What sort of experience are you delivering to your customers? How satisfied are they with that experience? Does the experience inspire loyalty within your customer base?
These are deep, meaningful, and rather complex questions… which makes it all the more surprising that the answers can be found by asking your customers another, and one just 10 words long:
How likely are you to recommend business/product/service to a friend?
Today we’ll be taking a look at the gold standard of customer experience metrics: the Net Promoter Score (NPS).
What is Net Promoter Score (NPS)?
Our first and most obvious question: what is NPS?
First developed in 2003 by Fred Reichheld, and brought to market in 2006 by management consultancy Bain & Company, Net Promoter Score is a simple, transparent and highly effective way to measure consumer sentiment. As of 2020, some version of NPS was used by two-thirds of Fortune 1000 companies.
Reichheld realised that one simple question, answered on a scale of 1-10 – how likely are you to recommend [business/product/service] to a friend? – gave an incredible amount of insight into how a customer felt about the subject and the buying experience, and how loyal that customer was to the brand. Sometimes this question is accompanied by a number of others, all open-ended, designed to further colour the initial response.
Respondents are divided into three groups…
Promoters: People who give ratings of 9 or 10
Passives: People who give ratings of 7 or 8
Detractors: People who give ratings of 6 or lower
…and these individual scores are collated to produce a final NPS score, between -100 and +100.
Benefits of Net Promoter Score
The beauty of NPS is in the way it pairs outward transparency and simplicity with incredible depth of insight – a customer can tell you exactly what they think of your product, service or brand in a single click. Other benefits include:
It gives an indication of repeat business: NPS is one of the most accurate measures of loyalty there is.
You get the big picture: Where other surveys focus on the most recent interaction a customer has with a brand, NPS can reveal broader sentiment – what they think of your brand in totality.
It’s universally relevant: Everyone who has ever dealt with your brand is a candidate for an NPS survey.
It’s quick and easy: You don’t ask much of respondents, which makes them far more likely to participate.
It offers you direction: By asking follow-up questions of detractors, you’ll find exactly where you need to improve.
It’s inexpensive: By sending an automated email or presenting the survey post-purchase, you can get endless insights for next to no investment.
It provides a benchmark: The simplicity of NPS makes it easy for you to benchmark yourself against competitors, and for you to track changes in the sentiments of your customers over time.
How to calculate NPS
What does an NPS score look like, and how do you make an NPS calculation? While NPS tools will do the maths for you, it’s surprisingly easy to do yourself.
The formula is as follows: The percentage of detractors minus the percentage of Promoters equals your NPS score from -100 to +100. As they lack a strong opinion, Passives aren’t considered when working out your NPS, beyond the fact that they take potential points away from the Promoters and Detractors.
Let’s say your NPS breakdown is as follows:
If 10% of respondents are Detractors and 75% are Promoters, your NPS score will be (75-10 =) 65. If the scores for Promoters and Detractors are flipped, your score will be -65.
Net Promoter Score Scale
Let’s focus a little more on the grouping of respondents. It might seem a little odd that a score of 8/10 means that a customer is labelled assive – in other fields, from study to sports to entertainment, an 80% mark would be on the high end.
What Reichheld realised is that customers tend to begin at a 10 and markdown if they find fault with the product, brand or experience. A rating of seven or eight, therefore, indicates a middling experience, and a rating of six or below indicates an actively bad one.
A more detailed breakdown of the three groups might look like this:
Promoters (9-10): Super happy and loyal customers who will be coming back for more, and who may even turn into proxy salespeople by spreading the good news about your brand.
Passives (7-8): While generally satisfied, these customers aren’t particularly unenthusiastic about the product, experience or brand, and wouldn’t think twice about buying elsewhere.
Detractors (<6): Unhappy customers who feel as though their experience was bad, and who can damage your brand through negative word-of-mouth.
What is a good NPS score?
Given the range spans from -100 to 100, anything above zero could be interpreted as a good NPS score, as it means that a business has more promoters than it does detractors. But the reality, as always, is far more complex, and what is classed as a ‘good’ score will change from industry to industry.
The average NPS score for internet service providers is often zero, meaning that any positive score is considered above average. But the average NPS score for speciality and boutique retailers is often around 65, meaning you need to do a lot more to be above average.
Don’t fret if you don’t get a score of 100 – according to Inc.com, not a single business has ever done it before.
What is a bad NPS score?
As above, a bad NPS score is anything below your industry average. This benchmarking resource might come in handy!
Types of NPS surveys
There are two main forms of NPS programs – transactional and relational.
1. Transactional NPS surveys are sent out after a customer interacts with your brand in some way – perhaps they make a purchase, perhaps they speak to support – and zoom in on specific areas and experiences.
2. Relational NPS surveys are sent out on a regular schedule, often quarterly or annually, and aim to get a birds-eye view of how your customers feel about your brand overall. These surveys are great for benchmarking and tracking success.
What can be measured with NPS surveys?
Between transactional and relational surveys, you might be surprised at how many metrics can be measured with NPS. You can track:
The reputation of your organisation over time, and how it compares to your competitors
Scores for individual products and services
Scores for key players in your customer experience, including web pages, stores and staff members.
All this information will allow you to gain a complete picture of your standing with customers, your place in the market, and how these things change over time.
3 NPS survey tips
1. Gain demographic data
If a customer has already made a purchase, you may already know a little bit about them: age, sex, location, etc. If you don’t, consider asking for this info at the start of the survey, as it can add real colour to your responses.
2. Add open-ended questions for each type of respondent
Follow up the rating section with customised, open-ended questions. Ask what Detractors didn’t like, what promoters did like, and how Passives thought you could improve.
3. Ask the customer if you can follow up
NPS data is made so much more valuable if you can track the same individuals over time, so ask for permission.
3 tips on how to run NPS surveys
1. Use the right tools
2. Automate the process
Include an NPS survey as the final step of the buying process, whether in-store or online. Use email automation to send out regular relational NPS surveys to track your performance over time. If you choose the right tools, like the Square products mentioned above, automation is made so much easier.
3. Track your result
You have the data, so be sure to use it. Track your NPS over time, and act on insights to ensure it’s always heading in the right direction.
How to use NPS to increase loyal customers
The results of an NPS survey are crystal clear. Your most loyal customers – the Promoters – are presented to you on a platter, and as they are also your business’s most valuable customers, you should do all you can to keep them loyal.
A program like Square Loyalty can work to reward customers who you have identified as loyal and to attract more people to become loyal to you, increasing your NPS all the while.
Net Promoter Score: it’s a simple yet powerful concept and one that can be fully capitalised upon by pairing it with Square’s complete suite of innovative business solutions.