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Net Promoter Score Definition
NPS is a customer loyalty metric that measures how likely customers are to recommend a product, service, or brand to friends and family based on their overall satisfaction.
The score is calculated by asking customers a single question: “On a scale from 0-10, how likely are you to recommend [product/service/brand] to others?”
Using NPS survey responses as input into a customer churn model can help predict when a customer is likely to cancel a service, allowing for follow-up and retention efforts. Segmenting the survey responses by behavior, demographic, social class, or market can also reveal patterns and opportunities for improvement.
However, the NPS score is most helpful when analyzed alongside several other data points– such as CSAT, customer effort score, and value enhancement score–to better understand what might be driving customer responses.
Promoters vs. Detractors vs. Passives
NPS is scored on a scale of 0-10 and customers are categorized into three groups: promoters, detractors, and passives.
Promoters are those who respond 9 or 10. They’re loyal customers who actively recommend the product or service to others, helping to increase customer acquisition.
Detractors, those who respond between 0 and 6, are typically less satisfied customers which can have a negative effect on the brand’s reputation if not addressed.
Passives are customers that respond either 7 or 8. They’re neither strongly satisfied nor dissatisfied with the product or service, representing an opportunity to increase satisfaction and improve customer loyalty.
Net promoter score formula and example
The formula for calculating NPS is quite simple:
NPS = % of Promoters - % of Detractors
This means subtracting the percentage of detractors from the percentage of promoters. This will give you a score between -100 (no promoters) and +100 (all promoters).
Let's say a company asks its customers to rate their experience on a scale from 0-10. If 40% of the customers responded 9-10 (promoters), 10% responded 0-6 (detractors), and 50% were neutral (responded 7-8), then the company's NPS would be 30.
History of Net Promoter Score
The Net Promoter Score was developed in 2003 by two parties: Fred Reichheld, a business strategy consultant and founder of Bain & Company’s loyalty practice, and Satmetrix, a customer experience analytics platform.
NPS was designed to measure customer purchase and referral behavior. To uncover the most predictive question for this purpose, Reichheld's team sent out 20 distinct questionnaires across six different industries to thousands of customers. Reichheld's team found that a single question about recommending a company to a friend or colleague was the most correlated with customer loyalty and growth in most companies. This stand-out question became the basis of the NPS and has since been widely adopted by businesses as a way of gathering customer feedback.
In 2003, Reichheld published an article in Harvard Business Review outlining NPS's value to companies. Unlike other generally accepted methods of measuring customer satisfaction which ask about individual experiences with customer service interactions, NPS asks customers to rate their likelihood to recommend a company based on their general experience: a calculated score that reflects the potential for growth through customer retention and word-of-mouth referrals.
Today, customer service leaders are building cases to remove NPS from their surveys. While executives tend to believe it's an effective way to measure customer loyalty, NPS makes it difficult for contact centers to determine which actions to take to improve performance since it doesn’t share the root cause of the customer’s evaluation. It’s a lagging measure of performance that happens after an interaction has occurred–which doesn’t allow it to be linked back to a unique contact reason.
Another issue with NPS scores is that customers can sometimes respond very literally about whether or not they would and have promoted the company to their family and friends. For example, if they’re using a product or service that isn’t relevant to their family members (or something they consider personal, such as for medical needs), they may answer an NPS survey in a way that makes them appear to be a detractor–even if they are satisfied with the service or product.
How to Use Net Promoter Score
Measure customer loyalty
According to call center statistics, personalized customer experiences lead to stronger customer loyalty. From your NPS survey responses, you can determine your customers’ level of loyalty and if it needs improvement. You can also track changes in customer advocacy over time and compare them against other metrics, such as revenue growth and customer churn rate.
To improve customer loyalty, businesses can use NPS to identify passives. However, due to the lack of actionable data in NPS scores, they’ll need customer demand intelligence tools like Operative Intelligence to turn passives into promoters.
Operative Intelligence can also make limited NPS scores more actionable by adding context to the data. The platform ingests NPS surveys and then shows the contact center which customer drivers of contact have the highest and lowest NPS scores. This links a distinct set of customer needs to each score–making the metric far more actionable for teams across the business. It also provides data on the volume and cost of these drivers at scale, so organizations know what actions will have the greatest impact on customer service, NPA and the bottom line.
