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What is the Net Promoter Score?
Keeping track of customer satisfaction and loyalty is vital for every business and, essentially that’s what the Net Promoter Score (NPS) does. It provides you with a single metric to show how well you’re doing.
It measures the willingness of customers to recommend you to others, and is based on just one question, ‘How likely is it that you would recommend our company/product/service to your friends/colleagues?’.
How does the Net Promoter Score work?
To calculate your Net Promoter Score, you need to take away the percentage of detractors (those giving you a score from 0 – 6) from the percentage of promoters (those giving you a score of 9 or 10). For instance, if 70% of respondents were promoters and 30% were detractors, your NPS score would be 40 (70%-30%=40).
The NPS score ranges from -100 to +100, so a ‘good’ score needs to be above 0. An ‘excellent’ score would be above +50 and a company would be considered ‘world-class’ if it were to achieve a score of +70 or over.
Here are some examples of NPS scores of organisations you might be familiar with:
Using Net Promoter Scores as a measure of customer satisfaction is a great way of getting employees to focus on customers, and this in itself can have a direct impact on the success of your business. Ideally, however, Net Promoter Scores should be part of a broader strategy because, like anything, it has both strengths and weaknesses.
Strengths of the Net Promoter Score
- NPS is simple, quick and easy to work out, and within seconds you get a measure of where your company stands.
- Benchmarking – since so may organisations use NPS scores and it’s a standardised measure, you can use these scores to compare your company with others.
- NPS is not only good to benchmark against other companies, or industry averages, but is also a good measure for a company to compare its own performance, whether it is year on year, or after specific campaigns.
- NPS provides a simple, single metric that’s easy to understand and measure and just getting managers together to talk about changes in the score helps to focus attention on customer-centricity.
Limitations of the Net Promoter Score
- It focuses on one factor effectively concentrating on the tip of the iceberg and it fails to show what’s causing the result. Arguably NPS needs following up to get deeper into what’s needed to make improvements. To do this, think about linking NPS to Kano or Key Driver Analysis.
- Recommendation isn’t the only question to ask customers, they might recommend you to someone else but would they buy from you again and how do they feel about your brand and all that is stands for? Using NPS alongside other measures (such as for loyalty) gives a bigger picture.
- There’s an argument that social/digital media and the culture of “liking” or “sharing” something has caused a fundamental shift in attitudes so the value of NPS as a single metric might not be what it was. The jury’s out but it’s still a great start.
- Response rates to all research have been falling at an alarming rate which means the representativeness of samples is increasingly challenged. Typically, only the very unhappy or the very happy tend to respond (often it’s more of the former than the latter) so you might get overly negative scores.
If you’d like to chat about the way you collect NPS data or how you can add value to what you’re doing already please give us a call – customer service is something we’re extremely passionate about.