NPS (Net Promoter Score) – a crucial benchmark for business

17 August 2023

The term NPS was first used in 2003 by Fred Reichheld, the author of the book “The Ultimate Question: Driving Good Profits and True Growth”. The indicator was described in the Harvard Business Review under the title “One Number You Need to Grow“. The NPS concept was popularized by the company Satmetrix, and today it is used worldwide as Net Promoter Score®.

NPS is a tool used to measure the loyalty of customers towards a specific company or brand. It is an indicator primarily based on the question “How likely are you to recommend our product/service to others?” This is an important metric for evaluating the market success of products and the reliability of services provided by your business.

According to Bain & Company’s “Prescription for Cutting Costs” study from 2001, it is estimated that a 5% increase in returning customers results in over a 25% increase in profits. Returning customers tend to make more purchases. Furthermore, according to Accenture’s “Global Consumer Pulse Research” from 2013, as much as 51% of unhappy customers in the United States switch companies due to poor service quality. The market research shows significant growth in competition across most industries worldwide, making it increasingly challenging to maintain loyal customers.

It is worth noting that most consumers claim that recommendations from family, friends or colleague are crucial when making purchasing decisions. As we live in the age of the internet, customers also trust online reviews as much as they trust their acquaintances. It is widely known that people are more likely to leave negative comments than positive ones. Social media can quickly turn passive customers into critics, therefore, positive word-of-mouth can work wonders.

Given these situations, there is a need to increase investments and focus on customer relationships, and the NPS survey result can serve as one of the most effective methods to measure satisfaction and assess customer loyalty towards a brand.

What is NPS?

NPS stands for Net Promoter Score, which is a metric that measures the degree of customer loyalty towards a brand, product, or company. Among various indicators, NPS is the simplest and quickest way to assess customer loyalty towards a particular company, product, or service, making it an efficient technique to determine the likelihood of customers making repeat purchases or using a service again.

The NPS can be applied in any business that involves the sale of products, goods, or services. The NPS survey is based on a loyalty-related question: “How likely are you to recommend us to a friend?” Companies also use NPS to gauge customer satisfaction with customer service levels. In this case, the NPS question focuses on evaluating the propensity to recommend the service in a specific physical location or a particular customer service representative handling a hotline or online chat to friends or family.

Why is it worth using the NPS?

NPS can be described as a “success indicator.” Over half of the large companies in the United States, such as Apple and American Express, utilize this metric for business development and assessing the risk of business decline.

The study by Bain & Company titled “What it takes to win with customer experience” from 2011, conducted across six different industries, shows a correlation between high NPS and revenue growth. Furthermore, there is a significant difference between industry leaders and laggards. For example, the NPS score for the Chick-fil-A restaurant chain exceeds 60%, with a four-year cumulative annual revenue growth rate of 11.5%. In contrast, a laggard in the fast-food industry had a negative NPS and negative revenue growth rate.

Advantages of Net Promoter Score survey

The greatest advantage of the survey is the ability to understand the company’s image through the eyes of customers and identify weaknesses that lead to dissatisfaction among the audience. It shows exactly what needs to be improved or strengthened to enhance the quality of services provided and presents a real picture of the customer’s relationship with your company/brand.

NPS helps to determine the effectiveness of recent changes. For example, if a new website layout has been implemented, based on the survey, we can verify the issues reported by users or the overall level of satisfaction.

The NPS metric is also used for benchmarking, which involves analyzing the market environment. Comparing the loyalty level obtained in the survey with the competition’s results helps evaluate the actual position of the brand/company in the market. For instance, achieving a score of 22% should not cause excessive concerns if, compared to other companies in the market, this result is high.

It is best to conduct such assessments periodically and treat it as an ongoing study to monitor the fluctuating level of the metric and, consequently, the fluctuations in customer loyalty towards the brand.

In summary, the advantages of NPS survey include:

Ease of conducting the survey
Ease of analysis
Utility
Flexibility of the study
Indicator of growth
Applicability of the solution

Disdvantages of NPS survey

Whether NPS software is a good or bad tool depends on how the survey is conducted. The success of the satisfaction survey depends on various factors, including:

The method of data collection and questionnaire construction,
The quality of drawn conclusions and actions taken based on them,
The strategy and frequency of sending out surveys.

Therefore, to make the customer satisfaction and loyalty survey meaningful and deliver the expected results for your company, it should be approached with proper preparation and planning so that customer can leave qualitative feedback.

It is also essential to remember that the NPS result alone may not be very informative without the appropriate context. It is best to assess it in relation to the weeks, months, and quarters in which business actions were taken.

