Understanding NPS, How It Works & Whether it’s a Measurement that Makes Sense

Improving customer experience is one sure-fire way of expanding your business and establishing a credible brand name for yourself. After all, who doesn’t want their brand to be known for a great customer experience?! Great customer experience is essentially the key to a successful business. So why not use tools to help you improve your customer experience? There’s an abundance of tools available both online and offline that are designed to help you achieve the ideal you’ve envisioned for your clients. However, few can boast the power and usefulness that the NPS can provide you with.

So, What Is This “NPS”?

NPS stands for Net Promoter Score and it was developed by Fred Reichheld. It helps to create a clear and understandable customer satisfaction score which can then be used as a comparison between various businesses over even a single business across an extended period of time. This is done through surveys (we’ll get to that in a bit), and sometimes questionnaires, which are directly given to consumers so that accurate data can be collected. Of course, you’re probably wondering where this happens.

Well, think about any random time you ever got a pop up on your screen while you were visiting a website. Often times you will get questions like “would you recommend this product (or service) to a family or friend?”. Considering how little time it takes, you will probably answer and then continue your search. Well, that is the kind of surveys used to determine the NPS. They’re short, to-the-point and strategically placed by companies so that you answer them as honestly as you can as you’re doing your search.

Calculation

The NPS question given to the customer will generally include an 11 point scale from 0 to 10. Think of it as a rating with 0 meaning that you are not likely to recommend it at all to 10 meaning that you are extremely likely to.

According to the NPS guidelines, consumers can be broken down into three categories:

Category #1: Promoters

These are the people who will be giving your recommendation question a 9 or a 10. We call them promoters because they are very likely to spread the word about your product. 

These are the people who loved your customer service and will probably be advertising your brand to others through the word of mouth; never underestimate the power of word of mouth! It is a great, genuine and free advertisement for your business and as such makes promoters very valuable.

Category #2: Passives

Next up are the “passives”. These are the people who will give a score between 7 and 8. These are the most vulnerable of your clientele. Why? 

Because, unlike the promoters, they aren’t spreading the word about how great your brand is. They’re just there because. 

They don’t love your brand; they don’t hate it either, but they can be easily diverted elsewhere if the competition is offering the right price tag.

Detractors are the unhappy customers who’re giving you’re a score of 0 to 6. These are the people who can cause some serious damage to your brand. Like the promoters, they’re going to be spreading the word…of how bad your brand is. 

You need to make sure that you do not have a lot of detractors because they can seriously hinder the growth of your business.

In order to calculate your Net Promoter Score, you subtract the percentage of detractors from the promoters. The NPS is not expressed in terms of percentage. It needs to be an absolute number between -100 and +100. Generally, a positive NPS is considered good for businesses. In fact, many businesses aim to make sure that their NPS does not fall to zero or negative as zero shows that your business is stagnant while a negative NPS will show that your business’s customer experience is bad and that there are more detractors than promoters. This will, in turn, lead to a series of losses for you, so it is vital to make sure that your NPS is always positive.

By using this data, you can begin to plan a business strategy that improves your NPS.

Why Is It Important?

The biggest advantage of NPS is that it is able to provide a simple, yet holistic, understanding of your customer experience. This coupled with the fact that your customers are the ones directly answering questions without any filter, provides you with accurate data. 

The NPS is able to give you the real picture of how your clients perceive your business. Similarly, by comparing the NPS of other businesses, you can determine how well you’re doing. In some sectors, the NPS score rarely comes out to be more than +50 and even though this may not look good, if held up against the rest of the market, you will find that the NPS of +50 might actually be the score of the highest performing company in that industry. 

It’s relative yet it does not generalize or marginalize any competitor. You get a clear picture of what’s happening and that is great for business. There are many other benefits to the NPS which you can find here.

Does It Make Sense?

While it might initially take some time to wrap your head around it, once you get it you’ll realize the NPS is actually really easy to use and understand. While other tools can be very complicated, the NPS is simple, and its effectiveness lies in its simplicity. 

The results are pretty clear: the promoters are your loyal customers, the passives may be deterred away and the detractors are leaving. As we’ve already said before, you can use this to your advantage and establish an order that helps to grow your business. It accurately shows how your client feels.