Insights

What is NPS? Your Guide to Net Promoter Score

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Insights
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4 mins to read

Net Promoter Score (NPS) is a metric used to measure customer satisfaction and loyalty. It provides companies with a simple way to gauge how their customers feel about their brand, product or service.

NPS is calculated based on responses to a single question survey:

"On a scale of 0-10, how likely are you to recommend [company/product/service] to a friend or colleague?"

Customers respond with a score from 0-10, which divides them into three categories:

Detractors (0-6)

These are unhappy customers who can damage your brand through negative word-of-mouth.

Passives (7-8)

Passives are neutral or moderately satisfied. They may switch to a competitor if given a reason.

Promoters (9-10)

Promoters are highly satisfied, loyal customers who bring in referrals through positive word-of-mouth.

To calculate your NPS, subtract your percentage of Detractors from your percentage of Promoters. This will give you a score between -100 and +100.

The higher your score, the more customer-centric your company is perceived to be. Industry leaders often have scores above 70.

Why is NPS Important?

NPS is important because it correlates strongly with revenue growth. Studies show that companies with higher NPS tend to grow faster than their competitors.

It provides actionable data that can be used to identify areas for improvement. By analyzing detractor responses, you can pinpoint pain points in the customer journey.

NPS also rallies employees around a shared objective - improving customer satisfaction. This alignment is powerful for building a customer-focused culture.

How to Conduct an NPS Survey

Here are some tips for running an effective NPS survey:

  • Ask the NPS question - Use the standard 0-10 recommendation question to calculate your overall NPS.
  • Follow up with open-ends - Ask detractors why they gave a low score and what you could do to improve. Ask promoters what you're doing well and how you can get more referrals.
  • Send at the right time - Soon after a purchase or interaction works best. For ongoing services, monthly or quarterly is ideal.
  • Keep it short - The question and 1-2 follow ups is sufficient. More than 5 questions leads to survey fatigue.
  • Offer an incentive - Consider providing a discount code or freebie to encourage participation.
  • Track over time - Monitor your NPS regularly to spot trends and see if changes impact scores.
  • Close the loop - Share results with frontline employees and take action on feedback. Customers will notice when you make improvements based on their input!

NPS Benchmarks by Industry

Your NPS score should be evaluated in the context of your industry. Here are average scores for some top industries:

  • Software - 30-50
  • Retail - 20-40
  • Telecom - 10-20
  • Airlines - -10-10
  • Hotels - 20-40

Scores above 70 are rare and indicate a very customer-centric organization with strong referral flows. As you can see, NPS varies widely between industries based on the nature of the business.

NPS Best Practices

Here are some proven best practices for getting the most value from NPS:

  • Segment your data - Break down NPS by customer persona, product line, purchase channel etc. This identifies underperforming areas.
  • Use qualitative data - Comments from detractors are even more valuable than the score for diagnosing issues.
  • Take action - Have a system for routing feedback to relevant teams and addressing problems uncovered. Close the loop with customers when improvements are made.
  • Empower employees - Ensure frontline staff have access to NPS data relevant to their roles so they can deliver better experiences.
  • Benchmark competitors - Evaluate your NPS versus competitors to identify strengths and weaknesses. This provides direction for improvement initiatives.
  • Link NPS to incentives - Tie executive compensation and frontline bonuses to reaching NPS targets. This motivates driving improvements.

Wrapping Up

NPS is a simple, effective way to measure and improve customer satisfaction. By regularly surveying your customers and taking action on their feedback, you can boost loyalty, referrals and growth.

To get started, add the NPS question to your customer touchpoints today. Even a basic NPS program can provide tremendous value if results are acted upon. Over time, you can refine your approach for maximum impact.

Frequently Asked Questions About NPS

What is a good NPS score?

Scores above 0 are generally considered good. 70+ is excellent. However, you should compare your score to competitors in your industry.

How often should I survey customers?

For transactional businesses, surveying soon after a purchase is best. For ongoing services, monthly or quarterly surveys work well.

Where should I put the NPS question?

On your website, in post-purchase emails, in account portals, and more. The key is embedding it into natural customer touchpoints.

What incentive should I offer for participating?

A small discount code or free product often improves response rates. Just don't overdo it in a way that biases results.

How can I segment my NPS data?

By customer persona, product line, purchase channel, geography, or any other relevant cuts. This reveals underperforming areas.

What should I do with NPS feedback?

Route it to relevant teams for diagnosing issues and making improvements. Close the loop with customers when actions are taken.

How do I improve my NPS?

Analyze detractor feedback to address pain points. Empower employees with relevant NPS data to improve experiences. And keep innovating!

Is NPS the only metric I need?

No. NPS should be supplemented with other data like CSAT, revenue growth, retention rate etc. But it's an important piece of the puzzle.

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