When considering the pros and cons of implementing the NPS metric, it is worth noting that a satisfied customer is likely to recommend the product or service to an average of 5 other people, while an unsatisfied customer will likely discourage up to 9 people.

How to create an NPS survey?

Creating the survey is relatively easy, but it should be noted that it is not a one-time task; it should serve us over an extended period or become a regular element of our services. Firstly, we need to decide on the format and platform for placing our form. It is recommended to use online surveys sent to respondents’ email addresses, which allows for monitoring and storing responses in one place.

There are various websites offering ready-made templates for creating the form or tools for efficient self-creation. Besides online surveys, they can be done directly in emails, on our own website, through SMS or phone contact, and also in the traditional paper form, if applicable to physical locations.

Regardless of where the NPS survey is conducted, the survey questions are the most important aspect

The questionnaire should include any number of basic questions that will serve as the main source of data. Additional supplementary questions can be added to facilitate the analysis of the obtained responses. Only optional questions can take the form of open-ended questions and request an explanation for the answer.

At the end, you can also add a text field for respondents to provide additional comments or share specific experiences if they wish. If you plan to contact respondents individually to discuss their feedback, it’s essential to ask for their consent for follow-up questions after sending the survey. If the response is affirmative, the next message may ask for their contact number or email address.

The survey can be customized based on the customer’s contact channel. It can be different for a customer at a physical store than for a customer at an online store because they may have different experiences and, most importantly, interact with different employees. Since customers evaluate the service based on interactions with specific employees, the content can include the ID number of the consultant or employee who served them. The results will reflect the quality of that employee’s work, and the employer can use this metric to create a monetary incentive system, rewarding those employees who receive the highest ratings in customer reviews. The gathered customer feedback will allow the employer to identify knowledge and competency gaps within the team and take actions to improve the quality of their work.

Example of NPS (Net Promoter Score) research on customers

Individual NPS survey points should be constructed in a clear and understandable manner. Responses should be provided in the form of numerical values on a 0-10 scale. These questions could be related to customer service, company image, or whether they would recommend the product to their friends. By collecting this data, we can gain valuable and actionable insights into what respondents think about your company and implement appropriate improvements to acquire new customers. An example question is provided in the image below.

Effective NPS Survey – Here are 5 tips

Create a short survey. The survey should not take longer than 5 minutes to complete. Lengthy surveys can discourage respondents from providing answers. Let’s try to include the ultimate question, which is the fundamental question.
Avoid suggesting answers. Craft Net Promoter System questions that do not lead respondents towards specific responses.
One question, one answer. Combining two unrelated topics in one question can confuse the respondent.
Set a goal. Create a questionnaire focused on a specific issue, such as CX in-store, for example.
Identify the right target group. Ensure that the questions reach the appropriate individuals who use your company’s services and are not brand advocates, as this might skew the results.

Mistakes in creating NPS survey questions

The most common mistakes that reduce the reliability of the conducted survey are:

Too many survey points leading to prolonged survey duration. Surveys taking more than 15 minutes are estimated to discourage respondents from completing them fully, leading to form abandonment or random number selection to expedite the process. Let’s try to keep the number of points to a minimum while still obtaining meaningful data.
Lack of the option to skip questions. Not all customers will be affected by all the listed aspects of service. If a respondent cannot truthfully answer a question, they may select any answer, resulting in skewed results and rendering the survey unreliable.
Using evaluative words with excessive positivity. For example, “How do you rate the service of our outstanding team?” This could unnecessarily irritate a customer who had mixed feelings before starting the survey.
Overzealous distribution of surveys. Sending surveys too frequently will cause customers to stop filling them out, as they might have already completed one just a week or two ago.

How to calculate the Net Promoter Score?

We already know that data to calculate your NPS among consumers is collected by solving a questionnaire in the form of a survey, using a closed-ended question on a scale of 0-10. We ask customers about their willingness to recommend the company or brand to others. Respondents provide answers on a scale from 0 to 10, where 0 represents a dissatisfied customer who will definitely not recommend the services, and 10 represents a satisfied customer who will definitely do so. IMPORTANT! ONE QUESTION EQUALS ONE CALCULATION OF THE NPS! So based on the answers, we record the rating for each question separately.

How to categorize responses to calculate the NPS

The received responses are classified into three groups based on the obtained ratings.

