Guide to Net Promoter Score (NPS)
Our email NPS survey makes getting feedback a snap.
Net Promoter Score (or NPS) has become quite a buzzword in business in the last few years and, like many buzzwords, this one is a little confusing for folks.
If you have time, we recommend reading The Ultimate Question (and The Ultimate Question 2.0) written by Fred Reichheld.
If you don’t have time (and who does?) then this guide is for you. Its goal is to describe all the basics you need to get started using Net Promoter Score® like a pro.
What is NPS?
NPS® data is gathered by getting responses to a single question:
What is the likelihood that you would recommend Company X to a friend or colleague?
Answers are arranged on a 11-point continuum from “Very Likely” all the way through “Not at all likely.”
Those people who answer on the “Not likely” end of the spectrum from 0 to 6 are marked as “Detractors.” Those whose answers fall in the 7 or 8 spots are called “Passives,” and those who answer on the “Very Likely” end (9 or 10) are called “Promoters.”
To get from these numbers to the actual NPS® score you simply take your total percentage of Promoters and subtract the percentage of Detractors. You can leave it as a percentage (43%) or change it to a whole number (43), depending on what seems to make the most sense for you.
To gather data about how likely customers are to recommend you, you need to administer a single question survey with the above question. (Grab our handy NPS® template if you don’t already have it!) SurveyGizmo will calculate and track your score, so you can focus on making it climb.
USE OUR Net Promotor Score (NPS) TEMPLATE
History of Net Promoter Score
Fred Reichheld, a Harvard Business School graduate, invented and began using the Net Promoter Score® in 2003 as part of his work with the Bain & Company consulting firm. In 2006 he published his book, The Ultimate Question, with Rob Marke. Since then Reichhold has published an updated version of his book, titled The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World. Bain & Company have heavily advocated and promoted their system, helping lead to widespread adoption across industries of all kinds. They characterize the approach like this:
A Net Promoter® system is a way of doing business that requires a true commitment by company leadership. It combines a reliable metric, loyalty economics and root cause analysis to form a virtuous cycle of closed-loop learning and action.
The consulting firm investigated many different question types and formats to try and come up with one that had strong statistical correlation to higher profits and overall business success. The NPS® question was the winner.In mature, competitive industries, high NPS® scores “correlated strongly with repurchases, referrals and other actions that contribute to a company’s growth. In 11 of the 14 industry case studies that the team compiled, no other question was as powerful in predicting behavior.”
Are You Free to Use NPS?
The short answer here is yes, anyone can use the Net Promoter System® and the “Would you recommend…” question.
Net Promoter®, Net Promoter Score® and NPS® are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld, so be sure to cite them properly when using them in internal or external documentation (with the ® symbol).
Fred Reichheld has stated that he’s glad the system is free and available to the public at large, because it’s helped the system grow and adapt to cover almost any imaginable company.
In an interview with Hubspot he declared, “One of the most important decisions I made in creating NPS was to make it an open-source movement. As a result, there has been an explosion of creativity from the NPS user community around how the metric and system can be applied.”
Why Track Customer Satisfaction and Loyalty?
Using good software certainly makes this process easier, but it’s still one more thing to worry about in a business environment that’s often already crowded with customer input via social networks, phone calls, emails, and more.
Nevertheless, running an NPS® survey constantly is well worth it.
In 2015, customers expect you to go beyond just taking their money and giving them a product or service. They demand attention, responsiveness, and the feeling of being connected to the companies they frequent.
By measuring their levels of satisfaction and loyalty, you can determine how well you’re doing in these vital areas of growth and retention.
Data like NPS® scores give you good insight into aggregate data about customer sentiment, but it’s still important to work hard within your organization to think of your customers as individuals. Each person deserves one-on-one consideration, or at least as close to it as you can get.
Word of Mouth and Referrals: Still Important
NPS® scores give you a handy number that you can track week over week, but you can’t focus exclusively on this particular feedback loop.
Remember, word of mouth marketing (the original social network) still holds sway over the vast majority of your customers. According to Nielsen, 92% of consumers believe recommendations from friends and family over all forms of advertising.
Even if your NPS score is through the roof, you’ve got to be able to leverage the power of organic conversations that your customers should be having about your product.
By continuously creating extraordinary experiences, you’ll produce a steady stream of people that are genuinely excited to talk about your company because they think their friends will like it to.
That’s still the most impactful way to market, even if it doesn’t have a handy number attached to it.
NPS and Word Of Mouth Marketing
When it first came onto the scene, NPS® made a huge impact because it seemed that someone had finally found a way to quantify word of mouth marketing. By asking how likely a customer would be to recommend them, companies could get a direct line into how well they were doing in the nebulous world of customer conversations.
With such high value placed on recommendations from friends and family, it’s easy to see how valuable these data points could be to all sorts of companies.
Even as social media began its meteoric rise to ubiquity, casual chats among friends offline still offered marketers an unparalleled path to brand dominance.
The goal of the Net Promoter System® has always been to give companies insight into this slippery metric, and that’s been a source of both its popularity and many of its criticisms.
Will those who are ranked as Passives on the NPS® scale damn a brand with faint praise? Are Detractors more impactful now that there are so many avenues where they can air their grievances online? Will Promoters really actively evangelize a product or brand?
