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 practically an expert on the subject and will understand some fundamental concepts and strategies for starting 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 for recommendations .
Recommendations from friends and family are incredibly valuable to your customers. According to Nielsen's Global Trust in Advertising Report 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.
buzz these days , especially on mobile devices, your customers can quickly share recommendations and negatively review your business with the push of a button.
In addition to making this feedback collection much faster, it's essential to focus on resolving negative experiences to turn these customers into evangelists for your brand .
And it's at this stage that NPS comes into play, as a system to improve the customer experience . Let's talk more about it.
What is NPS (Net Promoter Score)?
NPS or Net Promoter Score a metric developed to measure customer loyalty levels 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 indicator that is known worldwide and used in all segments.
In general, the metric assesses how likely respondents are to recommend 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'll want to share that experience with others, right?
And the Net Promoter Score℠ 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 wide dissemination of NPS is due to its simplicity , in addition, the metric is used by big brands such as Apple , Airbnb , Netflix , Amazon , which direct the focus on the customer, and differentiate themselves from their competitors by creating a learning cycle with those who are using their service or product.
When was the Net Promoter Score℠ developed?
NPS metric studies began in 2000, more specifically by Fred Reichheld, a partner at the company who customer loyalty practice at the time.
The concept emerged after decades of field experience and market research with clients, advising senior company executives on issues of customer loyalty and growth .
Realizing the limitations of the traditional customer survey approach—highly complex, time-consuming, labor-intensive, and with low response rates—Fred Reichheld led his team of consultants to find a definitive question that could reveal the link between customer experience and business growth.
The research project generated an article published in the Harvard Business Review in 2003, called “ The one number you need to grow ”.
In short, 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 around the world encouraged the team to further develop the metric into a broader management model.
Fred Reichheld and Rob Markey subsequently 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 rumor has it they are further refining the metric in the next edition of The Ultimate Question.
NPS Calculation: How to correctly measure this metric!
After your customers complete 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.
Neutrals (score 7-8) are relatively satisfied customers who purchase with average frequency and are vulnerable to competitive offers.
Detractors (score 0-6) are dissatisfied customers who can damage your brand and impede growth through negative word-of-mouth.
Knowing the three categories your customers fall into, the next step is 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 isn't an absolute score, and this metric varies across different segments. So what counts as a good NPS score depends on your company's industry, the methodology used, and the survey channel (email, app, SMS, web).
According to a 2018 NPS benchmark report Temkin , the average Net Promoter Score℠ for auto dealers is in the range of 39, with 20 being the lowest, while the average NPS for service providers is in the range of 0, with the lowest being -16 and the highest being 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 may be the worst in the industry, for others it may be ranking 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 customer experience management!
It's crucial to understand what your customers think of your company, what the positives are, and what needs improvement. Below are some points that explain the use of NPS:
#1 Simple and fast
A simple question is all it takes to determine your NPS score, and it's also very easy to calculate and interpret 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 recognized 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 responsiveness of your customer support, the ease of use of your application, the efficiency of your particular business processes, and much more.
#5 Direction
Understanding your audience's needs and expectations is what should guide your company toward changes and improvements . NPS is an excellent source of feedback on how you can improve your product or service.
Detecting bugs, avoiding common mistakes early in the customer experience, and prioritizing tasks by coming up with additional feature ideas are among the valuable insights you'll gain.
Net Promoter Score and Net Promoter System: What is the difference between them?
So far, the term most people are familiar with is the Net Promoter Score℠, which is the method for measuring customer loyalty , right?
But after getting the survey 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 that will eventually need to be closed.
This closure typically occurs when the customer is given feedback on their feedback. But this 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 being 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 responding to the survey in order to resolve the customer's problem, if they have complained, and the employee who provided the service .
Outer Loop Closure:
closure seeks to prioritize, in a friendly manner, the easiest and quickest solution for the customer , to make them a loyal consumer.
