Net Promoter Score to measure customer loyalty

Net Promoter Score

Net Promoter Score- a simple metric which helps you measure customer loyalty towards your company or brand. Learn more about Net Promoter Score!

What is Net Promoter Score

‘How likely are you to recommend us to a friend?’

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 Net Promoter Score 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.

How do you Calculate Net Promoter Score

Before knowing how to calculate Net Promoter Score, 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.

Net Promoter Score measures brand loyalty

Net Promoter Score Formula

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,

Net Promoter Score formula calculation

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 Net Promoter Score formula remains the same, and you simply have to replace customer numbers with your employee numbers.

How Important is Net Promoter Score for a Business

NPS to identify Promoters, Detractors & Passives

The popularity of Net Promoter Score or NPS® is justified by its straightforward approach. And companies/brands use the ‘likelihood to recommend’ idea, as the key metric to predict their growth in revenue.

A good Net Promoter Score is an indicative of happy customers and that you are doing a great job. On the other hand, a weak NPS means that your business is on dangerous grounds.

Net Promoter Score 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.

Who Should Care About Net Promoter Score

If you care about the Net Promoter Score 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 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.

What is the Net Promoter Score Benchmark for a Business

Benchmark for Good Net Promoter Score

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 above 70 is top-notch. A positive NPS 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 NPS 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.

How do you Build a System to Track your Net Promoter Score Continuously

Net Promoter Score asks your customers the likelihood of recommending the brand to a friend or family. It typically has one or more questions. This is done keeping in mind to reduce the burden on the customer. The simple and straightforward attempt doesn’t require much time or efforts. Hence, it works like a charm and the survey can give you impressive completion rates.

Sending out a customer pulse survey, or a routine survey, maybe weekly or monthly can fetch you impressive results.

Always make the responding channel easy-to-use. If a customer who’s traveling in a car can give a quick rating via mobile, you are providing them a whole new level of flexibility, and they would return the favor.

Constant checks on the customer vibe can bring things on track and enable a smooth customer experience management.

How to Analyze your Net Promoter Score

Gathering the views of your customers and calculating NPS is not sufficient. Based on the score, taking the appropriate measures is the main aim behind NPS. Without an action, Net Promoter Score remains just a number.

NPS involves more than one straightforward question which can be easily answered by your customer. While the first one is a direct question to rate the product/service on a scale of 0-10, the subsequent one can be a follow-up as to why the score was given. This is a question which is usually descriptive in nature. Text Analysis can be performed to gather the recurrently occuring answers and based on this, you can conclude what your customers like/dislike about your brand!

How to take Action on Net Promoter Insight and Improve the Business

Fred Reichheld, the creator of the Net Promoter System, says,

It’s not the score that matters, it’s what you do with it to make Promoters that really count.

Always ensure quick follow-ups. You spot a detractor who has given you a miserable score of 2 on 10, set your support staff to follow up immediately and find out what was amiss. Probe more data, resolve the issue, and you may find yourself another promoter if you resolve their issues efficiently.

This particular activity is referred as ‘Closing the loop’ in the Net Promoter Score System.

So close the loop, and seal the deal in your favor!

Net Promoter Score gives you simple goals- More promoters, no detractors.

Implementing an NPS system for your company

Are you awed by the Net Promoter Score concepts and want to implement NPS for your organization? Well, get started by signing up with SurveySparrow NPS Software, and we will help you set it up in a jiffy! Not sure yet? Then drop us an email, and our experts will get in touch with you and guide you through every step. Meanwhile, have a look at the NPS Calculator we have created for you!

Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.

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