If you're looking to understand what NPS is and how to apply it to your company, you're in the right place!
By the end of this article, I bet you'll be almost an expert on the subject and will know some fundamental concepts and strategies to start a customer experience monitoring program. But first, I need to ask you a question…
What do you usually do when you need to choose your next vacation destination? Or how do you decide whether to buy a certain product or hire a different service?
Well, I don't know about you, but I usually do two things. First, I research the product online, and second, I ask my friends for suggestions or recommendations
Recommendations from friends and family are incredibly valuable to your customers. According to Nielsen's Global Trust in Advertising Report , 92% of consumers said they completely trust recommendations from family and friends more than any other form of advertising.
So even if you do everything right and have the best product on the market, a single bad customer experience with your brand can cost you dearly.
Nowadays, with the "buzz" of social media, especially on mobile devices, your customers can quickly share recommendations and negatively review your business with just the push of a button.
In addition to making feedback collection much faster, it's essential to focus on resolving negative experiences, turning these customers into brand evangelists.
And it is at this stage that NPS comes into play, as a system to improve the customer experience. Shall we talk more about it?
What is NPS (Net Promoter Score)?
NPS , or Net Promoter Score , is a metric developed to measure customer loyalty levels . It was created in 2003 by Bain & Company consultant Fred Reichheld , in collaboration with Satmetrix .
The goal was to determine a consistent and easily interpretable score that can be compared over time across different industries.
Furthermore, Fred always wanted to justify the relationship between customer loyalty and company growth; with this in mind, he created this globally recognized indicator used in all sectors.
In general, this metric assesses how much a respondent recommends a particular company, product, or service to friends, family, or colleagues. The idea is simple: if you enjoy using a product or doing business with a particular company, you want to share that experience with others, right?
And the Net Promoter Score℠ question is simple. On a scale of 0 to 10, your customers rate how likely they are to recommend your company to friends or family. See the image below:
The widespread adoption of NPS is due to its simplicity; furthermore, the metric is used by major brands such as Apple, Airbnb, Netflix, and Amazon, which focus on the customer and differentiate themselves from their competitors by creating a learning cycle with those using their service or product.
When was the Net Promoter Score℠ developed?
Studies on the NPS metric began in 2000, specifically by Fred Reichheld, a partner at the firm who led the customer loyalty practice at the time.
The concept emerged after decades of field experience and market research with clients, advising senior company executives on customer loyalty and growth.
Recognizing the limitations of the traditional approach to customer research—being highly complex, time-consuming, laborious, and with low response rates—Fred Reichheld led his team of consultants to find a definitive questionthat could reveal the link between customer experience and business growth.
The research project resulted in an article published in the Harvard Business Review in 2003, titled "The one number you need to grow".
In summary, the findings revealed the ultimate question:
"On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?"
The success of the work and the rapid adoption of the metric in organizations worldwide encouraged the team to further develop the metric within a broader management model.
Fred Reichheld and Rob Markey later published two books: The Ultimate Question: Driving Profits and True Growth in 2006 and The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World in 2011, and according to rumors, they are further refining the metric that will be included in the next edition of The Ultimate Question.
NPS Calculation: How to correctly measure this metric!
After your customers respond to your survey, they will be divided into three categories based on their Net Promoter Score℠:
Promoters (score 9-10) are loyal enthusiasts who will continue to buy and recommend your products to others, fueling the growth of your business.
Neutral customers (scoring 7-8) are relatively satisfied customers who buy with average frequency and are vulnerable to competitive offers.
Detractors (score 0-6) are dissatisfied customers who can damage your brand and hinder growth through negative word-of-mouth.
Knowing the three categories your customers fall into, the next step is to calculate your company's NPS
To do this, you need to subtract the percentage of detractors from the percentage of promoters, thus obtaining a score between -100 and 100.
What is a good NPS score?
Well, the first thing you should know is that NPS is not an absolute score, and this metric varies according to each segment. So what counts as a good NPS score depends on the sector your company belongs to, the methodology applied, and the research channel (email, app, SMS, web).
According to a 2018 NPS benchmark report developed by Temkin , the average Net Promoter Score℠ for car dealerships is in the range of 39, with 20 being the lowest score, while the average NPS for service providers is in the range of 0, with the lowest being -16 and the highest 19. See the image below:
This means that you can't say much about a company just by looking at its absolute NPS, without considering its relative performance in that segment.