Of course, Operative Intelligence doesn’t stop at NPS analysis: the platform pulls and analyzes 100% of inbound interactions to uncover the root causes of contact. It uses AI & machine learning algorithms to:
- Share the volume, cost, and sentiment of every customer inquiry, so contact center leaders know which changes will drive the highest impact improvements.
- Identify which interactions can be automated, creates a business case for change, monitors ROI, and ensures the most effective use of resources.
- Displays agent performance metrics and highlights areas where coaching is needed using easy-to-read dashboards.
With this additional context, customer service leaders can improve the performance of their teams and drive changes at every level of the business.
Operative Intelligence agent dashboards
Increase referral marketing
NPS can also be used to increase referral marketing by taking advantage of promoters’ passion for their product or service. These promoters can help drive acquisition by sharing positive experiences and opinions and encouraging friends and family to try the product or service.
Companies should focus on creating an effective customer advocacy strategy that encourages promoters to share positive reviews and send referrals their way. They can:
- Create an incentive program: Incentives encourage customers to refer friends or family to use your product or service. By providing rewards such as discounts or free products, customers will be more likely to refer others to your brand and help you grow.
- Make it easy: Make sure it’s easy for customers to refer people they know by providing simple forms they can fill out with social sharing buttons next to them. Make sure you provide contact information so customers can get in touch if they have questions or need help.
- Design a loyalty or rewards program: Create loyalty programs that reward customers for their continued patronage with exclusive offers and discounts. Show appreciation for your loyal customers by sending them personalized messages or gifts.
- Reach out directly: Take the time to thank someone directly for a referral, whether through phone calls, emails, or direct messages on social media platforms like Twitter and Facebook. This will show those who referred somebody that you’re grateful for their efforts and will encourage them to continue the referral process in the future.
Improve customer satisfaction
While NPS scores can be a helpful measurement, to truly improve customer satisfaction it's important to dive deeper into what drives these scores.
One way to do that is by gathering and analyzing feedback from detractors. They can provide useful insights that lead to improvements in products, services, and the overall customer experience. It’s also critical to understand why passives score as they do, and how you could turn them into promoters for your brand or business.
Though NPS can be a good guide for customer satisfaction improvement, it doesn’t usually provide all this information directly. However, using it along with customer intelligence tools like Operative Intelligence can provide additional context to customer issues.
Though NPS might identify if there’s a decrease in customer loyalty, Operative Intelligence can determine exactly what it is about a product, service, or company that customers are having issues with. It then shows every inquiry's volume, cost, and sentiment–so contact center leaders know which changes will drive the highest-impact improvements. Armed with this data, organizations can implement the changes required to reduce real customer pain points and improve the entire customer experience.
How do you calculate Net Promoter Score?
You can calculate NPS by doing the following:
NPS is typically measured through customer surveys, which can be conducted through various channels, from pop-ups on website pages to emailed post-transactional surveys created on SurveyMonkey or Qualtrics. Businesses may also use outbound call centers to reach out to customers directly for their feedback.
Once gathered, businesses will need to analyze survey results to determine their NPS score.
Tracking your NPS
By tracking NPS scores over time, you can identify changes to customer loyalty. Here are some tips for tracking your NPS effectively:
- Choose a consistent survey cadence: Decide how often you will survey your customers (e.g., quarterly, bi-annually) and stick to a consistent schedule.
- Use a standardized survey question: Use the same question every time you survey your customers to ensure consistency in your results.
- Collect demographic information: Collecting demographic information, such as age, gender, and location, can help you identify patterns in your NPS score across different customer segments.
- Benchmark against industry standards: Compare your NPS score against industry standards to see how you stack up against your competitors.
- Take action on feedback: Use the feedback you receive from customers to make improvements to your product/service and address any issues that are causing detractors.
However, to improve on any dips in NPS, you’ll need additional metrics to make the data actionable.
Measure & Improve Your Net Promoter Score
Net Promoter Scores can help businesses measure customer loyalty and then make informed decisions about their customer experience strategies. However, though it’s a metric valued by the C-Suite, it often lacks the context and actionable insights customer service leaders and companies need to drive real change.
Operative Intelligence is the best way to drill down on pain points to understand exactly what is bothering your customers. The platform automatically pulls, analyzes, and displays the data needed for businesses to not only improve customer service operations but also discover opportunities for modifying products, services, and organizational policies and procedures.
Operative Intelligence provides more context around customer interactions so you take actionable steps based on NPS scores–and all of your data.
Ready for actionable data that can change the customer experience?