A really cool example of external loop closure that I can share was with Nubank.
Imagine you work in customer service at a bank and receive a message from a customer saying their new credit card was eaten by a dog. What would your reaction be? Or rather, what reaction would the bank where you work allow you to have?
Well, the Nubank representative who received this request not only sent the new card but also sent a purple treat for the dog to enjoy. Pretty cool, right? It's no wonder this story ended up trending on social media! Check out the details here.
📌Check out: Closing the Loop with Customers: The Science of NPS
Inner Loop Closure:
closure 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 cycle closure.
In this situation, a customer complained about unsatisfactory service . The customer approached management to complain about an employee's performance.
Since the customer went to the manager to complain, the manager will be the one to 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 parties find an internal solution to ensure this type of situation does not happen again.
It is important to close the loop with all customers, not just detractors and neutrals, but also promoters.
After all, recognition and gratitude for feedback is also considered closing a cycle.
How to apply the Net Promoter Score correctly in your business
At this point, you know what questions to ask and how to calculate your score, right?
For the NPS system to work and generate tangible results for your company, you need to continually measure and analyze customer feedback. Check out this step-by-step guide:
#1 Segment your target audience
The first step to making NPS happen is to segment the audience you'll send the survey to. In this step, 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 case of B2B, is this the best contact to be sent? (Influencer)
- my NPS survey be relational or transactional ?
Describe who this audience will be and how you will segment them.
#2 Define the point of contact
After segmenting, you need to choose how you'll send the survey. You can start by looking at your database.
- What contact details do you have for your customers?
- What is the best channel to talk to them?
Some companies use SMS , email, social media – others administer the questionnaire directly in their software.
Choose the method that makes the most sense for you from the options you have.
#3 Ask the right questions
Adapt the questions to your company's scenario. We suggest asking one or two questions.
The priority 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 about how your solution performs from the customer's perspective.
The second question is qualitative . It aims to understand what motivated the customer to give this rating. Depending on how it's phrased, it can even help you identify potential bottlenecks in your company and turn them into an action plan.
A good follow-up question is: "Thank you so much for your feedback. Can you tell us what motivated you to give this rating? "
Did you know that in addition to the standard NPS question we're already familiar with, it can be applied in different ways? We've written a comprehensive article on the subject: NPS Question: Learn about its application variations. Check it out!
#4 Submit your survey
Sending your survey depends on the contact point, which we discussed earlier. Basically, the survey can be sent via email, via the web, embedded via iframe, via SMS, or even 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.
At first, don't pay too much attention to the response rate. The initial focus is on understanding your customer's opinion, and after that, think about optimizing and improving these indicators.
If you're unsure about the best method, test different collection points to see which channel has the highest response rate.
#5 Time and Frequency
There's no set rule for determining the timing and frequency of NPS assessments. You can determine what you believe best fits your situation, based on your own reports.
In our experience, we've found that for SaaS solutions that use relational search, a quarterly assessment can be sufficient. This can then be incorporated into team 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 set from the customer's perspective, considering their lifecycle.
For transactional business models, try to survey the customer soon after a purchase or event, but with enough time for them to use and reflect on the purchase.
Optionally, for more expressive customers, you can set a survey cadence. A good example for this model is: 7 days after purchase, 6 months after purchase, and 12 months after purchase.
#6 Monitoring and optimization
The key to NPS is not the metric itself, but the closing of the cycle you create with your customers or employees after the action.
The number responded is just an indication of the expectation vs reality that the customer had with your brand.
The real results will come when you can use this number as an indicator of your experience, regarding 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 survey is biased, right? This question makes perfect sense, because NPS, like any survey metric, can be biased toward 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 them in your business:
- Partial sampling: not conducting satisfaction surveys with detractors, targeting a small number of close 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 its segment, customers tend to avoid negative reviews.
- Requesting scores: It's quite common these days for companies to reward their employees based on NPS scores. However, this practice should only be implemented once the company's NPS is well established.
