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Net Promoter Score- Getting Started

What is NPS

Net Promoter Score is a simple yet very effective way for businesses to measure customer satisfaction and loyalty. It is a very highly regarded measure of customer loyalty. The beauty and appeal of the Net Promoter Score (popularly known as the NPS) is that it is very simple and fits all industries and use cases. This also makes the NPS a great benchmarking metric.

The Net Promoter Score is measured on a scale of 0-10, asking the customer their likeliness to recommend the business to their friends, family, colleagues and other acquaintances.

Why NPS?

Over the time, companies have developed many different methods for measuring the attitudes and behaviors of their customers. But all these methods pointed at data that could be used to improve product and service only. And none of the method was actually practical enough to establish accountability for the customer experience.
NPS is popular amongst industries because unlike the other conventional surveys, the Net Promoter Score Survey actually drives behavior change. Also, the fact that NPS is linked with growth is proven and Net Promoter leaders on average grew at more than twice the rate of competitors.

The magic NPS Question

The NPS question is a fairly simple and straightforward question. It is – ‘How likely is it that you would recommend this company to a friend or colleague?’. Respondents are given a choice to enter an answer on a scale of 0-10, where 0 is Not Likely at all and 10 is Very Likely.

<5>So where did Net Promoter Score come from?

NPS (Net Promoter Score), also called the Ultimate Question, was developed by (and trademark of) Fred Reichheld, Bain & Company and Satmetrix Systems. NPS was introduced in 2003 and has been adopted by many companies as a measurement of customer loyalty.

NPS – A metric or a process?

Both! Yes, you can describe Net Promoter Score as both a metric and a process. Net Promoter Score is a metric that was first developed in 1993 by Fred Reichheld and later adopted in 2003 by Bain & Company and Satmetrix as a way to predict customer purchase and referral behavior. NPS is designed to measure your customer’s overall loyalty to your brand. Also, businesses have to surpass a series of steps/actions in order to calculate the ultimate net promoter score, which makes it fall into the category of a process too.
Want to view how a standard NPS Survey looks like? Click here to view the template.

NPS Question

The question

The Net Promoter Score Question is a tested and industry-wide accepted question which asks the respondents about their likeliness to recommend a brand/product/service.

The question is something on the lines of . .

How likely are you to recommend us to a friend or colleague?

The word “us” can be replaced by the brand/product/ service’s name. The answer options are arranged horizontally on a scale from 0-10. Respondents are then measured based on 3 response elements or categories based on their choice of score.

The Net Promoter Score is a standard question i.e. it’s wordings cannot be changed. However, the question can be modified based on different situations.

Modifications in the NPS question

Other than calculating the likelihood of a respondent to recommend a brand, the NPS question can be modified to calculate the tendency to recommend based on a particular transaction. This type of NPS survey is called Transactional NPS survey.

The question can now be something on the lines of . .

Based on your last transaction, how likely are you to recommend us to your friends and family?

The word transaction can be replaced by words visit, experience, etc. based on the nature of the business. And the words friends and family can also be replaced with colleagues and relatives.

The NPS follow-up question

The second part of an NPS survey is an open-ended follow-up question. This allows respondents to specify the context for their chosen score. This helps business owners in listening to valuable feedback from their customers in their own words.

The follow up question can be something like –

The NPS follow up question can also be further modified for better engagement. Some other alternatives for standard follow-up question are listed below.

  • What is the most important reason for your score?
  • Please specify the reason behind your score?
  • Why did you give that score?
  • What can we do to improve your experience?
  • How can we improve?
  • Please provide your reasoning for this rating.

Calculating NPS

Elements of NPS

Understanding the scale of a Net Promoter Score is pretty straightforward once you understand the three main concepts it conveys. The NPS is classified into three major customer groups according to the scores given by them.

Detractors

They are the customers who have rated you from 0-6. They were not entirely satisfied with their experience and would probably tarnish your brand’s reputation with negative word-of-mouth. They will criticize your brand and demean your brand’s reputation. It would be highly unlikely that they would even return as customers again.

Passives

They are the customers who have given a 7 or 8 rating in the NPS survey. They probably had a good experience with your brand but they are ‘passively satisfied.’ They may bring referrals, but may quickly switch to a competitor if needed.

Promoters

The customers who answered the question with a 9 or a 10. They are the customers who loved your product or service offering and are most likely recommend your brand to their friends and family. 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. Also, they account for more than 80 percent of referrals in most businesses.

The Net Promoter Score is then calculated by subtracting the percentage of detractors from the percentage of promoters.Theoretically, it can range from -100 to +100

Let’s take a company which wants to calculate Net Promoter Score for product A amongst its 100 customers.

Now let’s say after the responses are collected, 50 of the respondents are Promoters, 30 are passive and 20 are detractors.

