrongly use the term ‘NPS score’ instead of just NPS.
The whole purpose of the Net Promoter Score (NPS) is to give generalized information based on one single question. You can most effectively use this tool when you are able to categorize who your customers are with this one question and then use this categorization to ask for the right action.
If you are looking for some general feedback about a company, product or service, then the NPS survey is able to provide this. As I said before, the information is based on a single question, so although you cannot get an overall picture of customer satisfaction, it is easy to operate and if used properly with the right feedback strategy, you do get a lot of benefit from it.
In 2003, Fred Reichheld of the Brain & Company and Satmetrix Systems invented the NPS. The question that is asked is based on the idea that every customer is able to be divided into three categories: detractors, passives and promoters.
Since this time, almost every big company has started using the NPS question to measure their customer satisfaction and customer loyalty.
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To determine the NPS, we use the following question: “How likely are you to recommend [xx] to a friend or a colleague?” It is essentially built on a customer’s recommendation of your company, product or service to others.
The question and answer possibilities are simple and are always the same. As you can see, the question can only differentiate where you fill in your company, product or service, marked [xx] in the question above.
We build a scale with the qrite feedback tool for easy NPS calculation:
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Answers are given on a numeric scale of 0-10. Based on their answer, the respondent is categorized as either ‘detractor’, ‘passive’ or ‘promoter’.
Detractors are customers on the scale between 0-6. They are not satisfied enough to recommend your business. If they share their recommendation about your company, it will be through negative word of mouth and it could potentially damage your company’s reputation. It is most likely that a detractor’s answer is grounded by a negative experience with your company. They are unhappy.
Passives gave a score of 7 or 8. They were satisfied with your company, service or product but are not immediately understood to be a repeat-purchase customer. We can surmise that they are likely to not spread any negative or positive recommendation for your company. Passives are unenthusiastic customers who are vulnerable to switching to a competitor.
Promoters gave a score of 9 or 10. They are supportive and enjoyed their experience with your company, product and services. The promoters will most likely be actively recommending your company to others. They are your potential repeat-purchase customers and it is most likely that promoters will recommend your company through positive word of mouth.
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To calculate the Net Promoter Score, we use the following formula:
(percentage of promoters – the percentage of detractors) x 100 = Net Promoter Score.
Your company can score between -100 and 100. For example, if your company has 50% promoters and 20% detractors, your NPS is: (50% – 20%) x 100 = 30.
But what does this numerical value tell us about true customer satisfaction? It is good, excellent or not so good? Thankfully, there are global NPS standards, which we advise.
We have translated these standards in four classifications:
- Between -100 and 0. Improvement necessary. There is work to be done to improve customer satisfaction. With a score like this, you have a lot of detractors, who are unsatisfied customers. Are you ready to listen and solve problems?
- Between 0 and 50, the NPS is good. Your company’s NPS is positive. This means that your company has more promoters then detractors, or in other words, more customers who are satisfied than not.
- Between 50 and 70, the NPS is excellent. Your company’s NPS is excellent and you have a lot of promoters, or satisfied customers coupled with a few detractors who haven’t been so pleased with the product or service.
- Above 70 and the NPS is world-class. Congratulations! your brand has almost no detractors and almost only promoters. Well done.
These classifications can tell you a lot about any potential ‘organic’ grow. Organic growth is where your company develops through word-of-mouth spread. If your NPS score is excellent or world-class, then it is likely that you will be seeing a positive impact return to you in sales and expansion.
Is a negative bad?
From my point of view, a negative score is always bad. Your company is promising a solution to customers but is not able to keep that promise. In the Netherlands, for example, the average NPS for consumer banks is -5. So, in other words, there are more people unsatisfied with the service they have received than there are satisfied.
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Comments on the NPS:
I love the NPS, especially if you use it in a feedback strategy. But not everyone is a promoter of the NPS surveys. Here are three of the most shared comments:
- The KPI would add little to existing methods of measuring loyalty and customer satisfaction.