While for some companies an NPS of 30 might be the worst in the industry, for others it could be ranked among the market leaders.
If you approach NPS from a quantitative perspective, your expectations will likely not be met.
Instead, view the NPS methodology as a way to understand your customers and implement best practices to increase their loyalty.
But why use NPS? Understand its importance for managing customer experience!
It's very important to know what your customers think about your company, what the positive aspects are, and what needs improvement. Below are some points that explain the use of NPS:
#1 Simple and fast
Just one simple question is enough to determine your NPS score, plus it's very easy to calculate and interpret the survey data.
#2 Quantifiable
Management will have tangible data to see how their company is performing with a simple metric that is easy for all departments to understand.
#3 Standardized
Widely known as the standard for measuring and improving customer loyalty, the NPS score can be easily compared with competitors in the same industry or country.
This practice will help you better understand your current situation and how other companies in the same segment are doing.
#4 Macro view
The metric reveals customer sentiment regarding the quality of your product or service, the promptness of customer support, the ease of use of your application, the efficiency of specific business processes, and much more.
#5 Direction
Understanding the needs and expectations of your audience is what should guide your company towards change and improvement. NPS is an excellent source of feedback on how you can improve your product or service.
Detecting bugs, avoiding common mistakes in the early stages of the customer journey, and prioritizing tasks by presenting additional feature ideas are among the valuable insights you will gain.
Net Promoter Score and Net Promoter System: What is the difference between them?
Up until now, the term most people are familiar with is Net Promoter Score℠, which is the method for measuring customer loyalty, right?
But after obtaining the research results, what are the next steps? What actions will be taken regarding the NPS calculation?
When you encourage your customer to register their opinion about your product or service, you open a loop (cycle) that will eventually need to be closed.
This closing process typically happens when giving feedback to the customer regarding the opinion they registered. But this task isn't always easy, as it requires control and organization. That's why the Net Promoter℠ System.
The Net Promoter System℠ is the NPS methodology taken to the next level, transforming results into actions focused on customer feedback.
The system focuses on closing the loop, which, in short, is the action that must be taken after a survey response in order to resolve the customer's problem, if they have complained, and the problem of the employee who provided the service.
External Loop Closure:
closing aims to prioritize, in a user-friendly way, the easiest and quickest solution for the customer, in order to turn them into a loyal consumer.
A really cool example of external loop closure that I can share is with Nubank.
Imagine you work in customer service at a bank and you receive a message from a customer saying that their new credit card was eaten by their dog. What would your reaction be? Or rather, what reaction would the bank where you work allow you to have?
Well, the Nubank employee who received this request not only sent the new card, but also a purple treat for the dog to enjoy. Pretty cool, right? No wonder this story ended up being featured on social media! Check out the details here.
📌Check it out: Closing the loop with customers: The science of NPS
Internal Loop Closure:
closing allows frontline teams to understand and evaluate their performance. The goal is simple: to optimize and improve the quality of service provided.
Now let's imagine an example of internal loop closure.
In this situation, there was a customer complaint about unsatisfactory service. The customer himself approached management to complain about an employee's performance.
Since the customer went to the manager to make this complaint, it will be the manager who will resolve the situation with the customer and close the external loop. The internal loop also needs attention.
The cycle will only be complete when the employee receives feedback from the manager and both find an internal solution to prevent this type of situation from happening again.
It's important to close the loop with all customers, not just detractors and neutrals, but also promoters.
Ultimately, acknowledging and thanking people for their feedback is also considered a way to close the loop.
How to correctly apply the Net Promoter Score to your business
At this point, you know which questions to ask and how to calculate your score, right?
For the NPS system to work and generate tangible results for your company, it's necessary to continuously measure and analyze customer feedback. Check out this step-by-step guide:
#1 Segment your target audience
The first step in making NPS a reality is to segment the audience you will be sending the survey to. At this stage, ask the following questions:
- Will the survey be sent to all customers or a specific group?
- Does it make sense for this group of people to receive my NPS survey at this time?
- How many times has the customer/user interacted with my product?
- In a B2B scenario, is this the best contact to send the information to? (Influencer)
- my NPS survey be relational or transactional?
Describe who this audience will be and how you will be able to segment them.
#2 Define the point of contact
After segmentation, you need to choose how you will send the survey. You can start by looking at your database.
- What contact information do you have for your customers?
- What's the best way to get in touch with them?
