What is Net Promoter Score?
Net Promoter Score (NPS) is a survey tool designed to gauge the loyalty of customer relationships. The Net Promoter Score asks participants “How likely are you to recommend us to friends or family?” on a scale of 0 to 10, with 0 being unlikely and 10 being very likely. From this, you can categorize them as detractors (0-6), passives (7-8), and promoters (9-10).
By calculating NPS, the idea is you will see if your business is growing or shrinking. The Net Promoter Score is easy to measure, produces a number to track, and allows you to identify brand advocates. It is convenient for customers to provide the feedback and thus tends to have a high response rate. According to Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow”, given the NPS range of -100 (all detractors) to +100 (all promoters), NPS above 0 is considered “good”, above 50 is “excellent,” and above 70 is considered “world class”. This sounds great in theory, but NPS is not perfect.
Why NPS is not perfect and how to improve
Four major problems with NPS:
- It’s subjective. Since there is no specific guidelines, you can’t say for sure what’s the difference between ratings of 6 and 7 or even between two 6s. Not even mention many participants usually pick a number without putting much thought into the process. Sometimes, people who used to reply with high scores start to give you 0’s just because they get annoyed with NPS emails and just don’t want any more.
- It doesn’t answer “why”. You would need to investigate further and analyze why certain customers provide their NPS score.
- It lacks action. Just because someone says they will tell their friends and family about your service or product, it doesn’t mean they actually will. For example, an enthusiastic customer is not necessarily a chatty person who are more likely to do so.
- It is only one metric. Since NPS is just one metric, it shouldn’t be used as a “be-all end-all” of metrics.
A common mistake people make is to use NPS as an indicator of loyalty or satisfaction. In theory, the net number of promoters should give you an idea of your loyal or satisfied customers, but it’s not accurate. A better way to gauge the loyalty and satisfaction of customers would be through customer loyalty program and CSAT (Customer Satisfaction by answering “How would you rate your overall satisfaction with the product or service you received?” on a scale of 1-5).
You can improve NPS with five strategies as follows:
- Asking for customer’s feedback through their preferred channel at the ideal time.
- Monitoring NPS in real time and how it changes over time.
- Balance persistence of getting back an NPS survey with respect of a customer’s time and the number of times asking or reminding to complete the survey.
- Tracking metrics for behavioral segments individually to have an array of metrics that provide a better view of the customer’s behavior.
- Link it to some immediate action, for instance, if a customer scores as a Promoter, offer them the opportunity to provide a reference immediately, or if a customer scores as a Detractor, follow up with them immediately.
Ways to use it
Although NPS isn’t perfect, there are some ways to improve its effectiveness after it’s collected.
- Use it for in-depth follow-ups and engagement – It’s an opportunity to learn more from your customers and to show that you’re listening. You can ask questions to figure out their reasons behind the feedback. For example, if a customer gives a rating of 10, you could provide them with specific examples of how they could promote your product or service. If they rate low, ask them what problems they had and how you could improve.
- Use it to measure changes in score over time – Customer sentiments change constantly. It’s meaningful to see how your NPS score changes over time. The best practice for tracking trends over time is to send any individual customers several NPS surveys per year depending on your business nature.
- Use it with cohort analysis – Tag the NPS results so that you can segment them into cohorts and further analyze them by these cohorts. We will talk about the ways to segment NPS in How to segment your customer data to improve NPS score. Learn the top reasons why people love or hate your product or service, you can then prioritize feature developments to address your weak areas and then watch how feedback for that segment changes over time.
NPS is a simple tool that can help you achieve many goals of your business. Like all metrics, it’s just a number and you would need to do further analysis. NPS is a start for you to dig deeper into your customer’s feelings so that you know how to improve.