Do you keep hearing about Net Promoter Score (NPS) being a great tool for improving customer satisfaction, boosting customer lifetime value, and generating more revenue?
If you’re interested in learning what NPS is about and implementing it into your business – you’re in the right place.
In this guide, we’re going to go over what NPS is, as well as discuss its advantages and challenges.
We’ll also show you how you can calculate NPS for your business, teach you how to collect NPS feedback, and go over a few NPS best practices.
What is Net Promoter Score (NPS)
Net Promoter Score (NPS) is a metric designed to help measure and evaluate customer satisfaction and loyalty. It does so by measuring the willingness of customers to recommend a company to other people.
An NPS survey asks one simple question:
On a scale of 1 to 10, how likely are you to recommend our company to a friend or colleague?
This is usually followed by an open-ended question asking users to explain the reason behind their score.
Apart from providing insight into customer satisfaction and loyalty, NPS also gives companies an idea of the quality of the customer experience they provide, their growth potential, organizational performance, and overall brand sentiment.
The creation of NPS is widely credited to Fred Reicheld, a writer and business strategist best known for his work on loyalty marketing.
After realizing the ineffectiveness of traditional customer surveys, Reicheld set out to create a simplified way of surveying customers and find a single question that would provide companies with the biggest insight into customer satisfaction and loyalty.
His research culminated in a paper published in the Harvard Business Review in 2003, where Reicheld summarized his findings and unveiled the NPS metric and its associated survey question.
The advantages of NPS
There are plenty of advantages associated with using the NPS system to measure customer loyalty and satisfaction.
Predict business growth
NPS can be an excellent predictor of business growth.
If your NPS is high, it’s clear that you have a great relationship with your customers and that they are likely to promote and help grow your brand further.
Having a lot of promoters also means an increased likelihood of repeat purchases.
The score correlates with growth, with a 7% increase in NPS translating to a 1% increase in revenue.
Reduce customer churn
NPS enables you to identify customers who have a high risk of churning. This, in turn, allows you to do what you can to make these customers happier and prevent them from switching over to a competitor.
This might involve personally reaching out to them and listening to their concerns, solving an issue they’re having, or giving them a better deal.
Save time and money
NPS is very simple and affordable to implement. Its results are easy to comprehend and share across different departments and teams.
NPS surveys are also quick to complete, which ensures that most customers won’t mind doing them.
Benchmark against your competition
NPS is a widely used system across a variety of industries, making it easy to compare your company’s scores with the industry average.
If you’re behind the industry average, you’re probably doing something wrong. Measuring your NPS forces you to look into your overall customer experience strategy and see if you can make changes that would improve your score.
Uncover areas for improvement
NPS surveys start a conversation with customers, which you can then continue to find out more about their needs and wants, as well as how your product suits them and how it could be improved.
NPS provides you with an idea of what you need to work on to make your customers happier. This is where the second, open-ended part of the NPS survey comes into play.
Surveying customers in this way will provide you with an insight into which areas of your business you need to improve to be able to generate more customers and retain existing ones.
At Teamleader we use NPS as a source for qualitative feedback about frustrations and positive experiences with our feature portfolio.Joren Devocht, UX Lead at Teamleader.eu
The challenges of NPS
As popular and useful NPS might be, it does come with a few challenges.
Critics claim that NPS has issues with answer score distribution and that it can’t accurately measure customer behavior. It’s also often used as nothing more than a vanity metric.
Can’t accurately measure customer behavior
One of the biggest criticisms of NPS is that it’s an attitudinal metric that can’t accurately measure customer behavior. For example, a customer might claim they’d recommend a company, but there’s no proof they’ll actually do it.
On the other hand, a customer might use an NPS survey to express their dissatisfaction but then not act on it due to switching barriers.
Additionally, when companies use NPS to measure customer satisfaction across different channels, departments, or transactions, the results can be misleading.
For example, just because a customer rates a customer support session with a high NPS doesn’t mean that they’re satisfied with the overall customer experience and willing to recommend a company or product.
Issues with answer score distribution and NPS calculation
There’s also the issue of the distribution of answer scores in NPS, with no distinction being made between customers with scores of 0 and 6, even though there might be substantial differences between the two.
The NPS calculation itself is criticized for being too simplistic and failing to recognize different promoter-to-detractor ratios.
For example, when calculating NPS, a company with ten promoters and no detractors has the same score as a company with twenty promoters and ten detractors.
Used as a vanity metric
Finally, NPS often ends up being used as a vanity metric. Companies will calculate their score, maybe compare it with the industry average, and then leave it alone.
NPS should be used to better understand the customer experience you provide and then devise specific strategies to improve customer satisfaction and loyalty.
How to calculate NPS
Based on their answers to the NPS question, customers are divided into three groups: promoters, passives, and detractors.
