NPS® (Net Promoter Score®) is a Customer Loyalty metric developed by Fred Reicheld, Bain & Company and Satmetrix in 2003. It measures the likelihood of customers to recommend business, brand or service. It is measured by asking a single question on a scale of 0-10 and lies between -100 to +100.
One of the most popular Customer Feedback Metrics to know Customer Feedback and the customers' likelihood to be your loyal customer is using the Net Promoter Score or NPS. Let's review what is NPS, how it can be calculated and how it helps you in the growth of your business.
What is Net Promoter Score®)?
NPS® (Net Promoter Score) is a proven Customer Experience Metric that measures the Customer Loyalty towards a brand, business or experience. NPS measures Customer Experience in terms of Loyalty and likelihood to recommend the business and predicts business growth.
NPS is measured by asking a single question called the Net Promoter Score Question. The question is: 'How likely are you to recommend us to your friend or colleague?' The customers rate on a scale of 0-10 where 0 is Not at all Likely and 10 is Extremely Likely.
On the basis of the response, the customers are categorized in three different categories. These are:
- Promoters: The customers rating 9 and 10 are promoters and are most likely to recommend your products to their friends and family. They can even try their best to convince their known ones to go with your brand.
- Detractors: Those customers who give the ratings from 0 to 6 are called detractors. They may be so dissatisfied with your product that they will try to stop their known ones to opt your brand, let alone recommending your product to anybody.
- Passives: Those who give 7 or 8 come under passives. They will usually neither recommend your product nor spread any bad word of mouth about it.
Why is NPS® important?
With the growing popularity these days, Net Promoter Score has proved to be one of the most useful and effective metric to get Customer Feedback. The NPS report is very helpful in making business decisions on the basis of its results. Let's list out some benefits of NPS which adds to its importance.
Importance of Net Promoter Score
- It helps to measure customer loyalty
- It helps to know your position in the market
- It helps to know promoters and detractors
- It helps in closing the feedback loop
- It helps in strategic planning
- It helps in making better business decision
Let's review how these benefits make NPS a crucial metrics for a business.
1. NPS helps to measure Customer Loyalty
Net Promoter Score is a very useful metrics to focus on Customer Experience. It shows how much loyal your customers are thus measuring Customer Satisfaction in terms of their loyalty towards your brand.
2. NPS helps to know your Position in the Market
NPS is a proven leading indicator of business growth. If your Net Promoter Score is good, it indicates that you hold a good position in the market. Whereas, having a bad score of NPS means that you have a lot of detractors in the market. This affects your goodwill through a bad word of mouth. Read more about NPS Benchmarks.
3. NPS helps to know your Promoters and Detractors
With the help of NPS, you are able to know your detractors and promoters through the NPS survey. This enables you to have a good idea of your strengths and weaknesses because you can look into the customer experience with your detractors and promoters.
You can investigate to get a clear picture regarding why some people became your detractors and how some customers became your promoters. This helps a lot in business improvement as you can work on reducing the weaknesses and focus more on the business strengths to maintain appropriate standards.
4. NPS helps in Closing the Feedback Loop
NPS helps you to know your detractors and thus address them to know their issues which made them give such rating. You can resolve their issues by assigning tasks to the concerned teams or individuals. This will help you to close the feedback loop and also turn your detractors into your promoters.
5. NPS helps in Strategic Planning
NPS helps in making strategic plans for your business. When you get to know your promoters and detractors and what made them choose their rating, you get a good idea about your weaknesses and strengths.
This helps in making good business strategies and you get to know very well that when and how much you should focus on which business aspect. This strategic planning take you towards success.
6. NPS helps in Making Better Business Decisions
NPS is a great metrics which you can use to know the business trends. Knowing these trends can help you know the impact of your decisions on your business and the customer's opinion about your business.
This enables you to take better business decisions which are essential for the success of any business.
How to calculate NPS?
The NPS Score Calculation is a very simple calculation. All you need to do is, just sum up all the responses and then subtract the percentage of detractors from the percentage of promoters.
For instance, you received 300 responses the rating of which are as below:
- 45 respondents rated from 0 to 6 which become your detractors.
- 60 respondents rated among 7 and 8 which become your passives.
- 195 respondents rated among 9 and 10 and they become your promoters.
Now, when you calculate the percentage of all, what you get is that 15% are detractors, 20% are Passives and 65% are Promoters.
So, your NPS would be 65-15=50.
This is how you can calculate your NPS. The NPS range may vary from -100 to 100. You can also use a Free Online NPS Calculator to quickly know your Net Promoter Score.
How should you start measuring your Net Promoter Score?
For measuring your Net Promoter Score, you need to collect ratings from the customers on the Customer Experience they had. An NPS survey involves one to two questions.
The first question asks the customers to rate their experience on a scale of 0 to 10. It is the core question of an NPS Survey. Whereas, the second question is an optional question asking for some review or comment about the experience.
The second question is used only when you want to collect some feedback in the customers' own words. You should try collecting NPS Survey data on the right time. You can do it by following either of the two approaches.
1. Transactional NPS Survey
The best time to capture Customer Feedback is when the customers had recently done a transaction or had an interaction with you or your employees. This is the time when the Customer Experience is fresh in their minds.
In this approach, your customers are able to provide feedback more accurately and give appropriate ratings. These surveys are only done post a customer interaction or a transaction and hence known as Transactional NPS Surveys.
2. Relationship NPS Survey
To know the customers' loyalty towards your brand and the overall experience they are having over a period of time, you can also do periodic NPS surveys. These surveys are done on regular basis over a certain period of time like annual surveys or quarterly surveys.
These surveys helps you to maintain good customer relationships and hence are called Relationship NPS surveys.
Getting NPS instantly with Zonka Feedback
To take an NPS survey effectively and calculate accurate Net Promoter Score, you should use a good NPS Software. It helps you to collect rating of every aspect of your business from your customers and that too instantly!
Zonka Feedback is an effective survey app that helps you to measure NPS instantly by creating customized NPS surveys to measure every aspect of your business and fetching you instant NPS reports.