Promoters – They respond with a score of 9 to 10. This group consists of individuals who positively evaluate the brand/company, are highly satisfied with its products and services, and are loyal to the company. These individuals are likely to share their positive experiences and opinions with their close ones. Promoters consider occasional instances of poor service quality as isolated incidents and remain loyal. However, it is essential to maintain services at a consistently high level since they are usually the ones contributing the most to the company’s profits. People in this group also have the highest potential to become brand ambassadors. They are indispensable for the growth of any company; hence, it is crucial to strive for a high NPS score to retain customer satisfaction and loyalty.

Passives (or neutrals) – Scores of 7-8. Individuals in this group may list both the advantages and disadvantages of the product or service. They are not usually loyal to the company/brand and only occasionally use its services. They can easily switch to a competitor if they find it more beneficial and attractive. If presented with a more attractive offer, they might shift to another company. It is essential to pay particular attention to the quality of products and services for this group to strengthen their association with the brand/company and convert them into promoters. Improving the quality of services is also necessary.

Detractors – The range of 0-6. These individuals have had negative experiences with the brand/company/product. They will share their negative opinion about their interactions with your business, even without prompting or requests. They may express their negative opinions online and discourage others from using your services. Filing complaints adds costs to the company, harms marketing efforts, and repels potential new customers. This group requires special attention and response from the company due to the threat posed by their negative comments. The negative customer perception can significantly damage the company’s reputation and lead to reduced interest in its services among other potential customers, consequently affecting the company’s revenue. It is essential to work on improving the opinions in this group.

Formula for NPS – Deep Customer Insights

Now, we calculate the percentage share of each group. We calculate NPS – the Net Promoter Score, as the difference between the percentage of promoters and the percentage of detractors. The NPS calculation is very easy and quick. To do this, follow a few simple steps:

Obtain high response rate from the NPS survey of the target group of customers.
Divide the responses into the three groups mentioned above based on the obtained scores (passives, promoters and detractors).
Record the count of each group.
Calculate the percentage of each group in the survey – divide the count of each group by the total number of responses.
Calculate the NPS by subtracting the percentage of detractors from the percentage of promoters. The neutral group’s count is not considered in the calculations.
The number of individuals in the neutral group does not participate in calculating the result. The calculation shows that scores of 7 and 8 do not affect the NPS survey results.

The collected responses are presented in the form of a percentage share in the total number of respondents, and this will serve as the basis for calculating the average Net Promoter Score. We can use two simple formulas below.

NPS = ((Number of Promoters – Number of Detractors) x 100%) / 100

NPS = % Promoters – % Detractors

Calculation of NPS – Example

The company received 100 loyalty ratings from customers regarding whether they would recommend our products and services to their friends. We obtained the following data: 55 ratings from 9 to 10 (promoters), 20 ratings from 7 to 8 (passives), and 25 ratings from 0 to 6 (detractors). Plugging these numbers into the first formula or subtracting the percentage of detractors from the percentage of promoters as in the second formula, we get the following:

NPS = ((55 – 25) x 100%) / 100 = 30

NPS = 55% – 25% = 30

Second example. Let’s assume that the company collected 400 responses. After categorizing them according to the given ranges, we obtained the information that 85 responses were between 0 and 6, 147 responses were 7 and 8, and 168 responses were between 9 and 10. So, the percentage share of each group is as follows: detractors 21%, passives 37%, promoters 42%. Calculating the NPS using the given formula, we get NPS = 21% (42% – 21%).

What is a good NPS score?

NPS values range from -100 (where every respondent is a critic of your business) to +100 (where every customer is willing to recommend your business). If the NPS score is positive, it means that there are more individuals in the customer group who rate the product or service positively than there are detractors.

An NPS score below 0 indicates that the customer group has more individuals who are disappointed with the company’s services. Such a result is a signal to take immediate action to elevate customer satisfaction. If more customers are critics than promoters, it may suggest that the company should improve the quality of its products or services.

Positive values are considered good results, and values above 50 are considered excellent, indicating that the majority of customers are loyal to your company.

The NPS score obtained in the example above, which is 30 and 21, is okay. The company is not currently at risk, but it doesn’t mean that one can relax and not work on improving the quality. Efforts should be made to increase this number. Above 30, your brand is well-managed, and you have strong customer loyalty to your product/service.

Benchmark NPS – Compare the Score with the Market

The second part of assessing whether the calculated NPS score is good involves conducting a market study of our data. The NPS score should be compared with the results of other companies in the same industry or with the ratings obtained by our company in previous periods.

We check the industry benchmark – how other companies performed in comparison to us. If our score is just slightly below 0, it may not look great. However, when we compare it with the competition, whose ratings range from -30 to -60, we will realize that a score of 0 indicates a quite good result.