- Strategic calendar: A strategic calendar or a specific event can increase your satisfaction score, precisely because it addresses customer emotion.
- Color scale: While survey template artwork may look cool and capture customer attention, too much of it can actually influence 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
Have you worked hard to achieve a high NPS score , but now you're unsure of your next steps? 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 experience marketing that generates referrals, encourages new customers to sign up for your product or service, and even accelerates your company's growth rates.
While it may seem obvious, many companies don't view their promoter customers as a marketing asset , but rather as a guarantee that their product or service is satisfactory. In Brazil, this culture of making recommendations isn't as widespread as it is in the United States, for example.
So, no matter how great your promoter customers think your product or service is, few of them will share that experience unless you ask them to. We've selected four strategies for you to use:
1) Use testimonials: One of the simplest ways to turn your promoters' feedback into a valuable marketing resource is through an email follow-up and 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. Therefore, referral programs increasingly help businesses grow by engaging and leveraging the brand's greatest assets: its customers.
3) Create success stories with your customers: If you have a customer who is achieving incredible results with your solution, it's time to develop a success story to tell others about how your customer achieved amazing results using your service.
4) Request reviews from your customers: Customer experience encompasses every aspect of the consumer's journey with your brand. But do you know which of these aspects has the most influence on your customer's purchasing decision? The review !
A review is nothing more than the opinion of real customers, serving as social proof for other buyers' decision-making.
Today, 93% of consumers consult reviews before purchasing (Bright Local). They're choosing products and services based on shared experiences! So, to generate more sales and a higher 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, research-driven approach to an integrated system that prioritizes the customer journey , rather than just survey data.
But remember, the key to NPS is not the metric itself, but the closing of the loop you create with your customers or employees after the 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 , not just a measurement methodology. Furthermore, the customer journey must be considered throughout the entire customer lifecycle. To help you better understand this, we've created a comprehensive article on NPS and NPS2: Understanding the Difference .
6 Success Rules for Measuring NPS
According to Fred Reichheld, creator of the book The Ultimate Question , there are some rules for success when 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 long questionnaire with different metrics.
2) Choose a scale that works: According to the book The Ultimate Question, there's no one-size-fits-all scale. As the author himself states, the goal of NPS isn't scientific rigor in research, but rather a reliable system for collecting feedback. Bain & Company was always open about the scale type initially, but over time, the company that created the metric found some advantages in the 0-10 scale.
3) Importance of high response rates: Response rates are crucial for interpreting survey data and gathering as many diverse opinions as possible about your product or service. Relying on a small sample of customers is not recommended; you need a larger sample or a complete census to ensure data reliability.
4) Customer focus as an organizational culture: according to the Ultimate Question book, for NPS to achieve extraordinary results and operate easily within companies, the senior leadership team, especially C-levels, personally take on the improvement of customer loyalty through the Net Promoter System℠ .
5) Customer experience across the company: Another very important point the book makes is that companies must link customer feedback to the decision-making processes at all levels of the organization, creating closed loops of learning and improvement. Instead of turning customer experience into a department, the ideal is to make these metrics and actions comprehensive for the entire company.
6) Closing the loop: Closing the loop is the action you should take with customers after they complete your survey. Fred Reichheld says closing the loop is the heart of NPS. If you don't apply this action to your surveys, you'll only get one score and miss out on the key part of the process—learning.
Conclusion
While 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 customer experience information . Ideally, you should diversify your metrics to gain an overall view of your operations and identify different business perspectives.
After all, your customers will use a variety of channels to express their concerns, frustrations, and compliments—and it's up to you to stay active on these 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 closing, 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 NPS.
This will be a long-term project, but NPS allows you to perfectly assess where your organization is in the growth process.
📌IMPORTANT REMINDER!
Check out our super complete and updated article : Customer Journey: What is it and how to map yours? We've answered all our audience's main questions and it's packed with rich supplementary 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.
