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How to Calculate Net Promoter Score (NPS) the Right Way

Various industries calculate Net Promoter Score ® with a standard formula: (Number of Promoters — Number of Detractors) / (Number of Respondents) x 100. However, the definition of an ideal net promoter score differs for different sectors.  Here is a representation of average Net Promoter Score by sectors and industries.

How Different Industries Calculate Net Promoter Score

An average Net Promoter Score may differ for various industries. What is acclaimed as a good Net Promoter Score for one industry can be considered a bad Net Promoter Score for another industry. When you are trying to decide whether your NPS® is a good or a bad score, compare it to your competitors within your industry.

nps-by-industry Copyright Satmetrix

There are a lot of industries currently using the Net Promoter Score.  What can be considered as an “ideal” NPS score depends on the industry type, and the products or services provided by your company. For example, (refer to the image above) the Net Promoter Score for health insurance companies ranges from -2 to 35, with an average of around 10. On the other hand, the  Net Promoter Score for hotels, ranges from approximately -20 to 62, with a rough average between  30-32.

The average Net Promoter Score for different industries can be diverse.  Thus, qualifying NPS scores for individual organizations as good or bad would depend on the different industries themselves based on the ongoing industry trend.

So, even though an NPS as close as 100 is considered best, you may want to only concentrate on making your NPS the highest in your industry. Also, one of the best ways to judge your NPS is on the basis of your previous score. You must try to improve your Net Promoter Score as compared to your previous one. This continuous competition with your own self to improve your score will ensure that you’re on the right track in terms of providing outstanding services to your customers.

Classification: Promoters, Passives, and Detractors

Understanding the scale of a Net Promoter Score is pretty straightforward once you understand the three main concepts it conveys.

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Detractors

Customers who give you scores between zero to six are known as “detractors.” They are unhappy customers who can damage your brand and impede growth through negative online and word-of-mouth reviews. These could be customers who were not entirely satisfied with their experience and could probably tarnish your brand’s reputation with negative word-of-mouth. They are more likely to criticize your brand and tarnish your brand’s reputation. Left unaddressed, it would be highly unlikely that they would even return as customers again.

Passives

Customers who give you a seven or eight score out of ten, in the Net Promoter Survey are known as “passives” and are satisfied but unenthusiastic customers. These customers are likely to look at alternative choices. They may have had a moderate experience with your brand but they are ‘passively satisfied.’ They may bring referrals, but may quickly switch to a competitor if needed.

Promoters

Customers who give you a score of nine or ten out of ten are known as “promoters”. They are loyal enthusiasts who will be repeat customers and will refer others, fuelling growth. They are your most loyal customers and would look forward to repeating business with you. They are far more likely than others to remain customers and to increase their purchases over time. Promoters also account for more than 80 percent of referrals in most businesses.

The Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters. Theoretically, it can range from -100 to +100. Practically, it is most likely to hover around 15 for most businesses in a competitive space. An NPS above 40, in fact, is considered exceedingly rare and is regarded as the benchmark for top players of any industry. The NPS feedback system is a critical application in most businesses, restaurants, and hotels.

Customer Segments

The dashboard in Zonka’s feedback management system will automatically calculate your NPS score from the collective scores that you receive from your customers. But is this score trustworthy? Can you lay out your future follow-up procedures and strategies based on it? Obviously not! It’s a no-brainer to segment customers based on their NPS ratings (promoters, passives, detractors.) But the true results can only be uncovered from additional customer segmentation by metrics that are important to your business. For example, if you have formulated pricing plans for your product/services, segment your users based on those plans. You will notice discrepancies in the overall NPS score and sentiment, based on the distinct customer segments. This valuable insight will thus help you to strategize further.

Different industries can set their own custom customer segments. However, the bottom line is that you should group homogeneous customers together in one segment so that similar follow-up plans can be formulated for customers within one customer segment.

Non-Customers, Prospect, Freemium and Paying Customers

An on-premises business like a restaurant may segment their customers by asking a simple question in the survey, “How often do you dine at our restaurant?”

In this case, a person who selects the option “This is my first time” could be a non-customer for the restaurant and the person that selects the option “Once in several months” could be a prospective customer whereas people who  select “I’m a regular” and “Once in several weeks” could be considered as regular customers of the restaurant. This simple question now allows the restaurant to filter and segment their customers. You can now send NPS surveys separately to these groups and then strategize follow-ups accordingly.

A SaaS-based company can segment various people taking their surveys by capturing relevant customer information, such as the type of customer. For example –

Non-customer: A non-customer for a SaaS company can be a person who has enquired about their product and filled his contact details in the website contact form but hasn’t taken action since then.

Prospective customer: Someone who has recently registered for a free trial/demo with the company can be considered as a prospect for them.

Freemium customer: A freemium customer could be the one who is currently using the free version / free trial of the product.

Paying customer: A person who is paying for using the software.

Once you’ve segmented customers, you can create a custom report on customer feedback as per the customer type based on their NPS scores and then decide which particular segment or which section of a segment to focus on.

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Focus shift: Detractors vs. Promoters vs. Passives

You should begin the process of following up as soon as you receive the results of your NPS surveys. Different organizations use different strategies for following up but with the same aim – elevating customer satisfaction amongst their customer base.

After you get the percentage of net promoters, detractors, and passives according to customer segmentation, which customer segment (passive, promoter, detractor) to convert into another segment is something that is up for debate.

Some businesses believe that it is easier to convert a passive customer to a promoter. The reasoning is that passives are on the fence and might be more easily swayed. While others believe that it is easier to convert a detractor to a promoter. They are more vocal in expressing their dissatisfaction so it is easier to identify opportunities for improvement. You get one more chance to impress them in a concrete way.  On the other hand, in the case of a passive customer, it’s harder to identify how to make them into a promoter, and you are more likely to not hear from them again. Another benefit of addressing your detractors is that these customers can often be so surprised about the swift response and the action taken that they may respond positively and tell others.

Ultimately,  following up and converting a specific customer segment into promoters depends on your business strategy. However,  there are some tips everyone can generally follow.

  • Find the common denominators among your passives( rating 7 or 8) and begin to work towards resolving their pain points. Follow up with them and improve your own procedures/policies if the need arises, and try to turn these passives into promoters.
  • As for your detractors, focus on your “high” detractors (e.g. rating 4-6) because they have more potential to be a part of the next best group i.e passives and work on turning them into the passive group at least. You can use  Zonka’s collaborative response inbox, a response management system which allows you to solve customer queries and follow up by creating and completing tasks with assigned due dates. The insights from the response inbox can help you find out loopholes in your processes and then finally fill the gaps, elevate the level of your customer care, and address whatever issues obstruct a good customer experience.
  • Never forget your promoters – your free source of advertising. Understand why they love your business and why they actually are your true fans and ensure you provide them a continuous good experience in future as well.

Check out Zonka’s NPS survey templates to create a killer NPS survey for your organization.

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