Some companies use SMS, email, social media – others administer the questionnaire directly through their software.
Choose the method that makes the most sense for you from the options available to you.
#3 Ask the right questions
Adapt the questions to your company's context. We suggest asking one or two questions.
The most important aspect is the quantitative one, which could be: "On a scale of 0 to 10, how likely are you to recommend [this solution] to a friend or colleague?".
This type of question will help you capture the numbers you need to make quantitative comparisons regarding the performance of your solution from the customer's perspective.
The second question is qualitative. It serves to understand what motivated the customer to give that rating. Depending on how it is formulated, it can even help you identify potential bottlenecks in the company and transform them into an action plan.
A good follow-up question is: “Thank you so much for your feedback. Could you tell us what motivated you to give this rating?”
Did you know that besides the standard NPS question we're already familiar with, it has different ways of being applied? We've written a complete article on the subject: NPS Question: Learn about its variations in application. Check it out!!
#4 Submit your research
The delivery of your survey depends on the point of contact, which we discussed earlier. Basically, the survey can be sent by email, via the web, embedded via an iframe, via SMS, or it can even be automated, sent after a specific trigger such as a purchase or ticket closure.
The delivery channel depends on your company's strategy and the type of channel you consider ideal for your customer.
Initially, don't pay too much attention to the response rate; the initial focus should be on understanding your customer's opinion at a basic level, and only after that can you think about optimizing and improving these indicators.
If you are unsure which method is best, test different collection points to see which channel has the highest response rate.
#5 Time and Frequency
There is no fixed rule for defining the timing and frequency of NPS application. You can determine what you believe best fits your reality, keeping your own reports in mind.
In our experience, we've found that for SaaS solutions using relational search, a quarterly evaluation can be sufficient. Therefore, this metric can be included in the team's milestones.
Another option is to schedule the survey to appear to the customer at the end of each 90-day cycle. In this case, the cadence is tailored to the customer's perspective, considering their lifecycle.
For transactional business models, aim to survey the customer immediately after a purchase or event, but allow sufficient time for them to use and reflect on the purchase.
Optionally, for more significant customers, you can define a survey cadence. A good example of this model is: 7 days after purchase, 6 months after purchase, and 12 months after purchase.
#6 Monitoring and optimization
The key to NPS isn't the metric itself, but the follow-up you do with your customers or employees after each action.
The number provided is only an indication of the expectation versus reality that the customer had with your brand.
The real results will come when you can use this number as an indicator of the experience, in relation to the changes you've made to meet your customers' needs. Therefore, take advantage of all the insights derived from variations in your NPS score.
📌Check out our article "7 tips to increase your response rates in satisfaction surveys"
#7 How do I know if my NPS is biased?
You've probably wondered if your research is biased, right? That question makes perfect sense, because NPS, like any research metric, can be biased towards achieving higher scores.
However, you can take several steps to reduce the effects of biased results in your surveys. Check out the main factors that can influence your NPS and how you can correct this in your business:
- Partial sampling: not conducting satisfaction surveys with detractors, segmenting a small number of nearby customers to send the survey, or even excluding responses – which directly influences the NPS score.
- Fear of Retaliation: If a company has market power, either because it is much larger than its competitors or a technology leader in that segment, customers tend to avoid negative reviews.
- Requesting scores: nowadays it's quite common for companies to reward their employees based on NPS scores. But this practice should only be implemented when the NPS system is well-established within the company.
- Strategic calendar: A strategic calendar or a specific event can raise your satisfaction score precisely because it deals with the customer's emotions.
- Color palette: while the artwork in survey templates may seem appealing and capture the customer's attention, many of them end up influencing response behavior, resulting in biased data.
📌Check out more tips in the full article: How do I know if my NPS is biased?
#8 Turning a high NPS into recommendations
You worked hard to achieve a high NPS score, but now you don't know what to do next? How about turning all that feedback into more business by creating a referral program for your customers?
With a customer-centric strategy, you can transform your NPS into a valuable experiential marketing that generates referrals, encourages new customers to sign up for your product or service, and accelerates your company's growth rates.
Although it may seem obvious, many companies don't see their customer advocates as a marketing asset, but rather as a guarantee that their product or service is satisfactory. In Brazil, this culture of making recommendations is not as widespread as in the United States, for example.
