Read more about your Net Promoter Score and why it matters to your business.
Your net promoter score (NPS) is a big deal for your business, and it’s important to all businesses. The trouble is, a large number of business owners and operators don’t know what it is, or don’t know how it works. To some, the term is completely unknown—and yet it’s one of the most important metrics you can use to gauge the long-term success of your business. So, what exactly is a net promoter score? What does it measure, and why does it matter?
What does Net Promoter Score Measure?
The NPS is an index that ranges from -100 to 100. It measures how willing your customers are to recommend your business’s products or services, where the higher your score is, the more willing people are to recommend you to others. The NPS serves as a way to measure overall customer satisfaction with your business, and the strength of customer loyalty to your brand. The closer your NPS is to 100, the higher your customer satisfaction and customer loyalty levels are.
How to Calculate Your Net Promoter Score
The NPS is a simple calculation, as it’s based on the answer to one single survey question:
“On a scale of 1 to 10, how likely are you to recommend this company’s product or service to friends, family, or colleagues?”
Based on their answers, individual customers are classified in 1 of 3 different categories: detractors, passives, and promoters.
- Detractors are people who answer this question with a score of 6 or less. They’re not enthusiastic about your company and don’t feel much—if any—loyalty to your brand. They’re not likely to recommend you, and may even badmouth your company, damaging your reputation.
- Passives are people who give your business a score of 7 or 8. Overall, they’re satisfied with your business, but are not especially loyal, meaning they won’t hesitate to switch to a different company if they have the chance. They’re not likely to badmouth your company but they’re not likely to recommend it either.
- Promoters are people who answer this question with a 9 or 10. They love your company, and your products or services. They’re loyal to your brand, are repeat customers, and happily recommend you every chance they get.
NPS is expressed as a percentage, so to arrive at your NPS, subtract the percentage of detractor customers from the percentage of promoter customers.
For instance, if 15% of your customers are detractors and 45% are promoters, your NPS is 45 – 15 = 30%.
What Your NPS Means for Your Business
The higher the NPS, the better, simply because it’s a direct measurement of overall customer satisfaction. For the most part, companies with high scores tend to grow more quickly, and are more successful. In many industries, leading companies score up to twice as high as their competitors.
However, to fully understand what your score means, it’s important to look at it in a variety of contexts, and to make relevant comparisons to other businesses.
For instance, if your business provides plumbing services, the most relevant comparisons are to be made with other businesses that provide similar services. More specifically, if you can compare your NPS with that of your direct and indirect competitors, your NPS can provide some very useful insights.
If, for example, your NPS is significantly lower than that of your closest competitor, what does this mean for your business? It could be that your competitor has been operating for much longer, and has had more time to build brand loyalty. On the other hand, it could mean that one or more aspects of your business needs improvement in order to compete more successfully.
Can You Improve Your Net Promoter Score?
Absolutely! It’s rarely a quick-fix situation, however, as the key to improving brand loyalty and customer satisfaction is different according to the specifics of your business.
It all depends on what elements of your business need improvement. For instance, you might have great products, but your customer service is letting you down. Or, perhaps you need to work on building brand recognition and loyalty, with a new advertising campaign or customer incentives.
The most important thing is that a company with a low NPS must be willing to dig deep into survey data and other information to find out why their detractors are having negative experiences. It may not be possible to turn those detractors into promoters, but it’s likely possible that the company can make improvements that will increase the percentage of new customers who become promoters.
The Right Way to Look at Your NPS
NPS is an important number, but never forget that NPS is just a number. It’s a representation of a concept that’s much more important than the score itself. The number can be a useful way to gauge the long term health of your business, but it’s only part of the story. Behind the number, is all the work that goes into developing a business that ensures customers have positive experiences. If you develop that business, you’ll end up with an NPS that reflects the work you’ve put in.