How does NPS works: Beginner’s guide to Net Promoter Score

What is the Net Promoter Score?

Net Promoter Score is a powerful tool used that measures customer loyalty and gauges customer lifetime value. NPS is rated on a scale of 0 to 10 and calculated by asking,

“How likely are you to recommend us to a friend or colleague?”

Whether your brand is big or small, it is essential to learn about your customer’s experience at all touchpoints to gain a competitive edge. QuestionPro CX offers a unique solution for effective CX management, helping you create a customer journey dashboard.

Net Promoter Score ranges between -100 and 100. What that means is, if all customers gave a score lower or equal to 6, the result would be -100. On the opposite end of the spectrum, if all customers rated the question with a 9 or 10, it would be 100. NPS surveys first ask a single question, prompting the customers to rate a score between 0 and 10. Based on the customer’s rating, they are then classified into one of three buckets: detractors, passives, or promoters.

Promoters, Passives, and Detractors

Promoters (9-10) are best described as your brand ambassadors who are loyal and enthusiastic about your brand. Passives (7-8) are neutral with your brand and most likely won’t tarnish your brand reputation. Detractors (0-6) are assumed to be dissatisfied customers who can damage your brand through negative word of mouth.

nps classification buckets

How to calculate company NPS

Once you have classified your customers into respective groups, you are ready to calculate your company’s Net Promoter Score. Here’s how you do it:

how to calculate Net Promoter Score (NPS)

Company NPS = % Promoters – % Detractors x 100

An organization’s NPS is obtained by subtracting the percentage of detractors from the percentage of promoters and multiplying the result with 100.

Tracking your NPS over time will help you determine your progress in improving your customer satisfaction and loyalty. The sure shot way to improve your NPS is to reduce the percentage of detractors by addressing their concerns and improving the customer service.

What’s “good” Net Promoter Score?

In general, any NPS over 30 is considered good, over 50 is great, and over 70 is excellent. However, before you set your target goal of getting a 70, you should consider your industry, product offering, and price positioning. Because each industry is unique, there is no single number to determine what a “good” score is. 

Learn more about what’s considered a good Net Promoter Score.

For instance, the retail industry upholds different customer expectations than the manufacturing industry. Even among telecommunication service providers, it is unique even in its competitive environment. For example, the biggest cable providers in the United States have a negative NPS, meaning there are more unhappy customers than happy ones. Still, since the industry is monopolistic, many detractors are forced to continue their service without other options. In other sectors with more competition, such as food and beverage shops, customers can easily switch from one to another.

NPS Tracking

You can track NPS by sending survey questions to your customers. A simple Net Promoter Score survey consists of just one question, asking to rate on a scale of 0-10 based on their overall satisfaction. A detailed Net Promoter survey has many questions covering various aspects of your products and services.

A positive NPS signifies that you have more customers organically recommending your product or service than customers deterring others from your company. If it’s negative, the effect is the opposite. In general, there are various ways to determine a “good” Net Promoter Score.

The two primary methods are:

1. Industry or competitive benchmark

It is the most common method since NPS is measured against the most relevant set your customers can choose. The competitive NPS benchmark surveys give inputs on not only your customers but also your competitors. Using this will give you a clear idea of where your company stands in comparison to your customer’s choices.

Net Promoter (NPS) industry scores

2. Improvement over time

You can track NPS by collecting customer feedback regularly. Send customer surveys and analyze the data to understand their expectations. Connect with your customers and act on the inputs. Close the feedback loop and repeat the exercise. You should start seeing an improvement in the NPS score.

What does the Net Promoter Score mean?

A higher NPS indicates a more sustainable and healthier business. In comparison, a lower one can be a warning into customer loyalty or satisfaction issues that can derail your business in the long term.

Bain and Company, who had originally developed the Net Promoter Score, found that the NPS accounts for 20% – 60% of an organization’s growth rate for most industries. On average, the leader in an industry has an NPS more than 2x its competitors.

When to use NPS score

How to utilize NPS more effectively?

Understanding your Net Promoter Score provides insight into how your customers perceive your company. To start, measure it against your industry benchmark, if available. If not, create a campaign to send out your first NPS survey and treat the first set of results as your baseline. As you begin improving your NPS, be sure to focus on increasing your response rates to collect more data to learn more about your customer’s experience.

Here are few ways to start using NPS today:

  1. Map it into your customer’s profile to equip your support team to answer questions, knowing exactly how your customers feel
  2. Create reports filtered by NPS rating to understand customer segments
  3. Identify your passives and turn them into promoters
  4. Conduct spending analysis on your high-value promoters

While analyzing the NPS data collected is essential, it is also critical to have a closed-loop feedback system. Your frontline employees need to act upon real-time feedback from customers to improve and act on the information obtained. A good closed-loop system should give you the process and tools required to automate follow-up and alerts with dissatisfied customers to “close the loop” and take proper action.

Top 4 best practices for improving customer satisfaction NPS

Using these four key practices mentioned below, you can improve your customer satisfaction NPS significantly.

  1. Monitor progress

You need to monitor your customers closely and at all times. You need to be aware of your customers’ changing needs and requirements. These need to be taken into consideration when they pass through the various stages of the customer journey. A customer journey dashboard will come in handy to understand and set your CX priorities. Make notes of any changes in customer satisfaction metrics when they pass through it. Doing this will ensure you understand your customers and can take steps to add value and boost satisfaction rates.

  1. Devise an action plan

Your employees must know how to act as per your customer satisfaction metrics. Your action plans need to reflect that as well. There should be steps and clear information made available to all your employees for their purposes, such as campaigns, documentation, etc. Clear action plans should be ready and at your team’s disposal. They should know the steps to be taken and what mediums to use when NPS shows promoters, passives, or detractors.

  1. Engage with your customers

When your NPS shows detractors, reach out to them via various campaigns and channels to understand the reasons behind their score. Enquire as to what could have been done to improve the score or to avoid similar future scenarios.

Reach out to promoters, try and understand what made their experience great, and emulate ways to improve your NPS and CX with other customers.

  1. Evaluate results

Keep an eye on your scores and take necessary measures to improve it. It is an ongoing process, and you should continually check what’s working and what’s not. Keep an eye on customer reviews to see which aspects of the customer journey need attention. Look at the changes you made since gathering feedback on your NPS and how effective these changes were. It will give you an idea for other touchpoints too. Look at critical customer questions and resolve them to address key customer pain areas.

The bottom line

There is no single question that can forecast your company’s success. Understanding your customer’s sentiment about your company is the first step in taking an analytical approach to begin improvement. Complement NPS with other insights from interactions across the customer journey and closed-loop feedback system. It will give you a comprehensive and actionable view of your customer experience that empowers your organization to retain and grow your customer base.

Improving NPS requires persistence and consistency. But, you are sure to gain the fruits of hard work in terms of business growth. A better Net Promoter Score implies more customers are willing to recommend your business to others. A good NPS creates a strong brand over time and a robust company.

Looking to deliver an exceptional customer experience with QuestionPro CX? Discover more about how to delight your customer at every touchpoint and turn them into brand advocates.