Below are the NPS benchmarks for industries presented in the “NICE Satmetrix NPS Benchmark” report from 2020, which involved approximately 66,000 respondents from 23 different sectors.

NICE Satmetrix NPS Benchmark 2020 – NPS score by industry
source: https://www.satmetrix.com/webinar/the-2020-nice-satmetrix-nps-benchmarks/

How do NPS surveys fare among well-known companies? According to “NICE Satmetrix NPS Benchmarks” from 2018, the results are as follows:

Amazon – 68 points
Netflix – 62 points
Apple – 60 points
DHL – 45 points
Airbnb – 43 points

How to Increase NPS Score?

Happy customers is something everyone wants to have, so let’s not force changes in NPS questions. For example, changing the question from “Would you recommend the product or service on your own?” to “If you were asked?” may result in a slight difference in questions but can lead to a greater increase in customer loyalty and satisfaction, perhaps by several points. Let’s try not to bias the rating scale because it is not symmetrical and could work in our favor without bringing about true changes.

Under no circumstances should we ask for a positive rating through discounts or coupons for future purchases for completing the survey. There is a risk of attracting a group of people solely focused on gratification. The NPS rating must be earned for it to be reliable.

How to Improve NPS Score – Proven Methods

Before sending the survey or in the message containing the survey link, it is worth explaining what the NPS survey is and what it is intended for. If the customer does not know exactly what they received and why they should fill it out, they may simply ignore our message or click anything to finish quickly. It’s valuable to include a short and clear explanation of what this form is, why it is essential for us that they complete it, and what the answers will give us.

Good graphics also encourage participation. Adding diagrams, emoticons, colors, and graphics not only suggests to the customer what is what, but also captures their attention and encourages them to complete the form. Using color scales also emphasizes the importance and significance of the scoring.

However, the priority will be to analyze the obtained responses and identify recurring problems. Fixing these issues will be crucial to increasing customer satisfaction and loyalty. It’s worthwhile to add complementary content to the next survey, for example:

What influenced your opinion?
What do you like most/least about our service?
How can we improve your customer journey?
We are delighted that you rated us so highly. Please tell us why?

Once we understand the reasons for our customers’ disappointments, we can develop a recovery plan and begin working towards improvement.

It’s also a good idea to contact passive individuals, those with a neutral attitude towards the brand, classified into the second group. These individuals can be quickly influenced by critics to change their attitude towards the brand or become its promoters through our actions and appreciation. If we call a specific customer, showing genuine interest in their feedback and expressing a willingness to make changes, they will feel valued and will happily continue shopping with us to see if the changes were implemented. They will also have positive impressions of the brand’s customer care.

Once we receive the NPS score – how can we improve it? To improve the result, we should focus on improving the quality. Build a strong relationship with our customers.

Identify the causes – it could be poor customer service quality, problems with your product suppliers, or inaccurate product descriptions.
Regularly communicate with customers and respond to their needs as quickly as possible. This will help increase trust.
Periodically monitor the NPS result. This will allow us to adjust the appropriate strategy to our audience’s needs.
Always ensure high quality in the products and services we offer to customers.
Offer special promotions, events, or loyalty cards for loyal customers. By showing appreciation to loyal customers, they will choose our company more often, and, most importantly, they will identify with it.
To increase the NPS score, it is important to regularly survey your customers. This will allow us to track customer sentiments and identify areas that require improvement.

How to effectively increase customer loyalty?

Let’s act based on qualitative feedback,
Let’s pay attention to what we can improve to enhance relationships with critics,
Let’s strive to find recurring issues and resolve them. This will improve opinions about our company,
Let’s implement appropriate marketing actions. This will lead to increased customer satisfaction,
Let’s use analytics and insights based on data to understand how customers interact with your products or services, which will help you identify improvement opportunities,
Let’s compare ourselves in the region against competing companies.

NPS – Conclusions

The key to achieving success is, of course, drawing conclusions from the gathered responses. The percentage of participation can give us an idea of the company’s current situation or how we compare to others. However, if we aim for improvement and want to rise above, we must make the most of the gathered information. After identifying strengths and weaknesses, a plan of action should be devised. Then, both feedback and new findings should be communicated to all employees, especially those in direct contact with customers.

Taking immediate action to generate increased customer satisfaction will be the key to achieving success. Implementing these steps will help companies increase the NPS score and ensure loyalty from your customers. By actively listening to customers and responding to their needs, we can build trust with them.

And if you want to know what your NPS is among your customers, consider entrusting us with customer service with continuous quality control. At CCIG, we have been providing professional outsourcing contact center services for businesses for years.