The Net Promoter Score (NPS) is a powerful tool for measuring customer satisfaction and loyalty. In today’s competitive landscape, understanding customer loyalty has become a strategic necessity. Businesses that can assess the degree of loyalty customers have towards their brand are in a stronger position to retain them. In this article, we discuss what Net Promoter Score is and how the metric can help to drive customer loyalty.
What is Net Promoter Score (NPS)?
Net Promoter Score, developed by Fred Reichheld and Bain & Company, measures customer loyalty. More specifically – the likelihood of customers recommending a company’s products or services to others.
In essence, NPS is derived from the feedback obtained from a single survey question: “On a scale of 0 to 10, how likely are you to recommend our company to a friend or colleague?”
How do you calculate the Net Promoter Score?
Calculating NPS is straightforward:
1. Survey Your Customers. To begin, you need to ask customers the NPS question: “How likely are you to recommend our company to a friend or colleague?” on a scale of 0 to 10.
2. Categorise Respondents. Group the respondents according to the ratings they provided.
- Promoters (score 9-10): These are loyal enthusiasts who will actively promote your brand.
- Passives (score 7-8): These customers are satisfied but not enthusiastic, and they are less likely to actively promote your brand.
- Detractors (score 0-6): These customers are unhappy and may spread negative feedback.
3. Calculate the NPS:
- Subtract the percentage of detractors from the percentage of promoters to get your Net Promoter Score.
- The result can range from -100 to +100.
What is a Good Net Promoter Score?
A good Net Promoter Score is one that reflects a positive sentiment among your customers and signals a healthy level of customer loyalty. NPS scores typically fall into the following categories:
- NPS of -100 to -1: Companies in this range have more detractors than promoters and need to address significant issues immediately.
- NPS of 0 to 49: These companies have more detractors and passives than promoters. While they have room for improvement, they are not in dire straits.
- NPS of 50 to 69: This is the “good” range. Companies in this bracket have a healthy balance of promoters and passives and can expect strong customer loyalty and growth.
- NPS of 70 to 100: Companies in this range have a high level of customer loyalty and are likely to experience substantial growth through word-of-mouth recommendations.
However, it’s important to note that a good NPS is relative and may vary by industry. What might be considered an outstanding score in one sector may be merely satisfactory in another. Thus, businesses should regularly benchmark their NPS against industry standards and constantly strive to improve.
What’s Next?
Understanding your NPS is just the beginning. What truly sets this metric apart is its ability to guide businesses in their quest for continuous improvement to increase customer loyalty.
By segmenting respondents, especially by following up with open-ended questions, businesses can gain insights into why certain customers are detractors or passives. This can guide improvements in product offerings, customer service, or other areas of the customer experience. In the long run, this will help to foster brand advocates, drive growth and ultimately thrive in today’s competitive landscape.
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What Your Net Promoter Score (NPS) Reveals About Your Customers
Beyond The NPS: A Multi-Metric Approach To Understanding Customer Loyalty