Since it was first introduced in 2003 in the Harvard Business Review, the Net Promoter Score (or NPS) has quickly become one of the most powerful metrics in measuring customer satisfaction. Not only does your Net Promoter Score tell you how your customers feel, but it also correlates with customer spending, income growth, customer retention, and other important metrics. However, as with all data, the Net Promoter Score must be collected, calculated and used properly to be effective.
Collect, Use and Calculate Your Net Promoter Score
What is the Net Promoter Score?
The Net Promoter Score was first developed by Fred Reichheld, Bain & Company, Inc., and Satmetrix Systems, Inc. as a meaningful measurement of customer loyalty. It’s now a registered trademark of the three, and it is used by more than two-thirds of Fortune 1000 companies.
The Net Promoter Score is relatively easy to gather since it is based on a straightforward question and uses a simple formula. It also shows the strongest correlations with other important metrics, like sales and growth. These are a few of the reasons that NPS has become such a popular metric.
How to Calculate Your Net Promoter Score
Your Net Promoter Score is calculated based on customer responses to a simple question: “How likely is it that you would recommend our company (or product or service) to a friend or colleague?”
Customers respond to this question from a 0 (not likely at all) to 10 response (Very Likely). Those who respond with a 9 or 10 are considered “promoters.” These folks are loyal to your business and will likely, as their survey response suggests, be good ambassadors for your brand. Customers who respond with a 6 or lower are considered “detractors.” Though they might continue to use your services despite being unhappy, but won’t be making good recommendations, and will probably recommend that family and friends steer clear. Finally, customers who respond with a 7 or 8 are considered “neutral;” unless something happens to sway them, they probably won’t say much of anything about their experience.
Once you’ve collected responses, you can then use the following formula to calculate your Net Promoter Score.
Net Promoter Score = % of Promoters – % of Detractors
% of Promoters = # of Promoters / Total Respondents
% of Detractors = # of Detractors / Total Respondents
Net Promoter Score Example
Here’s an example of the Net Promoter Score formula at work. Let’s say you surveyed 220 customers. You determined that 90 customers were “promoters,” giving you scores of 9 or 10. 50 customers were “detractors,” giving you scores of 6 or less, and 80 customers were “neutral,” with scores of 7 or 8.
% of Promoters = 90 / 220 = 40.9%
% of Detractors = 50 / 220 = 22.7%
Net Promoter Score = 41 – 23 = 18
This number may be anywhere between -100 and 100. In this case, your net promoter score is about 18. Any positive number is generally considered to be a good Net Promoter Score, but this will depend more on your competitors and your industry. If, for example, all your competitors have scores of 20 or higher, this might not be as good as you thought. In this example, there were almost as many neutrals as promoters, which may indicate that your customer experience, though not overtly bad, is a bit lackluster.
Before you can calculate your net promoter score though, you need to collect responses from customers or clients. How you go about this can make an impact on your score, and whether or not you can use your Net Promoter Score to give you actionable insights.
How to Collect Your Net Promoter Score
Though NPS is based on a simple question, collecting responses to calculate your net promoter score can be more complex. How you collect your responses will depend on two things; what actionable insights you are looking for and how you best interact with your customers. Let’s break each of these down.
How Do You Interact with Your Customers?
There are two different variants of the Net Promoter Score and though they measure the same thing—customer satisfaction—they do it in different ways. The Transactional Net Promoter Score, as the name implies, measures customer satisfaction when an transaction takes place. The Relationship Net Promoter Score, on the other hand, measures the overall loyalty and satisfaction of the customer. Many B2C companies who depend on a large customer base and a large number of transactions use the Transactional Net Promoter Score. Many B2B companies who depend on ongoing relationships use the Relationship Net Promoter Score. Some companies may use both at different times.
If the Relationship Net Promoter Score is best for you, you’ll want to take a more personal approach. This means calling your clients directly or speaking with them at a meeting. This also means asking more in-depth follow-up questions, which we’ll get to later.
If the Transactional Net Promoter Score is ideal, you’ll want to gather a lot of responses and automate your collection process. You’ll probably send a survey after a purchase using an automated email, and use fewer, shorter follow-up questions.
What Insights Are You Looking For?
The Net Promoter Score is only an indicator of your customer experience. Alone, the NPS can’t tell you what you’re doing well or how you can improve. For this, you’ll need some carefully considered follow-up questions.
If you’re gathering a lot of responses after a purchase or another transaction, keep your follow-up questions brief and to the point. Many companies take a simple, two-question approach, asking the 0 through 10 question about the likelihood of a recommendation, and then an open-ended question about why the customer gave that score. These responses will give you specific things you can improve, or show you what your customers value most about your business. If the same things keep coming up, you’ll have actionable insights to work with.
Here are some follow-up Net Promoter Score survey question examples you might ask for the transactional approach:
- Why did you give that score? This will help us improve.
- Tell us what you liked or didn’t like about your experience.
- How could we make your experience better?
- What would you like to see in the future?
If you’re taking the Relationship Net Promoter Score approach, you’ll have fewer responses, so you’ll want to make them more in-depth. You might ask your client about each part of the ordering and delivery process, about specific people they work with, or specific features they use or would like. If a few customers provide similar responses, you’ll know where you can improve.
Here are some follow-up Net Promoter Score survey question examples you might ask for the relationship approach:
- Does our product have the features you need? What would you like to see in the future?
- What did you like or dislike about our customer service?
- How has your experience been working with our staff/specific person?
- Are you able to find the products that you need? What would you add?
How to Use Your Net Promoter Score
By itself, your Net Promoter Score is just a number. With the right follow-up questions, you can see where this number comes from and what you can do to improve it. In order to act on these insights and make real changes, you’ll need participation and leadership from multiple levels of the company. Before you collect and calculate your Net Promoter Score, make a plan to organize and enact changes, otherwise the time and energy you spent gathering your NPS will go to waste. Consider the following as you make your plan:
- Interdepartmental Leadership: Make sure each department is aware of NPS tracking and scoring, and be sure they understand the importance behind it.
- Communicate Your Plan: Remember that NPS is designed to improve your organization, not punish people within it. Emphasize to your team that you’re focused on making improvements, not penalizing employees.
- Score Results: Before you send your NPS surveys, have a plan in place for scoring and measuring the results. You might automate this with a survey tool, or assign this task accordingly.
- Capitalize on Strengths: Remember that NPS isn’t just about finding weaknesses. Use the tool to uncover and capitalize on strengths as well.
- Prioritize Improvements: Most likely, the NPS survey will reveal multiple areas of improvement. Decide how you address these, including which areas to address first and a timeline in which to do it.
- Incentivize Participation: Employees that work with customers everyday often have the biggest impact on the customer experience and on improving your NPS, however they seldom have the power, recourse or incentive to do so. Bring customer-facing employees to the table and make them a part of the process to enact real change.
Remember that even a good NPS score can still reveal important problems. Also, keep in mind that it’s only useful to compare NPS scores to other competitors in your industry; your score may be above average in general, but still low for your industry. Finally, remember that your NPS is only useful as long as you derive useful insights and act on them. With all of these things in place, you will have a system for measuring customer satisfaction and generating growth-driven improvements from them.
Posted in: Customer Feedback