Promoters (scores 9 and 10)
Promoters are your most loyal customers. They are more likely to spend more with your company, as well as spread positive brand awareness.
Promoters are a great source of reviews, testimonials, and referrals.
Passives (scores 7 and 8)
Passives are customers who are mostly satisfied with your product or service but might easily switch to a competitor if they are given a better deal. While they won’t bad-mouth your company, they’re also not likely to promote it.
Passives can be converted into promoters, provided you put in the effort to improve your product or the overall customer experience.
Detractors (scores 0 to 6)
Detractors are unhappy customers who are frustrated with your product, service, or the way you treat them.
They are less likely to spend more with your company, and more likely to switch to a competitor, as well as warn other people against buying your products or services.
NPS = Promoters (%) – Detractors (%)
The Net Promoter Score is calculated by subtracting the percentage of your company’s detractors from the percentage of your promoters. The final result is a number between -100 and 100, with -100 meaning that all your customers are detractors, and 100 meaning that all your customers are promoters.
What is a good NPS
Now that you know how to calculate your NPS, you’re probably wondering what kind of score is considered good.
Generally, anything above zero is good since it indicates that you have more promoters than detractors. Scores above 30 are great, while anything above 70 puts you among the top-ranking customer-centric companies in the world.
Average NPS varies by industry, with department stores and brokerage companies having the highest scores.
When it comes to US companies, JetBlue and USAA score the highest on the NPS scale, having scores of 71 and 73, respectively.
Right behind them are Ritz Carlton with an NPS of 68 and Zappos with an NPS of 58.
While it can be useful to compare your NPS with other companies in your industry, the most important benchmark you should be focusing on is your own previous score.
Instead of obsessing over meeting the industry average or outscoring your competition, focus on improving your own score every year or quarter.
Relationship vs. Transactional NPS
There are two main types of NPS feedback companies can gather: relationship and transactional NPS.
Relationship NPS is used to gauge customers’ loyalty towards a brand. Relationship surveys focus on the customers’ overall experience with a company and are usually conducted on a quarterly or yearly basis.
These types of surveys use non-specific language, making sure not to focus on any particular event or transaction.
Transactional NPS, on the other hand, focuses on learning about a customer’s experience in regards to a particular transaction. Transactional surveys are usually sent immediately following an event, activity, or transaction.
Instead of asking how customers feel about a company in general, their goal is to find out how a customer would rate a company based on their most recent interaction with the business.
Transactional surveys are often sent after:
- Purchases – You can use transactional surveys to find out how customers feel about the overall shopping experience you provide. Surveying customers after a purchase can reveal issues with your website design, checkout process, or page load speed.
- Customer support sessions – Another excellent way to use transactional surveys is to send them after customer support sessions. This can help you gain a better understanding of the quality of support your reps provide and learn how this affects your customers.
- Product updates – Transactional surveys can also be sent after major product updates to gauge customers’ response. This allows you to catch any potential errors and issues quickly, as well as find out about any features you should prioritize or put on the backburner.
How to collect NPS feedback
There are two main ways to collect NPS feedback. These include website and email surveys.
Website surveys enable you to collect feedback while customers are still on your website. These surveys are usually displayed on thank you pages (e.g., after a purchase) or when users try to leave your website.
They work by asking users how likely they are to recommend the company to their friends or colleagues, and then displaying a follow-up question based on their answer.
Passives and detractors are usually asked to share the reason behind their score and explain if there’s anything the company could do to improve the customer’s experience and score.
Promoters, on the other hand, are asked to state what they like about the company and its products.
Apart from using website surveys, companies can also email their customers and invite them to complete a survey. This is usually done after a purchase or some other significant interaction with a business.
Email surveys require customers to do a bit more work (i.e., open the email, click on the survey link, and then fill out the survey on a separate page).
The advantage of email surveys is that they allow companies to give customers ample time to use their product or service and form an opinion before giving a score.
Recommended NPS tool
Usersnap is a popular choice for measuring NPS and other customer feedback. You can set up the survey within seconds, install it with a short code on your app or website, then start receiving feedback. Track the score and response rates on Usersnap’s dashboard. It’s used by companies such as Microsoft, Facebook, Canva and Teamleader.
All design aspects of your NPS survey can be customized easily, including survey questions, ratings, text fonts, logo and colors.
The location you wish to show the survey can also be targeted based on URL, time on page, user events, etc.
Once gathered, feedback can be filtered by customer email, date, rating, and label.
Usersnap integrates with more than 30 different popular software solutions, including Slack, Microsoft Teams, Zendesk and your email.
NPS case study: Teamleader getting inside customers’ minds with NPS feedback
Teamleader is a SaaS tool that helps SMEs to manage their day to day business: from sending out proposals to managing their projects and eventually getting paid. Customer centricity is at the core of their business, so they put a lot of effort in gauging customer satisfaction after each feature release.
