Net Promoter Score (NPS) is a management metric that is used to gauge brand loyalty. NPS allows a company to continuously measure customer success and benchmark against competitors.
The Net Promoter Score is grounded in the concept that any company’s customers can be categorized across three general types:
1. Promoters — Loyal customers who are enthusiastic about the company, who buy from it on an ongoing basis, and who promote the business to their family, friends, and acquaintances.
2. Passives — Happy customers, but ones who can be tempted to switch due to an attractive offering from your company’s competitor. These customers can be transformed into promoters, by improving your company’s product(s), service(s), or other feature(s) of their customer experience.
3. Detractors — Unhappy customers (who may feel they’ve been mistreated). Their experience reduces their total dollar amount of purchases from your business over time. They are more likely to switch to your competitor, and to warn your prospective customers to avoid doing business with your company.
Why is NPS Important for Businesses?
There is a vast amount of value in knowing your business’s NPS Score.
· It establishes a critical benchmark. — Using NPS, you can start tracking your company’s progress in increasing customer satisfaction, and evaluating improvements you implement to help you figure out what works best.
· You can respond quickly to real-time input. — When your customers (or employees) assess a low rating, you can immediately see where the most urgent problems exist. And, when you receive high ratings, you can see precisely where your best upcoming opportunities for sales and/or for improvements are.
· It’s easy to understand and explain your data report. — The state of your brand loyalty becomes readily apparent to you, your prospective customers, your investors, lenders, employees, and any other interested parties with whom you may choose to share positive/negative information.
How Does NPS Work?
Customers respond to questions that offer them choices along a scale from 0 to 10 (with 5 being neutral), to express their level of approval (as it pertains to how well your business/product/service fares in the context of the given question). When a survey respondent answers a question on an NPS survey, his/her answer identifies the respondent as a member of one of these three groups of customers:
Promoters — Respondents whose answer is either 9 or 10.
Passives — Respondents whose answer is either 7 or 8.
Detractors — Respondents whose answer is under 7.
To calculate your overall Net Promoter Score, you can simply calculate the percentage of detractors and the percentage of promoters, and then subtract the former from the latter. Your NPS Score is always an integer, and it may range from -100 to 100.
Why is NPS More Accurate in Quantifying Customer Satisfaction?
NPS has dramatically changed the way businesses approach the customer experience.
Old method — In the days when all businesses were small/medium, a company owner was in a better position to have a fairly good awareness of his/her customers’ experience. The owner knew most customers personally. He could simply read customers’ facial expressions to assess whether or not they were satisfied with a product or service they were receiving.
Modern method — But, in the big modern company, an owner typically cannot maintain that level of personal interaction with the majority of his/her customers. Most modern companies, prior to the advent of NPS, had no way to really pinpoint what it was that their customers liked or disliked in their experience of doing business with them.
Other methods may be less reliable. Large contemporary companies have attempted through a variety of means to measure their customers’ satisfaction levels. Unfortunately, their metrics have proven largely unreliable by comparison with the more straightforward process and data yield in the NPS method.
· A customer may say they are “satisfied”, but that does not necessarily translate into repeat purchasing by that customer or into a longer term customer relationship with the company.
· Typical studies on customer satisfaction generate highly complex statistical data reports that are not easy to understand clearly, as necessary in order to interpret conclusions with full confidence.
· Such studies do not provide business leaders and operations managers with the kinds of real-time, granular customer feedback needed to make them fully aware of what customers are experiencing in the current sales and service period.
NPS generates real-time customer satisfaction information. Business managers can act on NPS information to swiftly and effectively correct deficiencies, or to enhance products, offerings, or messaging. This marks the meaningful difference between A and B:
A. The streamlined methodology of gleaning detailed information in real time through the easy-to-use NPS
B. A cumbersome, costly analysis spread out over databases, departments, and operational periods in order to pull together a comprehensive body of what are accepted as contributing factors to customer satisfaction—but perhaps not all of which are necessarily sufficiently relevant to it, or at least not at the time that the report is issued.