- Only one question with an answer within a different scale from 0 to 10 would yield few reliable results.
- The outcome is dependent on the type of product or service, which makes it difficult to compare the NPS of companies, especially when it concerns different industries.
Use the NPS in the right way. Implement a feedback strategy that is based on what your company’s goals are that you would like to achieve. Let’s look at how we can do this right now.
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What is the best way to use the NPS (outcome)?
The reason for using the NPS defines how you are to use it. What is your goal? What do you want from the outcome? In the last couple of years I helped a lot of businesses implement the best way to use the NPS. Generally, it comes down to 4 modes of use:
- Gathering feedback. Using the NPS to keep an eye on customer satisfaction. Finding those unsatisfied customers and finding solutions that address their concerns.
- Finding the promoters in the current customer base and use the results for direct marketing. This way, the company grows in recurring business.
- Finding the promoters (and sometimes the passives) in the current customer base and use the results to ask for a service, product or company review online.
- Ex-ante product research. Using the why question behind the NPS to find out how the market-fit can be found in order to satisfy the customer.
To better understand and implement these modes of use, let me discuss them in more detail so that you can appreciate how using the NPS and the outcome can achieve one of the four goals.
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Gathering feedback: solve their problems
In my opinion focusing on fixing problems is quite a good idea. It helps you to minimize the detractors that have come out in your research. A good feedback system will only work if you have a customer care team with a proactive approach. Why ask your customers to share the reasons why they are unsatisfied if you don’t want to rectify these issues? By giving your unsatisfied customers a little bit of extra attention and meeting their needs, you can easily reduce the percentage of detractors in the future.
Most companies don’t have the resources to send everyone a box of chocolates or flowers. But every companies – with or without face to face contact – could ask the question: how can we help? Start fixing the problems. And if there is no way to fix it, you would be surprised how the simple act of intention will help on the scale of satisfaction. In the long term, you give people an extra service. You build trust.
Think out of the box. Ask for people to join a webinar with the CEO of the company to share their ideas for the company. I am sure it will create trust and potentially turn detractors into passives or even promoters.
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Finding promoters through Net Promoter Score and use the data in direct marketing
Your company is looking to increase the repeat-purchasing customer base. Marketing has always been all about data. You use what you know, or what marketing platforms know, to better target your customers. By using an extensive feedback system like qrite, you will be able to build your own dataset which makes you less reliant on big marketing platforms.
If you get to know your promoters, then you will be able to send them targeted e-mails or create ads with specific content that they will love. Make them feel understood by your company and you will see this is another valuable way to create trust and rapport.
Most of the time, you already know a lot about your customers and your target audience. If you are, for example, an online store, you have a lot of interesting data and you are able to match it with the feedback.
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Finding promoters (and passives) and use the data to get more reviews
We all know how important social proof is on the internet. Testimonials and honest reviews are essential. My advice? Ask for reviews at the right time. If your customer is not satisfied or your product and service are not delivered yet, don’t ask for a review. Ensure that your customer care team has successfully completed their role in working with your client before pushing the request for a review.
If you’re looking for increasing reviews, timing is crucial. Our feedback tool automatically asks promoters and passives for a review. And you can ask the detractors after the customer care team is finished for a review.
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Ex-ante product research with NPS
Gather ideas from customers. In some examples that we have seen, the NPS was a negative score and was classified as ‘improvement necessary’. Together with the qrite client, we did a benchmark in the branch and looked for improvements. We started to ask the why question straight after the NPS question.
“Can you explain why you gave this score?” With the open answer field, the customers could share the opinions in their own words. After receiving the first answers we analyzed the feedback and the company made immediate improvements. After some time, the NPS naturally began to rise. Don’t suspect an increase from “need improvements” to “world-class” in a short amount of time. Detractors started to give a larger number between 0 and 6. Although they were still unsatisfied, the score did begin to climb and this is a positive sign towards growth and success.
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