NET PROMOTER SCORE(NPS)

Understanding Net Promoter Score (NPS)

Net Promoter Score (NPS) is a powerful metric that measures customer loyalty, satisfaction, and enthusiasm. By asking customers to rate their likelihood of recommending a product or company on a scale from 0 to 10, businesses can gain valuable insights to improve their services and earn more loyal customers.

The NPS system is essential for companies of all sizes as it provides a clear goal of increasing the score by acquiring more enthusiastic customers. This metric can be easily tracked over time, allowing businesses to monitor their progress and make necessary adjustments.

The Importance of NPS

NPS is a widely recognized metric used by businesses to assess customer satisfaction and predict business growth. A high NPS score, above the industry average, indicates a healthy relationship between a company and its customers. These satisfied customers become brand evangelists, driving positive word-of-mouth and fueling a cycle of growth.

Although NPS is a strategic metric, the score alone is not sufficient to provide a complete picture. The overall NPS system enables businesses to:

1. Gain a deeper understanding of customer sentiment by incorporating follow-up questions in the NPS survey. By analyzing customers' reasons for their scores, companies can identify areas of improvement and understand their strengths.
   
2. Track and quantify NPS scores over time to establish internal benchmarks and identify trends.
   
3. Foster a company-wide focus on earning more enthusiastic customers. By prioritizing this objective, businesses can enhance customer satisfaction and loyalty across the board.

Calculating NPS

NPS is calculated by subtracting the percentage of customers who rate their likelihood to recommend with 6 or lower (known as 'detractors') from the percentage of customers who rate with 9 or 10 (known as 'promoters').

Net Promoter Score scale:

• Detractors: 0-6
  
• Promoters: 9-10
  
• Passives: 7-8

Interpreting NPS

The Net Promoter Score (NPS) is a numerical indicator of customers' likelihood to recommend a company's products or services. The score ranges from -100 to 100. A negative score implies that there are more detractors than promoters, while a positive score indicates the opposite.

NPS scores vary across industries. According to a study by the Temkin Group in 2018, NPS values in the US ranged from 0 (for internet and TV service providers) to 39 (for auto dealerships).

Understanding a Good NPS Score

With an NPS range of -100 to +100, any score above 0 is considered good as it indicates more promoters than detractors. Achieving a high NPS is not limited to large global companies. In 2018, Netflix had an NPS of 64, PayPal scored 63, Amazon 54, Google 53, and Apple 49. However, a perfect score of 100 has yet to be achieved, meaning every respondent would recommend the company to others.

Identifying a Bad NPS

A low NPS score is a serious concern. A business must have more promoters than detractors to maintain a positive score. A score below 0 suggests that a business has a higher number of detractors. Comparing NPS to industry benchmarks can provide insights into a company's standing relative to its peers. Even if the industry average is low, a negative NPS score reflects the need for the company to improve customer satisfaction and generate more promoters.

Conducting NPS Surveys and Collecting Feedback

To calculate and track NPS for your business, you can conduct an NPS survey to collect customer feedback. You can choose to solicit feedback immediately or after customers have interacted with your company.