Which Questions Should a Company Ask on the NPS Survey?
NPS is designed to measure the customer’s loyalty to your business. So, questions should be directed at aspects of the customer’s experience of being your customer.
· The key question (as determined by NPS researchers) appears to be—how likely is the customer to recommend your company’s product/service, or to recommend doing business with your company, to a friend or co-worker.
Customers who respond that they are very likely to recommend your business (promoters) tend to do more repeat business with a company, remain a customer of the business over a longer term, and to praise the company to their acquaintances are loyal customers. Whereas, detractors are dissatisfied customers who respond that they are not likely to recommend your business.
· It is important to include at least one clarifying follow-up question, such as, “What is the main reason for your score?”
· Additional questions can include, for example, “What is the most important thing you think we could do to improve your experience?”
These questions are essential inclusions for maximizing the value of your NPS process and parlaying it into information that is useful in achieving increased levels of customer satisfaction.
What Survey Design Guidelines are Most Important?
You’ve probably had the experience of finding yourself in the middle of filling out an unexpectedly lengthy and excessively detailed survey. A customer satisfaction survey should not attempt to capture every single reason why a customer is happy or unhappy with their experience. Remember:
· Burdening your customer with a seemingly endless series of questions just makes it more likely that more customers will not finish filling it out for you. So, keep your survey brief.
· Keep each question short. People are very busy and usually don’t want to answer long questions or provide long answers. Keeping questions short encourages respondents to answer as many questions as possible.
· The critical follow-up question should be open-ended. Give your customers the opportunity to say what they think using their own words. You can gain much more insight by including space for articulated responses, than from a strictly multiple-choice bundle of questions.
Should All Companies Use The Same Procedure?
Each company using NPS should experiment with its own methodologies, and question phrasing, to discover what works best for their particular business type and general customer profile. However, a central requirement for every NPS user is to categorize your company’s promoter class of customers from its detractors, and employ an efficient and transparent way to allow your company to address exposed issues quickly. Additionally, when constructing your customer feedback survey:
· Ensure that the feedback and categorizations of customers and determinations of needed actions all make sense to the customer contact employees who are charged with implementing solutions.
· Compile and communicate relevant information from the NPS throughout your organization, so teams can undertake necessary action.
· Track results of remedial and/or enhancement activities.
The Four Key Steps to Effective Implementation of NPS
1. Understand points of contact between your company and customers. — Think about how these impact your customers’ experience. Consider these points, whether you decide to make your survey relationship or transaction oriented.
2. Design your NPS survey. — Determine the connections between your NPS customer satisfaction survey questions and your company’s KPIs (Key Performance Indicators). Determine whether your survey should be relationship or transaction focused. Decide on a data collection method (in-person or online). And, choose sampling methods.
3. Understand the influences on feelings and actions of your survey respondents. — Whether they are promoters, detractors, or passives, conduct follow-up contacts after the survey, as needed, to clarify responses and obtain greater insights useful to strengthen your customer relationships.
4. Involve all levels of management and customer contact personnel in integrating solutions. — Create a comprehensive closed-loop system of solutions:
a. Front-line customer contact staff (sales, service, tech support, and others) develop promoters and win over detractors.
b. Mid-level management provides training and coaching to manage excellence in customer experiences.
c. Top management develops necessary programs for communications and performance recognition, and ensures that outcomes of NPS align with timelines for implementation of business strategy.
The Net Promoter Survey Score is really a very simple but powerful tool. Although it was originally designed for assessing customer loyalty, these days it is widely used across business, industry, and other sectors not only for consumer surveys, but also for employee engagement surveys and other participant feedback analyses.
Its use has become so widespread because it has proven to be an exceptionally effective streamlined method for quickly gauging customer loyalty, participant engagement, group satisfaction, and providing other critical measures. It is a methodology your business can approach with confidence—as one well-recommended by many successful companies that have come to rely on it for help in evaluating the health of their business.
Also published on Medium.