So, even if your customer advocates think your product or service is great, few of them will share that experience unless you ask them to. We've selected 4 strategies for you to use:
1) Use testimonials: One of the simplest ways to transform feedback from your promoters into a valuable marketing resource is through an email follow-up, adapting it into a short text or video testimonial.
2) Referral Program: Finding the right method to acquire new customers for your business is hard work. That's why referral programs are increasingly helping businesses grow by engaging and leveraging the brand's greatest assets: its customers.
3) Create success stories with your clients: If you have a client who is achieving incredible results with your solution, it's time to develop a success story to tell others about how your client achieved amazing results using your service.
4) Request reviews from your customers: customer experience encompasses all moments of the consumer journey with your brand. But do you know which of these points has the most influence on your customer's purchase decision? The review!
A review is nothing more than the opinion of real customers that serves as social proof for other buyers' decision-making.
Today, 93% of consumers consult reviews before buying (Bright Local). They are choosing products and services based on shared experiences! Therefore, to generate more sales and a greater chance of repeat business, manage your reviews!
📌Check out more tips in this amazing post: How to turn a high NPS into recommendations
What is NPS 2.0?
The NPS methodology has evolved from a data-driven, survey-based approach to an integrated system that prioritizes the customer journey, rather than just survey data.
But remember, the key to NPS isn't the metric itself, but the follow-up you do with your customers or employees after each action.
NPS (whether the first or second version) is still about measuring, managing, and improving the customer experience.
However, the focus now is on using the metric as a customer satisfaction management, and not just a measurement methodology. Furthermore, the customer journey should be considered throughout the entire customer lifecycle. To help you understand better, we've created a complete article on the subject: NPS and NPS2: Understand the difference.
6 rules for success in measuring NPS
According to Fred Reichheld, author of the book The Ultimate Question, there are some rules for success in measuring the Net Promoter Score℠. Let's find out what they are!
1) Use one metric at a time: one of the main reasons for abandoning surveys is a lengthy questionnaire with different metrics.
2) Choose a scale that works: according to the book The Ultimate Question, there is no single scale that must be followed. As the author himself states, the goal of NPS is not scientific rigor in research, but rather a reliable system for collecting feedback. Bain & Company was initially open about the type of scale, but over time, the company that created the metric found some advantages in the 0 to 10 scale.
3) Importance of high response rates: the response rate is extremely important for you to be able to interpret the data from this survey and have as many different opinions as possible about your product or service. It is not advisable to rely on a small sample of customers; you need a larger sample or a complete census to ensure the reliability of the data.
4) Customer focus as an organizational culture: according to the book The Ultimate Question, for NPS to achieve extraordinary results and operate easily within companies, the senior leadership team, especially the C-levels, personally take responsibility for improving customer loyaltythrough the Net Promoter System℠.
5) Company-wide customer experience: another very important point the book shows us is that companies should link customer feedback to the decision-making processes of all levels of the organization, creating closed cycles of learning and improvement. Instead of turning customer experience into a department, the ideal is to make these numbers and actions company-wide.
6) Closing the loop: or closing the cycle is the action that should be taken with customers after they respond to your survey. Fred Reichheld says that closing the loop is the heart of NPS. If you don't apply this action in your surveys, you only get a score and lose the main part of the process – the learning.
Conclusion
Although NPS has its fans and critics, the most important thing to remember is that customers have more power than ever to express their opinions, which can make or break your brand.
In any case, it's worth remembering that NPS shouldn't be your only source of information about customer experience. Ideally, you should diversify your metrics to get a general overview of the operation, as well as identify different perspectives of the business.
Ultimately, your customers will use various channels to register questions, frustrations, and compliments – and it's up to you to remain active on those channels as well.
The most important thing to remember is that NPS will generate very objective and easily comparable data, perfect for monitoring, and therefore should be used continuously by companies.
In conclusion, NPS is a great starting point precisely because of its simplicity. After analyzing the results, the real work is to act on the feedback collected, to begin improving your organization and developing the necessary actions to improve your NPS.
This will be a long-term project, but NPS allows you to perfectly assess at what stage of the growth process your organization is.
📌IMPORTANT REMINDER!
Check out our super complete and up-to-date article , "Customer Journey: What is it and how to map yours?" We answer all the main questions from our audience and it's packed with rich complementary materials for you to download for free! 😀🤘
NPS is a registered trademark, and Net Promoter Score℠ and Net Promoter System℠ are service marks, of Bain & Company, Inc., Satmetrix Systems, Inc. and Fred Reichheld.