The Fundamentals of Net Promoter Score (NPS) - What, Why, How
The popularity and success of a product not merely depends on what features and benefits it offers to the target audience, but also on how the same product is being talked about among your buyers. What we call “word of mouth” is one of the most unpredictable yet influential forms of product marketing. Nothing boosts business as brilliantly as a customer recommending his/her/their peers to try out the latest product your company launched a couple of months ago. At the end of the day, the success of a business lies in the loyalty of its customers. So, how do you go on winning more hearts? How will you garner the assurance that your product will thrive a lot more in the days to come? This is where the Net Promoter Score (NPS) comes into play.
What is NPS?
The NPS, or Net Promoter Score, is a market research metric used in customer experience programs. NPS measures the customer loyalty towards your product or service and, in turn, your brand/company. NPS scores are measured with a single-question survey that measures the likelihood of your customers referring your business or product to others. Sometimes, an NPS survey may include an open-ended question for survey participants (i.e. your customers) to provide detailed feedback regarding your product or service.
NPS survey respondents are usually asked to give a rating between 0 (not at all likely) and 10 (extremely likely), in which a higher score is deemed desirable. Depending on their response, the respondents are categorized into the following subgroups:
- Promoters respond with a score of 9 or 10 and have a positive outlook towards your product and in turn your brand. They are your biggest asset and will definitely recommend it to their friends, family, and acquaintances.
- Passives or Neutrals respond with a score of 7 or 8 and are more on the neutral side. This means, they may or may not recommend the product or service of a particular organization/company to others.
- Detractors respond with a score of 0 to 6 and have a negative and will not recommend the services of the organization/company to others.
Based on all respondents' NPS question rating, your company’s NPS score will be a number from -100 to 100, in which a higher score is deemed desirable.
To give you a glimpse of how the NPS can help you boost your sales, here is Nichole Elizabeth DeMeré’s report on how Slack became a billion-dollar company solely based on word-of-mouth marketing:
“If you've been living in a cave you may not know that Slack is on fire. The company has been setting record highs for growth, gaining a $1 billion valuation in just a year. How? Through word-of-mouth marketing tracked by NPS… (Bill) Macaitis uses NPS to polish every interaction prospects and customers have with Slack, taking a holistic view of UX that includes not just customer service and sales, but things like online ads and their legal terms of service. He says he's not satisfied by prospects signing up for Slack or becoming paying customers — the bar is set at whether they recommend it.”
At the end of the day, the purpose of an NPS survey is to understand how your product or service is perceived by the customers and, therefore, help you overcome the apparent shortcomings to convert your passives (and detractors too) into promoters. After all, the more people talk about you, the more popular you become.
Characteristics of NPS
Frankly speaking, the Net Promoter Score is all about how important your brand is to a customer, from a subjective point of view. The features of a Net Promoter Score are as follows:
- It straightforwardly informs you whether a consumer likes your product or service, and your brand in general
- Tells you to what degree do they like or dislike your product/service (hence, the answer choices are titled as - “Likely”, “Very Likely”, “Extremely Likely”, and so on)
- Almost an extension of the first two points, an NPS survey helps you study your audience by categorizing them as Promoters, Passives, and Detractors
- The brief length of the NPS survey helps capture the instant response of a customer immediately after using your product or service
- It thoroughly studies your audience over a long period, thus helping you trace the dynamic changes in your customers’ attitudes towards your brand
The brilliance of the NPS lies in its seamless study of the consumers, identifying who is likely to say good things about your business. And all this would motivate you to provide them a better experience with your product. Ultimately, the consumer is king, queen, and everything.
Uses of NPS Surveys
As evident in the abbreviation itself, the NPS survey studies how much your customers are willing to support your products or services, particularly on the basis of whether they recommend the same to their family and acquaintances. Here are some of the important utilities of using an NPS survey:
- Identifying the Promoters, Passives, and Detractors from among your customers.
- Measuring the degree of satisfaction of your Promoters by further asking for open-ended feedback. To learn more about the necessity to collect open-ended feedback, you can jump to our second blog article on how to create NPS Surveys on SurveyVista.
- The degree of support they show towards your brand. After all, satisfaction does not always guarantee returning customers. The ultimate equation that every brand must remember is this - the success of a product is directly proportional to the percentage of customers who are interested to use your product or opt for your services again.
- The fact whether your customers will recommend your products or not is an important key performance indicator. This will help you to further assess the shortcomings associated with your products or services, since the brand impression might be affected the customers technically or emotionally.
How to calculate your NPS score
The moot point of an NPS survey is to know how likely it is that a customer will recommend a product or service to a friend or acquaintance. On the basis of the responses collected from your customers who participated in the NPS survey, this formula helps you derive the final Net Promoter Score;
\[x = {(No. of Promoters) - (No. of Detractors) \over Total no. of Respondents} \times 100 \% \]
Here is a simple example to help you understand how the calculation is done;
Consider a scenario, in which a company has sent an NPS Survey to 100 customers. Here are the statistics collected at the end of the survey;
- 70 respondents chose “Extremely Likely”, i.e. Promoters
- 10 respondents chose “Not at all Likely”, i.e. Detractors
- 10 respondents chose “Neutral”, i.e. Passives
- 10 customers did not respond to the survey
Therefore, the final NPS score of the said company will be;
\[{70 - 10 \over 90} \times 100\% = 66.66\% \]
Now, to determine whether the final NPS score derived is good or not, refer to the scale given below across industries. It is recommended that you review and compare your company’s NPS Score against NPS Benchmarks within your company’s industry.
- Score between -100 and 0 = Needs improvement
- Score between 0 and 30 = Good
- Score between 30 and 70 = Great
- Score between 70 and 100 = Excellent
So, on the basis of this scale, the above company has a “great” NPS score of 66.66%.
NPS with SurveyVista
While contemplating an NPS survey for your product or service, it is highly mandatory for your brand or organization to consider a platform that would deliver the most accurate reports with perfection. It goes without saying that an NPS survey demands close study and utmost precision as far as score measurements and subsequent analyses are concerned. Most importantly, in this fast-paced world, you will have to stay ahead of your competitors by identifying beforehand the opportunities of growth and improvement in your business and marketing strategies, so that you can make the right decisions at the right moment. And in case you are wondering, SurveyVista has all that you need to organize and analyze your NPS survey results seamlessly and perfectly. The next article will shed light on how you can use the SurveyVista platform to study your customer’s attitude towards your brand via the NPS survey, and also gather in-depth information on the strengths and weaknesses of your product or service as well.
For more information on NPS, CSAT, CES, or any other survey use cases which you would like to implement for your company or organization, feel free to contact us.
*NPS, Net Promoter & Net Promoter Score are registered trademarks of Satmetrix Systems, Inc., Bain & Company and Fred Reichheld.