Last Update: 10 Sep 2021
U.S. First Lady Eleanor Roosevelt once said, “What other people think of me is none of my business.” And while that may be true for personal relationships, it’s definitely not true for your business. After all, if you don’t know what your customers think of you, how can you possibly serve them better?
There are a number of metrics available to help you figure out what your customers think of your products (Product Satisfaction or PSAT), the customer experience (Customer Satisfaction or CSAT), and the effort they have to expend to work with you (Customer Effort Score or CES. However, none of these metrics tell you what customers think of your overall brand. Only Net Promoter Score (NPS) does that.
NPS is said to be the best predictor of a business’s long-term growth, and by benchmarking it and tracking it over time, you’ll be able to optimize the following:
Ultimately, tracking NPS will help you build a brand that your customers love, and your loyal fan base will drive profits in the years to come.
This article will answer the following 5 questions:
NPS is a customer experience metric that evaluates the customer’s willingness to recommend a brand’s products or services to their friends and colleagues. Since NPS is a standardized metric, it follows a specific format that consists of two questions. Let’s start with the first question.
The first NPS survey question is: “How likely are you to recommend this product or company to a friend or colleague on a scale of 0-10.”
You then group customers into three distinct categories, as follows:
Once you’ve got a large enough sample size, it’s time to figure out your NPS score. To do that, you subtract the percentage of detractors from the percentage of promoters. Neutrals are removed from the equation.
NPS = % Promoters – % Detractors
Example: Let’s say you survey 1,000 customers. 100 of them (10%) rated their likelihood to recommend between 0-6 (Detractors). Another 200 (20% ) rated you 7 or 8 (Neutrals), and 700 (70%) gave you a 9 or 10 (Promoters).
That means your NPS is 70 – 10 = 60.
That’s an excellent NPS score, by the way. On the flip side, you could end up with a negative NPS score, which means your detractors exceed your promoters. That’s never a good thing.
Great! So now you know what your customers think, in aggregate, about your brand and your products. That’s all fine and good, but there’s an equally important follow-up question you must tie to every NPS survey.
You need to know why they gave you the score they did, which means asking one of the following questions based on the score they gave.
Ask Detractors and Neutrals (0-8 scores): “What could we do to improve your experience?”
As Promoters (9-10 scores): “What did you like about your experience?”
The follow-up question will give you a solid understanding of what you must improve. You’ll notice certain themes (e.g., poor customer service, confusing pricing, poor instructions), and you can prioritize improvement projects based on what you learn. Then you can make those changes and conduct future surveys around them, verifying whether the changes were well received.
Here’s the million-dollar question, and I wish I had an easy answer. The truth is, average NPS scores can vary widely based on industry. Telecom companies (which are often quasi-monopolies and don’t care much about the customer experience) tend to have much lower NPS scores than eCommerce companies (which spend a good deal of time working to improve their services).
Here’s a recent study showing how NPS varies across different sectors.
What’s interesting is that, according to the folks at Bane & Company who came up with the Net Promoter System, the benefits you receive from a high NPS score are relative to your position in your industry. Specifically, companies with the highest Net Promoter Scores within a given industry receive the most benefit, while those that lag behind their competitors receive fewer benefits—regardless of their absolute score.
Confused? Let’s put it this way. If you’ve got an NPS of 50 in the eCommerce space (where the average industry NPS is 62), you may not receive nearly as much competitive advantage as a healthcare company with an NPS of 40 (where the average industry NPS is a mere 27).
The eCommerce company has the higher absolute score, but the healthcare company is blowing the competition out of the water—and likely gobbling up market share.
NPS has shown itself, time and again, to be the best predictor for a company’s long-term growth. Plus, having a high NPS relative to your competitors results in:
Measuring NPS benchmarks your customers’ perception of your business, and tracking it over time ensures you’re moving in the right direction. As you move along, you’ll make changes, test them out, and see what drives the score higher.
Here’s something to keep in mind about NPS. A lot of companies publish their own internal NPS surveys—and these surveys aren’t to be trusted!
Why? Since NPS has become so popular, it has morphed into a marketing tool. That means some companies do what they can to influence their score, buttering up respondents before asking for feedback. That’s not good science.
If you really want to know where you stand in your industry, look for independent research performed by an objective third-party researcher. You may, in fact, score better in comparison to your competitors when you look at more objective data.
Or maybe you won’t? If your score is still low by comparison, do what you can to improve it over time. Compare your current performance to your past performance, and ensure it’s an upward trajectory.
And whatever you do, make sure your internal data is as unbiased as possible. You’ll learn much more about the customer experience that way, and you’ll set yourself up for improvement.
NPS has quite the fan club, and those who use it regularly think of it as a system for shifting a company’s culture and creating a customer-centric organization. They use NPS data to:
What’s more? You can use these surveys to follow up on issues that individual customers raise. For example, if Karen from Idaho gave you a “0” on her NPS survey because Customer Support couldn’t solve her billing problem, a supervisor can reach out to her and work to fix the problem. Remember, all data is good data. When it comes to NPS, the Karens of the world are helping you improve.
The most important thing about developing a Net Promoter System is to make sure all your managers have bought into the approach. That means, if you’re the leader, you need to do more than pay lip service to improving your NPS. You need to make it an integral part of your company culture.
In the end, if everyone gets on the same page about improving the customer experience, you can do amazing things with the information you learn from this simple, powerful metric.