This simple question has brought a paradigm shift in the business world, with many successful companies using this one metric to predict their customer experience. Conceptualized by Fred Reichheld and coined as Net Promoter Score, NPS has now become the best predictor for Company Growth. This is owing to the fact that NPS directly relates to customer loyalty which in turn translates to Revenue and thereby Growth.
It goes without a say that Customer Relationship is the key to the success of any business. Net Promoter Score typically helps you to gauge the extent of customer loyalty towards your company or brand. Ask us, how? In an ideal scenario, the percentage of returning customers would give you a clear picture of their loyalty towards your brand or company. To go one step further, wouldn’t you want to know if they will refer you to someone else? Well, that’s precisely what you can decipher from your Net Promoter Score.
Before knowing how to calculate NPS, it’s necessary to acquaint with the pivotal components related to it.
You can classify your customers into three distinct groups that determine your Net Promoter Score, namely Promoters, Passives, Detractors.
|Player||Loyalty||Rating Given by the Player|
|Promoters||Enthusiasts that simply love your product||9 & 10|
|Passives||Happy but can be allured by competition||7 & 8|
|Detractors||Not satisfied customers||0 to 6|
The Net Promoter Score calculation is pretty simple. NPS can be calculated by simply subtracting the Percentage of Detractors from the Percentage of Promoters. You might ask, then what about the Passives? Well, they are included in the total participants from which the promoter and detractor percentages are calculated. To summarize,
Total Participants = Promoters + Passives + Detractors
Promoter % = Promoters/Total Participants
Detractor % = Detractors/Total Participants
Net Promoter Score (NPS) = Promoter % - Detractor %
Note: Just like you calculate Net Promoter Score for your customers, you can deduce NPS for your employees as well. In this case, it is called Employee Net Promoter Score (eNPS). The NPS formula remains the same, and you simply have to replace customer numbers with your employee numbers.
The popularity of Net Promoter Score or NPS is justified due to its straightforward approach. And companies/brands use the ‘likelihood to recommend’ idea, as the key metric to predict their growth in revenue.
A good NPS score is an indicative of happy customers and that you are doing a great job. On the other hand, a weak NPS score means that your business is on dangerous grounds.
NPS divides your customer base into three, and this segmentation benefits you tremendously.
Promoters are the happy bunch who will boost your brand value. They are fiercely loyal customers who defend your brand. They are ready to forgive the lapses at your end. And most importantly, they recruit. Yes, they recruit their friends, family, and everyone they know, who is in need of a product/service you offer. One promoter can bring you several potential customers.
Passives are the people who find your product exceptionally ordinary and are content. They may not speak ill of your brand, but if they come across something better, they’ll merrily flock in that direction. Having a Passive customer pool suggests it’s time to put in harder and stronger efforts to make your customers happy.
Detractors are the grumpy customers you have failed miserably. They can effortlessly send your brand tumbling down from any high pedestal. If you can’t bring down the detractors, you are in serious trouble.
If you care about the NPS of your organization, it means you care about your customers as well. You realize there’s no better way to build your brand than with the help of your customers.
You keep them happy,and you’ll be happier!
So it’s comes as no surprise that big names like Apple, Philips, Amazon, Virgin Media, and umpteen other companies have taken up Net Promoter Score as an essential aspect in their Customer Experience Management System.
Based on the global NPS standards, the Net Promoter Score varies from a range of -100 to 100. A positive or a score above 0 is lauded as a good score. A score of 50 is fantastic while NPS score above 70 is top-notch. A positive score means your customers have given an enthusiastic thumbs-up. The NPS toppers list included Apple and Amazon with impressive scores of 70 and 69 respectively.
The picture on the left side of the scale isn’t pretty. A negative score means you have a mob of displeased customers who won’t think twice to give you a rating less than 6. A zero even! This is a bad sign.