Net Promoter Score or NPS is the most popular metric which organizations are using to capture Customer Feedback in terms of Customer Loyalty. It enables you to measure the willingness of your customers to recommend your products and services to others by asking them to rate the Customer Experience on a scale of 0 to 10.
Customers rating 9 and 10 are promoters, 7 and 8 are passives, whereas those giving 6 or below are detractors.
Are you wondering if there is any good NPS or bad NPS? If yes, then what is a good Net Promoter Score to have or basically what score can be considered as a good NPS or a bad NPS?
Well, NPS may range from -100 to 100. It is derived basically by subtracting the percentage of detractors from that of promoters. Let's review what a negative NPS and a positive NPS implies and how you should consider them while analyzing your performance.
As you know that NPS score is calculated by subtracting percentage of detractors from that of promoters, a negative NPS clearly means that you have more detractors than promoters.
It can definitely not be considered a good NPS as you are having more unhappy customers that will stop others to opt for your brand than the happy customers referring your brand to their friends and family.
As the NPS decreases more towards -100, more your organization's goodwill is in trouble due to the bad word of mouth in the market. This means you need to work upon certain aspects of your business to get things fixed and convert your detractors into promoters.
A positive NPS indicates that the number of promoters are more than that of detractors. It is indeed good that you are having more happy customers recommending your products and services than those spreading a bad word of mouth. But you need to keep working for improving your business.
Dissatisfied customers often speak louder than the satisfied customers.
So, you should pay heed to the feedback of each unsatisfied customer to look into their negative experience and thus improve it before it reaches the market in the form of negative reviews.
If you really want to know whether your positive NPS is good enough for the success of your business, you should consider other factors like the industry standards, the average market NPS and you previous NPS.
Average NPS of the industry
Generally, it is considered that an NPS of 50 or above is an excellent NPS score and if it reaches 70, you are doing a world-class business as per the global NPS standards. However, the average NPS varies in different industries.
For this, you need to consider the average NPS of your industry. You cannot enjoy having an NPS of 20 where most of your competitors are having an NPS around 40, can you? So you need to do a fair comparison with the organizations of your particular industry only and then reach a conclusion.
Setting your NPS Benchmark
When it comes to setting your benchmarks for your NPS, you should not only consider the average NPS of the industry you are working in; but also compare it with your previous NPS. You must track your NPS over a considerable period of time like monthly, quarterly or annually.
This gives you a track record of your NPS that enables you to analyze your growth and improvement of your business. A constant improvement in your NPS indicates that you are climbing the ladder of success. Whereas, if your NPS is falling, you must find what's going wrong in your business and thus work for improvement.
Analyzing your NPS - Relative Method and Absolute Method
In order to analyse your NPS, you can use two different types of methods viz., Relative Method and Absolute Method.
The Absolute Method
The absolute methods considers any NPS score above 0 to be good, as it means that you have a more number of customers promoting your brand than the ones doing a bad publicity. The absolute method considers a score 0 to be positive or neutral but in reality, if the NPS is 0, it means you are not able to provide a satisfying experience to your customers. Let's review what absolute methods says about your NPS score:
- Score from -100 to 0 means that there are more unhappy customers in the market suggesting other people to avoid your products and services. This is a tough situation.
- Score from 1 to 30 is an acceptable NPS score range as you have a little more promoters than your detractors. However, there is a big scope of improvement your should look into.
- Score from 31 to 50 is considered good and implies that you have a good number of satisfied customers promoting your products and services in the market.
- Score from 50-70 is considered an excellent range and is attained only when you are providing a brilliant customer experience.
- Score from 71-100 is a rarely attainable NPS score and if you achieve it, it means you are one of the best in the industry.
The Relative Method
The second way to know if your company is working good or not in terms of NPS is the relative method where you compare your NPS score relative to the industry standards. It enables you to know the market position or your organization.
While setting up your NPS Benchmarks and comparing your NPS with others, you must keep in mind that the average NPS varies from industry to industry. Therefore, it is necessary to have a fair comparison to know your actual market position and thus make good business decisions.
Taking Action and Closing the Loop
Taking necessary action and closing the feedback loop is the most important aspect and one of the basic reasons to find NPS. Closing the Feedback loop means to follow up with the customers addressing their concerns.
The process involves acknowledging the Customer Feedback, looking into the problems, providing solutions and informing the customer about your work done on their problem. This conveys that you value the relationship and their satisfaction matters.
Many of the detractors are in such a state where a little concern and improved experience can work wonders and take them into the category of promoters. You need to identify such areas and work on them to improve your NPS and thus take your business towards success.