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BRAND SNAPSHOT Founded: 2015 in Sydney Initial Claim to Fame: A “mattress in a box” delivered incredibly fast, often within 4 hours
If you’re like most business owners, you’re always looking for ways to improve customer loyalty and satisfaction. That’s where net promoter score (NPS) comes in.
NPS Meaning:
The Net Promoter Score (NPS) is a customer loyalty metric that was developed by management consultant Fred Reichheld in 2003 and subsequently registered trademarks in conjunction with Bain & Company and Satmetrix Systems. It’s based on the premise that every company’s customers can be divided into three groups: promoters, passives, and detractors.
Promoters are loyal enthusiasts who keep buying from a company and refer others, passives are satisfied but unenthusiastic customers who may be wooed by the competition, and detractors are unhappy customers who can damage a company’s reputation through negative word-of-mouth.
NPS has become one of the most widely used metrics for measuring customer loyalty, because it’s simple to calculate and provides insights into both loyalty and satisfaction. Companies can use NPS data to track customer experience over time, identify areas of improvement, and make strategic decisions about where to invest in order to drive growth.
Want to learn more? Keep reading!
NPS Score and Business Growth Correlation:
Bain & Company have found that there is a strong correlation between a business’s Net Promoter Score and its future growth. In their study, they looked at the NPS score of competitors in various industries and compared it to their growth rates. They found that, on average, the industry leader in NPS outperformed its competitors by two times. This relationship is strongest in some industries more than others.
This study shows that a company’s NPS score is a good predictor of its future revenue growth. Therefore, business leaders should focus on improving their NPS if they want to see their business grow. By understanding the correlations between NPS and business growth, companies can make more informed decisions about how to invest in growth initiatives.
The NPS Calculation:
To calculate net promoter score, companies survey their customers and use the NPS question, which asks:
“How likely are you to recommend [the company] to a friend or colleague”
Customers answer this NPS question by providing a rating on the net promoter score scale of 0 to 10, with 0 being extremely unlikely and 10 being extremely likely.
“Promoters”: Are customers who rate their likelihood as 9-10
“Passives”: Are those who rate their likelihood as 7-8
“Detractors”: Are those who rate their likelihood as 0-6
The Net Promoter Score is calculated by taking the percentage of respondents who answered with a score of nine or ten and subtracting the percentage of those who answered with a score of zero to six. This gives you your net promoter score, which can range from -100 to 100. A positive score indicates that more customers are promoters than detractors, and a negative score means the reverse.
Understanding your NPS score through customer feedback:
Simply asking customers how likely they are to recommend your product or service is not enough. You also need to follow up with questions to understand the context and reasons behind their score. Only then can you begin to improve your NPS.
One-to-one interviews and follow-up sessions are crucial for understanding your net promoter score. By speaking with customers directly, you can get a better sense of what needs to be improved.
You can also ask additional questions of your survey respondents, asking them to explain why they gave their net promoter score. This qualitative feedback can help shed light on the key drivers impacting the experience of your customer’s and give you a more complete picture.
This customer-centric approach will help you focus your efforts and ensure that you are always improving your NPS.
What is a good NPS score?
A “good” NPS survey score will vary from industry to industry. For example, companies in the airline industry typically have lower NPS scores than companies in the software industry because customers are more forgiving of delays and cancellations when it comes to travel.
That being said, a company’s NPS survey score should always be improving over time. If you’re not sure what an acceptable NPS survey score is for your industry, a good place to start is 50. This means that 50% of your customers are promoters and 50% are passives or detractors.
The higher the score, the better; scores above 50 are excellent, and scores above 80 are elite.
What is a bad net promoter score?
A bad net promoter score indicates that a company has more detractors than promoters. This means that customers are unhappy with the company and are likely to spread negative word-of-mouth about it. A net promoter score of -100 would mean that all customers are detractors, and a score of 0 would mean that an equal number are promoters and detractors.
In general, companies with an NPS score below 0 should be concerned, as it means there are more customers with negative sentiment than those who are positive. Companies with bad NPS scores should take action to improve satisfaction and loyalty. Otherwise, they risk losing business to their competitors.
