If you’ve worked in or alongside Customer Experience teams for any length of time, you’ve likely heard of NPS, or Net Promoter Scores.
But while the standard NPS survey is simple, interpreting your NPS score and figuring out how to use it for company growth and improvement is anything but.
NPS is a metric that was first developed by Bain & Co. and NICE Satmetrix, and it measures the overall likelihood of a customer to recommend your brand to others. As such, it serves as a measure of customer loyalty, retention and perception of your brand. A higher NPS indicates high levels of customer loyalty and a positive brand perception, while low NPS scores indicate high levels of churn and negative brand impressions.
Of course, understanding this is important for a number of reasons for your company. For example, research has found that:
- companies with growing customer loyalty outperform competitors on revenue by 2x, on average
- NPS scores can explain 20% – 60% of the growth variation between competitors, indicating that NPS scores are a strong predictor of company growth
- More than 80% of positive referrals come from Promoters, and Promoters tend to be some of the highest-value customers for a company.
Comprehending the NPS score meaning is essential for interpreting and utilizing these insights to foster business success.
In this article, we’ll break down the NPS system, showing you how to effectively build, implement and respond to NPS surveys to assess and improve business growth and results.
NPS Surveys Explained
NPS surveys are fairly simple, at least on the surface. In general, NPS surveys consist of a single question:
“On a scale of 1-10, how likely are you to recommend our brand [or services] to a friend, family member or colleague?”
Customers then provide their rating on a scale provided, and the overall Net Promoter Score is calculated from there (more on that below).
But a really effective NPS survey requires more than the simple NPS score to be useful. Ideally, your NPS survey should also include:
- a follow-up question that asks the customer why they gave the score they provided. This can offer valuable insights into how to improve and common customer perceptions, values, and concerns.
- a follow-up flow for Detractors to attempt to solve their problems or concerns with your brand
- a tracking method to identify trends with your scores over time, allowing you to measure and quantify success and progress against internal benchmarks
- an implementation workflow that helps you team prioritize and implement actionable feedback from your NPS surveys to generate improvements
Understanding NPS Categories
Net Promoter Scores are based on three categories of customers: your promoters, your passives, and your detractors.
Promoters are generally those who give a score of 9 or 10 to your NPS survey. They are willing to—and likely already—recommend your brand or product to others and thus fall under the category of promoters of your brand. Some brands also include respondents who give a score of 8 in this category.
Detractors are those who give a score of 6 or less in response to your NPS survey. Generally, they are quite dissatisfied with your brand and unlikely to recommend it to others. As a result, they may actually be actively recommending against your brand to others, thus placing them in the detractor category.
Passives are in between the two, generally giving a response of around 7 or 8 to your survey. They’re not active promoters of your brand, but neither are they dissatisfied with you. They’re just not particularly inclined to recommend your brand to others.
It’s important to consider that detractors may have a much stronger impact on your overall brand reach and reputation than promoters. That is, you actually need a higher percentage of promoters to create a net-positive impact compared to how many detractors it takes to create a net-negative impact.
This is because customers, on average, tell about 9 others about a positive customer service experience, but will tell 16 others about a negative customer service experience. We’re more inclined to talk about our experiences when we’re frustrated, so negative experiences disproportionately detract from your brand reputation.
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Calculating the NPS
Now that we’re clear on the categories of Net Promoter Scores, let’s take a look at how to actually calculate your NPS. In short, NPS is a really simple calculation:
|NPS = % Promoters – % Detractors|
While there are a variety of tools and softwares that can collect NPS survey responses and calculate the overall score for you, it’s almost as easy to do it yourself in a spreadsheet. Here’s how:
- Collect all your NPS survey responses from a given period of time (we recommend companies measure NPS monthly).
- Note down the number of responses you got for each number, 0 – 10.
- Count the total number of responses who were promoters (a score of 9 or 10), and then divide by the total number of responses to find the percentage of promoters.
- Count the total number of responses who were detractors (a score of 6 or below), and then divide by the total number of responses to find the percentage of detractors.
- Subtract the percentage of detractors from the percentage of promoters to find your NPS.
Here’s a quick example to demonstrate this. Let’s say a brand received 375 responses to their NPS survey in the last month, with the following responses:
|Score||No. of Responses|
The total number of promoters is 101, which is 27% of the overall respondents. The total number of detractors is 142, which is 37% of the overall respondents.
We then subtract the percentage of detractors (37) from the percentage of promoters (27), which leaves them with a Net Promoter Score of -11.
Interpreting Your NPS
The NPS calculation itself is simple—but understanding the NPS score meaning is crucial for interpreting its significance.
