Understanding Net Promoter Score (NPS): What It Is and Why It Matters?
Do you know word of mouth is the fastest marketing technique, that requires no budget just good servicing, but the question is how to achieve a good word of mouth? To know what your customers might think about your business and how often they would share a positive word for it, use Net Promoter Score (NPS).
Understanding the pulse of your clients is critical for any business seeking success. The Net Promoter Score (NPS) has evolved as an effective statistic for assessing customer loyalty and forecasting growth. But what exactly is NPS, and why is it so important for your company strategy? In this article, we’ll look at the essentials of NPS score, including its importance and how it may change the way you analyze and improve customer interactions.
What is Net Promoter Score (NPS)?
NPS meaning Net Promoter Score is a major metric used in the world of customer experience. It is used to measure Customer loyalty by interpreting, how likely would the customer recommend a certain business. NPS score is measured by a single-question survey,
( e.g: On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or colleague?)
which is reported with numbers ranging from –100 to +100,which depends on the confidence level and the margin of error, however a higher score it desirable.
NPS was developed by Bain & Company in 2003, which is now used by a lot of businesses to know their perception in their customer eyes.
How to calculate Net Promoter Score?
Net promoter score calculations require you to know the three divisions of the NPS score. These division are;
Promoters, Passives & Detractors
- Promoters: These are the well-wishers and satisfied customers of your business, those who will promote your business and spread a positive word of mouth.
- Passive: These are the customers who are satisfied, yet thinks that your business can do better as they compare your business with competitive standards and have some reservations. They are vulnerable to competitive offerings and can stop availing your offers, once they find a little better one.
- Detractors: These are the customers, who did not like your offerings at all. They spread a bad word of mouth and can be damaging for your business. They can negatively impact your brand image.
Now after knowing the above three divisions of customers and the net promoter score definition, you can measure the score with the following net promoter score formula ;
Subtract the number of promoters from the number or percentage of detractors.
Promoter % – Detractor % = NPS Score.
Use the above-mentioned net promoter score calculation to measure the score for your business.
What is a Good NPS score?
The industrial positioning and its market requirements determine a good NPS. Though there isn’t a generally accepted standard, you may use the following broad criteria to understand how the NPS score is calculated:
Above “0”, the score is good as it states that there are more promoters than detractors.
Above “20“, the score is favorable, it states that you have a positive promoter list.
Above “50“, the score is excellent, and even more than the median known internationally.
Above “80”, the score is exceptional and world class, which indicates that your business is meeting standards important for your customers.
Yes, you would be striking and thriving for a score above or near 80, as it is often considered world class, although it seems easy, but it is very difficult in certain industrial standards to reach the score. Therefore, the best a company can do is keep itself above 0 score to make a good impact in the market.
Moreover, you need to know how to measure the NPS score now!
How to create NPS surveys?
NPS survey creation at first may sound like a daunting task, although it is not!
All you are going to measure is customer loyalty and gather valuable insights for your business, product, service or brand.
We highly recommend the use of Antlere Smart Survey software to create efficient and effective NPS surveys that are according to your relevant industry.
Smart offers you prebuilt template for NPS surveys that you can alter according to your needs and can also create an entire survey from scratch. Also, the plus is you got sentiment analysis and AI powered question creation to ease you up. Follow the following steps to create an NPS survey for your brand using Antlere Smart:
- Sign up and create an account on Antlere Smart
- Click on the “Create” button, and then click “Choose from template“.
- Search for “NPS Survey” in the templates list.
- Click the template and customize the template according to your needs and build a survey.
- Preview and then share the survey with your customers.
- Analyze the responses from the survey and make valuable decisions.
What can you measure with NPS score?
Net promoter scores can be utilized for different industries and brands to improve their service or the product quality. The NPS score can measure the following things;
- NPS score can help you know the customer retention rate and helps gauge customer loyalty.
- Customer perception is the most important thing for any brand or service that needs to be measured, NPS help you in this regard as well
- Reduce the customer churn rate, only if you measure the NPS score, will you know what the churn rate is and how to stop it knowing the problem.
- Also, it helps to monitor the overall improvements that are required to the product and the service.
NPS score is considered a KPI for any business growth and to bring more customers to your business or brand, you need to have a firm look at the NPS score and know what your brand’s image in the market is.
