Net Promoter Score: What It Is & Why You Should Measure It

Interested in using online surveys to drive business growth? Meet the Net Promoter Score (NPS).

Introduced in 2003, this simple survey question gauges overall customer satisfaction and loyalty based on their willingness to recommend a brand to others.

In this post, we’ll look at what NPS is, how it works, and why it matters to your business.

An Overview of Net Promoter Score

What is Net Promoter Score?

NPS asks a simple question: How likely are you to recommend our business to a friend or colleague? The respondent ranks their likelihood on a scale of 0 to 10—0 being highly unlikely, 10 being extremely likely.

Fred Reichheld introduced the Net Promoter Score as measure of customer loyalty while working with Bain & Company. Reichheld demonstrated a strong relationship between this simple metric and a company’s growth, compared to its competitors. After Reichheld premiered NPS in the Harvard Business Review, companies began using it both as a standalone metric and within broader customer satisfaction surveys to gauge how customers viewed their businesses. In both cases, NPS effectively boils down a customer’s overall feelings about a brand.

Why Net Promoter Score matters

While Net Promoter Score is only a snapshot of customer sentiment, its results can spark efforts to improve customer experience, boost brand loyalty, and reduce churn. It’s a simple starting point for a more complex conversation.

Bill Macaitis, CMO of Slack and former CMO of Zendesk, told SaaS Office Hours that he believes NPS is one of the most important marketing metrics:

“One metric that most SaaS marketers don’t measure frequently, but should, is Net Promoter Score. Best in class companies achieve a score of 70 on a scale of 100, but according to Zendesk data, the typical B2B software company achieves only 29. NPS is a leading indicator of future growth. The larger the number of advocates for product, the lower the customer acquisition costs for the company, and the more effective customer success team will be.” — Macaitis

Having a solid grasp on how customers view your business is extremely important. Why?

1. Unhappy buyers are quick to share their stories. In fact, 95% of customers will tell others about a bad experience. If you can spot an unhappy customer by a low NPS rating, you can proactively reach out to mend the relationship.


2. As Reichheld said, “Evangelistic customer loyalty is clearly one of the most important drivers of growth. While it doesn’t guarantee growth, in general profitable growth can’t be achieved without it.” In other words, without customers championing it, a brand won’t go far.

The bottom line: Net Promoter Score results show a business how it can improve customer experience. Every uptick in an NPS is proven to substantially impact success.

Calculating your Net Promoter Score

The NPS survey groups respondents into three categories: Promoters, Passives, and Detractors. With a quick calculation, you can produce a hard number (your Net Promoter Score). Your company can then study the results and work to improve customer sentiment.

Here’s how it works:

• Promoters respond with a 9 or 10.


• Passives respond with a 7 or 8.


• Detractors respond anywhere from 0 to 6.

To properly calculate your overall Net Promoter Score, you’ll need to subtract the percentage of Detractors from the percentage of Promoters (% Promoters – % Detractors = NPS).

If you’re using GetFeedback for your NPS survey, you’ll get an automatic summary report with a visual histogram, like the one below. And when you integrate NPS with Salesforce, you can examine customer responses against other valuable CRM data.

So, for example, say 100 people responded to your NPS survey, and these were the results:

• 5 responded with 0 to 6 (Detractors)


• 40 responded with a 7 or 8 (Passives)


• 55 responded with a 9 or 10 (Promoters)

Your calculation would look like this: 55% – 5% = 50

Your Net Promoter Score will fall anywhere from -100 to 100, with a score above 50 considered excellent. Some of the most successful companies in the world have notoriously high Net Promoter Scores. Apple, Google, and Harley-Davidson are among them, according to Reichheld’s research.

If you’re curious about the average Net Promoter Score by industry, NPS Benchmarks is a great resource. Here are some of their findings:

As you can see, different industries have very different Net Promoter Scores. Keep this in mind when you roll out an NPS survey or include the NPS question in a CSAT survey. You can use your industry average as a benchmark to meet or beat.

The pros and cons of using NPS

As with any metric, there are pros and cons to the Net Promoter Score. You should factor these in when using NPS to measure customer satisfaction and loyalty.

Pros:

• Easy to complete


• Fast, one-question format


• Predictive of future trends


• Metric for return on investment (ROI) that makes sense company-wide

Cons:

• Limited view of customer experience


• No specific insights (unless you follow up with an open-ended question or more specific CSAT questions)


• Location bias, based on where the NPS question appears

Start measuring Net Promoter Score today

Think of the Net Promoter Score as a starting point for a much larger strategy. It can deliver powerful insights about customer experience and serve as a constant benchmark for companies to beat.

If you’re ready to use NPS to evaluate your customer relationships, be sure to start with an effective survey as the foundation. Executed well, the Net Promoter Score can inspire major growth.

Author’s Note: This post was originally published in March 2016. It’s been updated for accuracy and freshness.

Source: B2C