How to collect NPS feedback:
There are a number of different ways to collect NPS feedback, but one of the most popular methods is through implementation of a net promoter score system to measure the experience of your customer’s using online surveys. To get an accurate picture of your company’s NPS, you need to receive feedback on your NPS survey from at least 100 respondents.
Do-it-yourself market research:
If you are confident in conducting your own market research, there are a number of different platforms that you can use to develop a net promoter system by creating and distributing your own net promoter survey, including SurveyMonkey and Google Forms.
Use a market research agency:
Most brands prefer to ensure their net promoter system is set up professionally and will therefore use a market research company to build, structure and administer a customer survey for survey administration and to collect responses from their target market. Utilising expert researchers, such as the team at Brand Health, will ensure your company is well placed to reap the benefits of an NPS program.
How to read and interpret your net promoter score results:
When you have collected enough responses to calculate your net promoter score, it’s time to take a look at the results. Here’s what you need to do:
1. Look at the percentage of respondents who are promoters and detractors.
A high percentage of promoters is a good sign, while a high percentage of detractors is a bad sign.
2. Compare your score to other companies in your industry.
This will give you a good idea of where you stand in terms of customer experience and loyalty.
3. Look for trends over time.
Is your NPS improving? If not, what changes do you need to make in order to improve it?
4. Use the net promoter score as a starting point for further research.
If you have a low NPS, try to find out why by talking to customers or conducting additional market research.
A net promoter score can tell you a lot about your business, but it’s just one metric. To get the full picture of your company’s performance, you need to look at other measures of satisfaction and loyalty. Most brands measure NPS, alongside a range of other important brand metrics (for example, Brand Awareness) and as part of a broader brand tracking program.
Segmenting your customer's net promoter scores:
Net promoter scores are a great way to measure customer satisfaction, but you can also use Customer Segmentation to provide even more insights. Segmenting an NPS score by behaviour, demographic, social class, or market can help you notice patterns. You can also find ways to improve certain touchpoints or experiences.
You can also use NPS scores along the customer journey to ask for feedback through the customer’s preferred channel, at the right moment, and monitor metrics over time. Tracking customer journey metrics can help you to identify areas where customers are dropping off, and make changes to improve the customer experience.
By segmenting your NPS scores, you can gain a deeper understanding of your customers and make sure that you are meeting their needs.
How can I improve my net promoter score?
There are a few key ways to improve your company’s net promoter score:
Increase customer loyalty:
- Promoters are loyal customers who keep buying from a company and refer others. To increase loyalty, focus on improving customer experience by delivering excellent service and creating satisfied customers.
Decrease customer churn:
- Churn is the percentage of customers who stop doing business with a company over a given period of time. To decrease churn, focus on retaining your existing customers and keeping them happy.
Increase customer referrals:
- Referrals are one of the best ways to acquire new customers. To increase referrals, create a referral program that incentivizes your existing customers to refer their friends and family.
NPS is a valuable metric for any business because it measures both satisfaction and loyalty. By increasing NPS, businesses can improve loyalty, decrease customer churn, and increase referrals.
In Summary:
The Net Promoter Score (NPS), is a valuable metric for measuring customer satisfaction and loyalty. Net promoter is particularly useful for identifying areas where your business can improve, as well as for benchmarking your performance against other businesses. To get the most out of net promoter score, businesses should look at the percentage of promoters and detractors, compare their score to others in their industry, and look for trends over time.
Additionally, the follow-up questions associated with the NPS survey can provide valuable insights into how you can improve your business and improve the customer experience. By understanding and utilising the NPS score, you can help ensure that your customers are happy and loyal, and that your business is on the path to growth.
Connect with an NPS Expert:
At Brand Health, we are experts in brand research and regularly advise clients on best practice in implementing an NPS system to inform business strategy. If you would like to further understand your customer’s loyalty, build customer survey’s and improve customer relationship management (CRM) please get in touch.
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