What is a net promoter score?

What’s a Net Promoter Score?

As defined by the website Medallia, a Net Promoter Score “...measures the willingness of customers to recommend a company’s products or services to others. It is used as a proxy for gauging the customer’s overall satisfaction with a company’s product or service and the customer’s loyalty to the brand.”

Ah, there is a way to peel that brand onion after all.

Essentially, a Net Promoter Score (or NPS) is a survey that gauges brand perceptions and customer satisfaction levels, providing actionable insights into what your business does well, does okay and, well, where it struggles.

How Do You Calculate Your Brand’s Score?

Specifically, your NPS measures how likely it is that a customer would recommend your brand to another. In essence, it tracks brand loyalty.

So, basically, you survey your customers by asking a variation on a fairly simple question: on a scale of 0-10, what is the likelihood that you would recommend our brand to other folks?

There are, of course, far more complex and involved customer surveys out there, but the beauty of the NPS is its simplicity both in data analysis requirements and the quick and easy nature of delivery to your customers and the minute amount of time they need to invest to respond.

So, you send out your NPS question and get your data back. Here’s how to slice and dice your data:

• “Promoters” are those that provided a 9-10
• “Passives” are those that gave a 7-8
• “Detractors” rated your brand a 0-6

To calculate your NPS, it’s simple math:

• Get a total respondent number
• Determine the percentage break down of promoters, passives and detractors
• Subtract the percentage of “detractors” from that of “promoters"
• As an example, if you received 20 responses and 5 were detractors and 15 were promoters your NPS would be 60 (75% promoters-15% detractors=60)

The best possible NPS is 100 if every respondent was a promoter. Worst is zero if every respondent was a detractor. Your NPS slides on a 0-100 scale.

Putting NPS into Context Is Important

NPS scores don’t mean much without context. That means the data that comes back needs to be measured against internal benchmarks (the ebb and flow of NPS over time) and industry NPS standards. For every business this can be different.

First, NPS surveying is less effective as a one-shot effort. You’ll get some valuable feedback; however, this represents only one moment in time. To really get value from your NPS survey, it needs to become part and parcel of your business process and needs to happen on a regular cadence. This builds up an NPS history and enables you to create key benchmarks that make NPS data more valuable and actionable. Knowing how NPS changes over time and in reaction to internal changes or marketing strategies is critical.

What’s more, NPS scores mean different things in different industries, again based on historical benchmark data. What makes a strong NPS in one industry does not in another.

The important thing to remember is to create internal benchmarks to measure changes in NPS while also comparing your business to your industry NPS data.

What Can I do With Historical NPS Data?

The simple answer: A whole lot.

NPS can be used to improve your referral marketing program. Referrals are the least expensive leads that yield the highest customer lifetime value. They also close at a higher rate traditionally. By identifying your promoters and working to move detractors to passives and eventually promoters, you can now segment your marketing to your promoter group. By tapping into your brand advocates, the benefits to your bottom line can be truly astounding. Get a load of these stats aggregated by the website Annex Cloud

• 92% of consumers trust referrals from people they know. (Nielsen)
• People are 4 times more likely to buy when referred by a friend. (Nielsen)
• 77% of consumers are more likely to buy a new product when learning about it from friends or family. (Nielsen)
• 81% of U.S. online consumers’ purchase decisions are influenced by their friends’ social media posts versus 78% who are influenced by the posts of the brands they follow on social media. (Market Force)
• 43% of consumers are more likely to buy a new product when learning about it from friends on social media. (Nielsen)
• 85% of fans of brands on Facebook recommend brands to others. (Syncapse)
• 84% of consumers say they either completely or somewhat trust recommendations from family, colleagues, and friends about products – making these recommendations the information source ranked highest for trustworthiness. (Nielsen)

NPS tracking helps you on two fronts: (1) It helps you identify your promoters that can then be marketing to; and (2) It helps you shape your strategy to improve your NPS score through the creation of a consistent customer feedback loop.

Increasing NPS and therefore customer loyalty is not just about getting new customers. It’s also key to generating repeat business from existing customers. Happy customers will keep coming back and buying products and services. And there is no better return on investment than new business from your existing client base. HubSpot puts it this way:

• It's 5-25X more expensive to acquire a new customer than it is to retain an existing one.
• Increasing customer retention by 5% can increase profits by 25-95%.

The benefits of consistently tracking NPS goes beyond your customers and generating new leads. It also can be a very useful tool when it comes to operational excellence and continuous improvement efforts internally.

NPS is scalable- it can be a simple one question survey, something a bit longer or a survey targeting a particular persona or customer archetype. So there are complexities to NPS depending on what you are looking to track and learn about.

NPS, when projected to your team, is an easily understandable metric across functions. NPS data in its simplest form cannot help but be understood: Our customers are happy, indifferent or pissed off at us. Now, as a team, what can we do to keep the good vibes going or stop the bad vibes from continuing.

According to Qualtrics, “Perhaps the most scalable part of this simple metric, is the ability to communicate it across the entire organization. It’s a powerful concept that people get almost intuitively. We all understand 'Net Worth' and we understand ‘Net Profit’. Your Net Promoter Score gives your team a familiar concept that can help rally the troops and align your organization when other, more complicated measurements often fall short. It’s a bottom line number you can focus on that allows you to decide when you need to look deeper into the breakout of promoters, passives, and detractors.”

The benefits of instituting regular NPS surveys (some even suggest doing an NPS-style survey every day to a micro-segment of your customer base) are clear.

Understanding how your customers feel about your brand over time empowers effective marketing and sales strategies while also providing operations and internal teams with easily understandable scoring for their performance.

The beauty of NPS is its scalability. You can start small and build from there. The important thing, however, is to get started as soon as possible.

We can help. Reach out to us today to learn more about how we can survey your customers to glean actionable data like NPS that will help you grow.