In general, you can think of four major ranges of NPS scores:
- NPS score between -100 and 0: indicates a poor reputation and needs improvement
- NPS score between 0 and 50: indicates a good reputation that still could be improved on
- NPS score between 50 – 70: indicates a great reputation that needs to be maintained
- NPS score above 70: indicates an exceptional reputation
As a result, a “good” NPS score is really anything above zero—when the promoters outweigh the detractors of your brand.
But having—and improving—a higher NPS is correlated with a variety of benefits for your business. Higher NPS scores generally mean:
- higher retention rates and lower churn
- higher levels of customer loyalty
- increased customer lifetime values
- higher expansion revenue
- more effective marketing costs
That said, reaching a “perfect” NPS score is basically impossible. Even the biggest companies with loyal audiences—Amazon, Apple, Disney, and so on—don’t have perfect NPS scores.
Benchmarking Your NPS
More important than attempting to reach a “perfect” NPS is charting your NPS score over time, understanding trends, and measuring yourself against industry benchmarks.
Some industries simply have much lower or higher levels of loyalty and trust than others. For example, Finance and Tech industries generally have higher NPS benchmarks compared to Retail, Healthcare and Internet Services companies.
Research from Retently found that the average NPS score among Financial companies was 71, while the average NPS score among Healthcare organizations was just 45. As a result, a bank that had an NPS score of 50 might be doing poorly compared to competitors, while a Healthcare organization with the same score could be a leading organization in its field.
This is why industry benchmarks are crucial when it comes to NPS scores.
Just as important is understanding your own company’s benchmarks and historical NPS data and trends over time. For example, some companies may notice spikes or dips in NPS scores during certain seasons, and improving those YOY can indicate a general improvement even if your score continues to fluctuate. Similarly, an improvement in your own NPS score compared to previous months or years is always a positive trend, even if you’re not yet hitting industry averages.
Types of NPS: Transactional vs. Relationship
Finally, it’s important to understand the variations available in running an NPS survey. The two main types of NPS tracking are transactional NPS vs. relationship NPS.
Transactional NPS is an NPS survey sent after a specific action or interaction with your brand—i.e. after a purchase, a service provided, a customer service call, or something similar. These are often phrased as “After your recent [purchase / interaction], how likely would you be to recommend our brand to a friend or colleague?”
With transactional NPS surveys, brands are trying to get a sense of how customers’ loyalty and perception of the brand is impacted by various key touchpoints throughout the customer journey.
Relationship NPS surveys are more broad, and aim to measure overall perception and loyalty of the brand. They may be sent out to customers at regular time intervals and are typically phrased as, “We value you as a customer of [brand]! How likely are you to recommend our brand to a friend or colleague?”
The timing and type of NPS survey you run can yield different business insights and help you hone in on different aspects of your customer relationships. For example, while relationship NPS surveys can help you get an overall sense of your customer’s relationships to your brand, transactional NPS surveys can help give you specific directions and touchpoints to improve that overall relationship.
Implementing NPS in Your Business
So, how can you implement NPS surveys in your business? Follow our team’s best practices for implementing NPS effectively:
Send NPS surveys on a rolling basis at regular intervals. For example, every month, send an NPS survey to 15-20% of your customer base, so that no customer receives an NPS more than twice a year, but so that you receive continuous data from your customers.
Use transactional and relationship NPS surveys in tandem. For example, consider sending a general relationship NPS survey once or twice a year to your entire audience, with transactional NPS surveys in between. Transactional NPS surveys can give you more specific data and are often seen as more relevant to customers, yielding higher response rates.
Add follow-up questions to your NPS. Even asking customers to (optionally) share why they provided the score they did can give your team an immense amount of qualitative data on where to improve and how to take action to improve your customer loyalty.
Provide a next step after your NPS survey. If customers fall into the detractor category, consider redirecting them to a customer service or contact page to offer more support and potentially fix their issue. If customers fall into the promoter category, consider redirecting them to an online reviews page where they can leave a review for your company.
Most importantly, for NPS to really be useful, you have to implement the feedback you receive. Whether that’s uncovering that customers grow frustrated by long wait times, are having product quality issues, or aren’t satisfied with your communications, an NPS survey can uncover valuable business insights—but it’s up to you to take action on them.
This is easiest when you have a dedicated team to provide analysis and support based on your NPS results, and who can provide an actionable roadmap toward implementing the feedback for growth. If you don’t have internal resources to dedicate to this, you can (like many companies) outsource this area of customer loyalty and analytics to a dedicated outsourced team, like our team here at Global Response.
Our team is here to help you kickstart a continuous improvement cycle—supported by NPS surveys and feedback, you can implement ongoing, customer-driven improvements to your business that further grow audience loyalty, retention and satisfaction.
Want to see how we do it? Connect with an expert from our team today and we’ll walk you through how we can help your team truly understand your NPS score meaning and how you can use it to improve your business.