Factors Affecting NPS standards
Some factors have a direct impact on the benchmarks of Net Promoter Score (NPS). These help you know how good your NPS score is and what is a good score in a specific industry. These include;
Segmented Niche Competition
NPS score helps you identify your niche competition and lets you know your market standing according to performance. Let’s, take an example of Tesla, the 2022 statistic of Tesla’s NPS score is +97, which means that the company has a strong hold on e-innovation and is customer-centric. This is why it can hold a unique position in the highly competitive market.
Unlikely, if we see the Nokia, once the largest brand in the mobile phone market, has now a nps score of +16, which might indicate it to the in the healthy terms but, if we compare the score with the market and the competitors, than we have Apple with the highest NPS score that is 72. All this is because Nokia did not take the right step to enter the android and IOS market on time and persisted in staying with the windows. This approach underscores the crucial lesson of continually adapting to customer needs, as illustrated by Nokia’s experience.
Customer Patience Threshold
The example of Nokia leads me to my next point as well. Customer patience threshold is very important to maintain a good NPS score. This is not just about mobiles, lets take the example of Ecommerce or marketplaces. Imagine, your business is unable to deliver the customer some parcel on time, might be possible the delay is of minutes, or hours, but there is a huge chance that your customer patience level has been breached.
However, this patience level actually depends entirely on the type of industry your business falls in. You should measure this on the scale of 1-10, which will let you know if your business needs to consider the patience level or not.
Vendor Switch Barriers
Another factor that can influence NPS standards is the challenge of switching vendors. For example, some customers purchase cars with their savings and might not have the financial flexibility to switch brands. Due to these financial constraints, they may develop a more positive opinion about their vehicle, even if the car isn’t particularly comfortable or performs average. This is because they are inclined to focus on the positive aspects of their purchase to justify their decision.
These switching barriers are important to consider, as they can skew NPS scores. Customers facing difficulties in changing vendors may rate their experience more favorably than they otherwise would, impacting the accuracy of the NPS score.
What are different types of Net Promoter Score Survey?
There are four widely known different types of NPS survey mentioned below;
- Bottom up NPS survey
- Top down NPS survey
Bottom NPS Survey:
This survey collects feedback on perspectives regarding customer service and company processes. It aims to understand how internal factors affect customer satisfaction. Also, this type of survey is for the feedback on the transactions and business processes and mostly related to the product and services; the questions are like;
Question:
Based on your recent transaction, how likely will you recommend our product and services to your friend or colleague?
Top Down NPS Survey:
This type of survey evaluates overall customer satisfaction from a strategic perspective, assessing broader aspects of company performance and customer loyalty. This survey will help you stack up against the competition and helps identify areas of improvement in the company.
Question:
How likely are you to recommend our product/company to others based on your overall satisfaction with our brand?
Net Promoter Score Software;
To ease up your process of feedback from the customers and analyzing all the data, you may use some nps softwares that can help you optimize your results while minimizing the efforts.
Some of the well-known NPS softwares are;
- Survey Monkey
- Survey Sparrow
- Question Pro
- Antlere Smart
- Typeform
Conclusion:
Whether you agree with the NPS methodology or not, the impact of your customers’ voices is undeniable. Word of mouth can shape perceptions, influence decisions, and ultimately determine your brand’s success. Positive feedback can expand your reach, while negative experiences can quickly damage your reputation. NPS provides a valuable lens into these sentiments, offering you the chance to understand and shape the narrative your customers hold.
From day one, customers are the focal point of any business, and if you can’t satisfy them, your growth prospects are limited. Gauging loyalty and enhancing satisfaction should be your primary goals, and the key to truly understanding your customers lies in evaluating your NPS score. This metric not only reveals how likely your customers are to recommend your product or service, but it also highlights areas where you can make necessary improvements based on their feedback.
Ready to elevate your NPS?
Get in touch with Antlere’s team now and start boosting customer satisfaction!
Frequently asked questions
Find answers to the most frequently asked questions
What is Net Promoter Score?
NPS score is the metric that is used to define customer loyalty and know how likely the customer would recommend your brand’s product, or service to others.
What is a good Net Promoter Score?
A good Net Promoter Score highly depends on the market you are competing in. However, the average score that is considered good internationally is above “0”, which means that you are in healthy competition.
How to calculate NPS?
The NPS score can be measured by the following net promoter score formula;
Subtract the number of promoters from the number or percentage of detractors.
Promoter % – Detractor % = NPS Score.