Promoters = 50 %

Detractors = 20 %

So based on the Net Promoter Score formulae:

% of Promoters – % of Detractors = Net Promoter Score

50 – 20 = 30

Types of NPS Surveys

Every organization that is willing to implement the NPS survey has the opportunity to perform the survey process in one of two ways: Transactional and Relationship. Each approach/type of survey has its own pros and cons but deciding which one is best for your organization can be difficult. To ease this up for you we have elaborated the both approaches.

Relationship NPS Survey Transactional NPS Survey

Relationship NPS Survey

Relationship surveys attempt to investigate a customer’s loyalty towards a company/brand. These types of surveys are concerned with just asking the customers about their overall experience and satisfaction that they have with a company. They are typically carried out at regular intervals (monthly, quarterly, half-yearly).

Companies can begin with the NPS system with Relationship style of surveying. You can roll out your NPS survey in stages initially and keep a tab on touch points (channels of contact such as email, sms, on-premises surveys) that are majorly getting responses as compared to other touch points. Transactional surveys should then investigate those touchpoints that relationship surveys indicate as the most important to the customer experience.

For Relationship NPS surveys the Net Promoter Score question is used without any alterations, i.e.

“How likely are you to recommend (your company name) to your friends, family or colleagues?”

Transactional NPS Survey

Transactional surveys investigate the experience a customer has had in a specific transaction/interaction. This survey is designed, not to measure customer loyalty, but to measure satisfaction with a specific company segment in order to improve it.

For transactional NPS surveys, the NPS question can be altered a bit. As asking someone’s likelihood to recommend a company is not related to a customer’s satisfaction with a transaction. As a solution, many construct the NPS question as: “Based on your recent experience, how likely are you to recommend the experience to your friends, family or colleagues?”

Now this question can also be altered industry wise, for example

“Based on your recent online shopping experience with AZA store, how likely are you to recommend the experience to your friends, family or colleagues?”

We have divided the transactional NPS surveys as used in different industries and point of time in a customer journey.

Real-time
  • NPS survey sent out while your customers are still on-premises are the best type of transactional surveys.
  • E.g. Sending this instantly post customer’s billing at a retail outlet –
    Based on shopping experience, how likely are you to recommend us to your friends and family?
  • Waiting long before sending the survey will mean that customer’s memory of the shopping experience would have changed.
Drip
  • NPS surveys can be sent like a series of drip emails that are based on customer’s usage and journey with your company.
  • This approach is popular in Saas industry popularly known as NPSaaS. Integrate In-app or send through Emails.
  • To keep an ongoing pulse on customer sentiment and react in the moment, drip NPS is used.
  • E.g – Say a Saas company sends out NPS surveys to measure the effect of a newly released feature on customer loyalty.
Post Purchase/Transaction
  • The transactional NPS surveys can be sent in real-time and they can also be delayed depending upon the nature of transaction.
  • E.g. An electronic products company may want to time their NPS survey say after 1 month of purchase as customer would have used the product briefly by then.
  • To keep an ongoing pulse on customer sentiment and react in the moment, drip NPS is used.
  • Industries such as Automobile can follow suit. Survey only when the customer has a solid opinion about your product.

NPS and Other Metrics

CSAT and NPS

When it comes to measuring customer satisfaction and loyalty, NPS is not the only metric that businesses have at their disposal. There many other metrics that are very popular and does the same job quite well. There are many who confuse CSAT with NPS as they both measure customer satisfaction. Arguments have also been made around the fact that which one is better amongst CSAT and NPS.

Now lets try to decode both of them one by one.

CSAT i.e Customer Satisfaction Score exclusively measures the short-term satisfaction of a customer driven from their latest transaction / experience with a company. It is measured on a scale of 1-5. The basic advantage of CSAT is that it gives quick results as compared to NPS. For e.g- if a company is looking forward to just hear about their new product / service they can count on CSAT to bring results within 30 minutes or so after their new product / service was used.

NPS is used in both relationship and transactional basis. NPS deals with the long-term satisfaction and loyalty of a customer as well as satisfaction post transaction. So, if organizations want to measure customer loyalty based on a customer’s perception of their overall customer journey exclusively, then NPS is what they require.

CES and NPS

CES is referred to as the Customer Effort Score. Customer Effort Score is a simple way of measuring how customers feel about the effort it took for them to interact with your company’s service or support team. It calculates the effort made by a customer in doing business or making a particular transaction with a business.

To measure Customer Effort Score, you ask your customers a question along the lines of “how easy was it to deal with our company today?” or “how easy was it to get the help you wanted today? The rating scale is usually between 0-5.

You then subtract the percentage of people who said “easy” from the percentage of those who said “difficult”. Those who were in the middle are ignored for the purposes of the calculation.

Well, by now you would have known what NPS and CES serve very different roles but they also complement each other so that service leaders have a full picture into the variables that they can control.

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