These kinds of questions epitomize the challenges of establishing a correlation between NPS® and good word of mouth marketing, as many critics of NPS® point out.
Proof That NPS Works
Thousands of companies have adopted the Net Promoter System® for tracking customer sentiment in the years since The Ultimate Question was first published, largely because the simple question, “What is the likelihood that you would recommend Company X to a friend or colleague?” has proven so effective.
The Ultimate Question 2.0 outlines many of the most successful case studies of NPS-driven companies, with many top NPS® companies growing at twice the rate of their competition. Of course, it’s not enough simply to collect responses to your NPS® survey and log them away. You need a system in place that will allow your entire organization to view and act on these results (more on that later).
Importance of Net Promoter Score Benchmarks
One of the most important things to consider when getting started with NPS® is how your scores compare with others in your industry. Some industries trend very high, while others tend to get lower scores regardless of steps taken by an individual company.
CustomerGauge has recently released a free database of Net Promoter Scores® broken down by industry and, in some cases, by company as well. You can find it at NPSBenchMarks.com.
The huge swings in scores that you’ll see there can give you an idea of why it’s nearly impossible to answer the question, “What is a good NPS score?” What you’re really striving for is an NPS® score that improves over time, as well as one that makes you competitive in your industry.
After all, your concern is customers who are likely to defect to competitors, not those who feel more positively about a product that’s totally unrelated to your own.
Calculating Your Score Over Time
Software like SurveyGizmo will help you track changes in your Net Promoter Score® over time, which is the only way to get an accurate measure of whether your company’s changes are having an effect.
To get truly actionable data from an NPS® survey, you should be administering it throughout the year and as close to the buying process as possible.
Companies who only send out NPS® surveys once a year, once a quarter, or even once a month risk missing out on opportunities to wow their customers or address concerns in a timely manner.
Here at Widgix, we randomly select people to receive our NPS® survey on a daily basis, and we track our score constantly. This real-time connection to our customers drives much of our decision making, and it gives us confidence in taking action on any fluctuations that we see.
If we only surveyed customers twice a year, it would be harder to justify making major changes based on the data.
Advantages of NPS
So many companies have adopted the Net Promoter System® because it allows them to break free of more inaccurate customer satisfaction surveys and instead create systematic approach to customer loyalty.
NetPromoterSystem.com puts it like this: “companies can use NPS® to measure customer relationships as rigorously as they now measure profits. What’s more, NPS® finally enables CEOs to hold employees accountable for treating customers right. It clarifies the link between the quality of a company’s customer relationships and its growth prospects.”
Essentially, Net Promoter® lets companies create a standard metric by which their customers’ sentiments can be accurately measured.
It also allows those companies to hold their employees directly accountable for customer happiness, because they can tie that satisfaction level back to profitability and growth with a high level of confidence.
Problems with NPS
In the nine years since The Ultimate Question was first published, NPS® has been adopted as the gold standard of customer feedback for thousands of companies. But it’s not without its opponents.
Here are some issues with the Net Promoter Score that are often cited by its detractors:
- Doesn’t answer “Why?” If your NPS® Score goes from 30 to 36 over the course of a quarter, it may give you an overly rosy picture of your customers’ real attitudes if you don’t know why they have changed their responses.
- High NPS doesn’t equal high loyalty. In this book The Loyalty Effect, Reichheld himself points out that 60 to 80 percent of customers who defected or didn't repurchase a product were in fact satisfied or very satisfied. This means you can’t rely on NPS scores to 100% match your customer loyalty levels.
- It ignores the middle of the pack. There are people on the fringe of being Promoters, as well as folks who are almost Detractors, but they get tossed out of the NPS® equation. Knowing why they are in the middle could help push them closer to Promoter territory.
- Not relevant to all industries. While nearly any B2C company could easily use the NPS question with confidence, its applicability can break down quickly in a B2B sector where an individual’s referral may carry little weight.
- Original research may be flawed. A group of researchers headed by Timothy Keiningham tried to replicate Reichheld’s results in 2007, but found no strong correlation between high NPS score and business growth.
How to act on NPS Feedback
As we mentioned above, you need a full system in place to support your NPS® survey to be truly successful at creating customer evangelists.
That means that Net Promoter Scores® need to be constant topic of conversation within and among customer service, marketing, business operations, and any other team that might come in contact with customers.
Fluctuations in your scores need to be carefully examined so that you can identify and address their root causes.
Here at Widgix, drops in our NPS® survey results can often be traced back to small hiccups in software performance, or they may help us identify growing segments of our customer base that want to see certain updates or changes to our software.
Your team might need to monitor them for similar trends, or you may use the data for a completely different purpose.
The main thing to keep in mind is this is not a “set it and forget it” survey.
Someone, preferably many people, should have their finger on the NPS® pulse constantly and be prepared to act on both individual responses and emerging trends.
Final Thoughts: Feedback as a Promise
Customer feedback data shouldn’t go into a giant well that gets closed off and forgotten. By taking the time to complete a satisfaction survey -- even if it’s just the one question NPS® survey -- your customers are placing their trust in you.
They have taken the time to provide input on how they interacted with your product or service, and by asking them about it you are implying that you’re going to do something about their answer.
If you consistently ignore input from them, don’t be surprised if you run out of customers pretty quickly.
USE OUR Net Promotor Score (NPS) TEMPLATE