NPS Meaning (In a Nutshell)
You’ve probably come across Net Promoter Scores (NPS) in some shape or form. Many of you perhaps even get pressure from the board to ensure that yours is better than your competitors’ – no doubt making you overly familiar with NPS. But for those of you going a bit cross-eyed at this point allow me to enlighten you...
NPS is a very simple surveying question used to measure your customer experience and potential for business growth by asking a single question – e.g. “How likely are you to recommend us to a friend or colleague?“ It's also worth checking out our post about eNPS, which focuses on the employee rather than customer.
All answers are based on a 0 -10 scale and the scores are broken down into three groups - promoters, passives and (the infamous) detractors.
Promoters are loyal and happy customers who scored between 9-10. They are likely to refer your company and become advocates for your brand.
Passives are satisfied but not blown away by your company or service; your competitors could potentially woo them. They scored between 7-8.
Detractors are unhappy campers who are highly likely to bad-mouth your company. They scored 6 and below.
To work out your NPS score you calculate the % of all three groups, then subtract the % of Detractors from the % of Promoters – the final sum is your NPS. Don’t panic, it sounds a lot more complicated than it is! Let’s say you have 70% Promoters and 20% Detractors, then your NPS is 50 (the score is typically displayed as a whole number without the percentage sign.)
Now you know what it is, we will examine if it is worth it.
Why Use NPS?
Simplicity: The beauty of the NPS is anyone can measure it; which means you don’t have to hire a statistician to walk you through the results – even if one of them tells you otherwise! You can easily send out your survey question to your customers via email, or even a website post. The calculation is very intuitive and therefore only requires a basic spreadsheet to work out your results.
Usability: A typical multi-question survey can be very laborious for your customers. By delivering one question and an open-ended follow up question, “Care to tell us why?” – you are providing your customers with a platform to quickly provide a score and elaborate on it. They can quickly answer the question and go into detail, before going back to their duties only a few minutes later. This simple and effective system is great for customer experience.
Benchmarking: NPS is widely adopted by companies worldwide; which means you can benchmark your score and see how you shape up to your competition. This is vital, as your score only gains any real relevance or context when compared to other NPS within your sector – e.g. if your NPS is 60 but your industry average is 70 then you need to buck up your ideas…
Buy in from the boardroom: If you are looking for an easily-digestible overview of your client and customer satisfaction levels to present in the boardroom – then NPS is the option for you. It can be used to gauge how you shape up to the competition and how one department compares to another – does the customer service department receive higher scores than the sales department? This will help you to indicate what departments need work, so you can deliver equally high scores across the board.
Before you start using NPS and become completely obsessed with winning over your detractors, there are a few things you should take into account. Let’s dive in to learn more about the necessary considerations.
Can you use it in isolation? NPS is often put on a pedestal and hailed as Holy Grail of metrics – it shouldn’t be. Whilst it performs one task very well, it is not that valuable a metric when used in isolation. By including it as part of a strong customer feedback program, it will become more effective.
*Here at The Happiness Index we see the benefits of NPS; which is why we couple it with our pulse technology to give you a comprehensive snapshot of your company’s “health” and a benchmark against your competition.*
Is satisfaction linked with retention? Those of you with a growing NPS score may have noticed that there hasn’t been an increase in customer retention too? If so, there is evidently a disconnection that requires your attention! After all, if your customers are happier, shouldn’t they be staying with you and using your service? One of the main reasons for this disconnection is that customers who had negative experiences didn’t answer your survey question. (see below)
Are all 3 groups answering your survey? Let’s say that 80% of promoters answer your survey question, and a mere 20% of detractors answer it; this won’t provide you with an accurate NPS score. Typically, more promoters will answer than detractors – some particularly unhappy customers may even opt out from your communications. Which is why it’s important to send out regular surveys so you catch your customers at various stages of their journey.
All the research suggests that higher NPS scores indicate more loyal customers; leading to an increase in revenue and ultimately profit. This means that all you have to do is increase your NPS to see these improvements – sounds pretty simple, right? Sadly, NPS isn’t without its flaws and limitations…
Not enough actionable insights: When using NPS it is important to note that you are in control and you must ask questions that will deliver actionable insights whilst adding value to your customer’s experience. Typically, most NPS questions are testing for perceived values, not for potential actions. NPS helps you to learn what your customers are struggling with – If you don’t have systems in place that will help you to action the feedback then all that data counts for nothing.
Lack of context for negative feedback: If your question is in the same ball-park as “would you use our service again” rather than “would you say negative things about our service” then you are only getting a general indicator of how your customers view your company.
Not specific enough: Whilst NPS may help you to gauge and understand your customer’s loyalty, it doesn’t help you to understand why your customers are promoters, passives or detractors – which means you can’t target people and try to reach out to them. Subsequently, this means you will be missing vital information about how your organisation should move forward.
Your customers’ opinions carry a lot of weight and can essentially make or break your brand. It is therefore advisable to implement any tool you can to help measure customer satisfaction – NPS should play an active role.
Your NPS in isolation may not give you the depth you require, but its transparency and simplicity will help you to generate buy in from your whole team; which is invaluable. By combining NPS with other insights and metrics you will gain a comprehensive and (most importantly) actionable snapshot of your customer’s journey.
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