The Net Promoter Score (NPS) is the most well-known customer satisfaction metric used by two-thirds of the Fortune 1000 companies. But it’s also easy to misunderstand and misuse.

Created in 2003 by Fred Reichheld of Bain & Company, the Net Promoter Score (NPS) asks: “How likely are you to recommend us to a friend or colleague?” Customers answer on a 0-10 scale. Then, the Net Promoter Score (NPS) is the percent of promoters (9-10) minus the percent of detractors (0-6). That means if everyone rated you a 9 or a 10, your NPS Score would be 100! However, the average NPS Score is a far cry from 100; in fact, according to Survey Monkey, it’s 32 and varies widely by industry.

 

net promoter score (nps) calculation

Net Promoter Score (NPS) has the advantage of being straightforward to calculate and comprehend. Also, it’s potentially relevant for some companies because the question emphasizes the customer’s social orientation by framing their likelihood to recommend in the context of their friends.

But the Net Promotor Score (NPS) has its drawbacks too. Here are a few:

  1. Given the popularity of the Net Promoter Score (NPS), companies can appear insincere when they ask the NPS question. Customers are so used to answering the NPS question that they may assume a company is not genuinely interested in what they have to say.
  2. The NPS categorizes all scores between a 0 and a 6 into a single category of detractors, but that’s a wide range in customer sentiment that’s worth breaking down.
  3. The Net Promoter question may not be a great fit for every company or every situation. For example, specialty manufacturers can provide an excellent customer experience, and yet it’s unlikely customers would recommend these kinds of companies to their friends or even necessarily their colleagues.
  4. The Net Promoter question does not work for all customer experience touchpoints, like website navigation or product packaging. Nevertheless, these touchpoints are critical to the customer’s experience.
  5. Finally, the Net Promoter Score (NPS) does not include a weighting factor to reflect the relative importance of various aspects of the customer experience.

With these considerations in mind, it’s critical to ask whether the NPS question is the right fit for your company. Does the metric match your company’s objectives?

In certain industries, customers aren’t likely to recommend companies to their peers at all, no matter what their satisfaction level might be. That’s why we generally recommend the Net Promoter Score (NPS) is best for companies in industries where customers are likely to recommend them, such as luxury hotels or spendy restaurants.

More broadly, it’s never enough to simply send an NPS survey. Instead, you need to optimize the Net Promoter question with a follow-up strategy to ensure customers feel heard and you have the insights you need to move your company forward.

Deploying Net Promoter Score (NPS)

Whether you conduct NPS Surveys monthly, quarterly, or annually, aim to gauge customer sentiment toward your company as a whole. Periodic assessments will help you monitor your customer health and establish a benchmark for your company’s success.

While some companies use NPS after transactions like product delivery or customer service interactions, the question isn’t suited to that. After all, customers don’t recommend you based on one event. Instead, your customers will recommend you (or not) because of their overall experience from start to finish and over time.

Segmenting NPS is Critical

Segmenting your NPS scores by demographics, customer categories, or product groupings is necessary to glean actionable customer insights. Without these segmentations, you will probably be at a loss for what actions to prioritize and which next steps to take. So, while you might report one aggregate score, practically speaking, you will work with several NPS scores.

Are you considering using Net Promoter Score (NPS)? If so, get in touch.

 

Categories: Customer Satisfaction Surveys
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