Initially, Teamleader looked at NPS to get a feeling for the impact on customer sentiment of their newly released features. However, they quickly realized NPS was not the right metric: it often proved to be quite difficult to match the general NPS comments directly to new features. NPS is the barometer for overall customer satisfaction (on product level) and does not sway with each new feature.
“Stepping away from using NPS as a guiding light for feature success, has allowed us to look at NPS comments with a more positive attitude” said Joren Devocht, their UX Lead.
“We now measure Satisfaction directly through in-app surveys. NPS is still used as a great additional source for qualitative input about the product-wide experience in addition to anecdotal opinions on new features.”
In this mindset, they are using NPS as a trigger for customer interviews when particularly interesting feedback comes in, or if they are working on a topic related to a customer’s comment.
Teamleader enjoys the quick insights into their customer’s mind that NPS offers and wisely combines this with deeper qualitative research. These days they are looking at NPS to measure the gradual YoY improvement of their customer’s perception of their tool.
NPS Best Practices in 2020
Before we wrap up this guide, we’ll go over a few NPS best practices you should keep in mind when implementing the NPS system. These include:
Survey all customers at the same point in the customer journey
You’ll want to survey all your customers at the same point in their customer journey to improve the accuracy of your results.
This will help you avoid bias by making sure that all customers have experienced a particular feature of your product or used it for the same amount of time.
Measure your NPS continuously
There’s very little use in measuring your NPS once and then leaving it be. For best results, you should measure your NPS continuously and periodically.
This will enable you to pinpoint the exact actions that influenced changes in your score and allow you to adapt your customer experience strategy accordingly.
Act on customer feedback
Calculating your NPS score shouldn’t be the end goal of collecting customer feedback. You should analyze all the feedback you receive and then act on it.
Use feedback from your detractors to improve your product and the overall customer experience you provide.
You should also work on finding ways to turn promoters’ feedback into valuable social proof through gathering reviews and testimonials, as well as asking for referrals.
Perform segment analysis
It’s crucial that you categorize and segment all the data you collect through NPS surveys. This will allow you to understand the most common reasons why customers love or hate your product or company.
You’ll then be able to prioritize improving certain features, adding new ones, or dealing with any particular weak point in your customers’ experience.
Follow up with detractors
Try to follow up with detractors within 24 hours of receiving their score. Find out why they’re not satisfied with your company and ask how you could improve their impression.
Work on solving detractors’ issues as soon as possible so that you can turn them into passives, or even better, promoters.
Reach out to passives
While passive customers appear to be neutral towards your business, they don’t have to stay that way. Reach out to your passive customers and see if there’s anything you could do to improve their experience.
Try to get more information out of them by asking additional questions.
You might find out that they feel somewhat negatively about your business but didn’t want to reveal it in the survey. On the other hand, it might turn out that a small change or fix could be enough to turn them into promoters.
Share feedback with your entire company
One of the main advantages of NPS is that it’s easy to understand and share across different departments. Take advantage of this by sharing NPS feedback and insights with your entire company.
For example, customer feedback containing a complaint in regards to a website bug can be shared with your customer support, engineering, and marketing teams so that each particular department has an easier time dealing with the repercussions of the bug.
Pro tip: Usersnap integrates with thousands of tools through Zapier, allowing businesses to share customer feedback through all the communication channels they use.
Typeform shares customer insights with all their team members and create a customer-centric environment. When asked how to create a culture of customer centricity, their Head of Product Marketing, Bozena Pieniazek, said the following:
The key to building a culture of customer centricity is hiring the right people. You also need to put processes and best practices in place and democratize customer insights so that everyone can use these for decision making.
At Typeform, for instance, we have Slack channels to share key insights, such as NPS scores and feature requests, as well as regular companywide Voice of the Customer (VoC) presentations.Read full interview in ebook “How to turn customer feedback into product value.“
Use NPS to gather customer feedback and improve the customer experience
Net Promoter Score (NPS) is a metric used to gain a better understanding of a company’s customers, their satisfaction, and loyalty. It uses a simple question to assess customer loyalty: How likely are you to recommend our company to a friend or colleague?
There are plenty of advantages that come with using NPS. It can help companies predict business growth, reduce customer churn, save time and money, uncover areas for improvement, and compare themselves with the competition.
While average NPS varies by industry, most companies should aim at having an NPS that’s above zero, at the very least. This will mean that they have more promoters than detractors.
When collecting NPS feedback, companies should make sure to survey all customers at the same point in the customer journey, as well as put in the effort to measure their NPS continuously.
It’s also crucial to act on customer feedback, perform segment analysis, follow up with detractors and passives, as well as share feedback with the entire company.
Collect NPS feedback with Usersnap
Usersnap can help you collect NPS feedback and enable you to provide a better customer experience.