How to calculate Net Promoter Score (NPS) and Why is it important
Customer experience management (CXM) is currently being used by every firm in every industry worldwide in order to maintain their market dominance. Recognizing, revising, restructuring, and maintaining CX strategies offered by customer experience companies is a part of this CX transformation. The Net Promoter Score (NPS) became a significant game-changer after sticking to CX in a dynamic and repeating method to be able to monitor the outcomes and progress in business.
What is a Net Promoter Score (NPS)?
The Net Promoter Score is a metric used in customer experience management to assess a company's customer loyalty and satisfaction. It typically employs a series of questions such as "How likely are you to recommend this product to your friends on a scale of 1-10?" The business improves and enhances its product/service, support, delivery, and communication based on the aggregate of the net promoter score calculator and net promoter score calculation to retain customers and expand the scope of the business.
How is a Net Promoter Score calculated?
The net promoter score formula is:
NPS = % of Promoters - % of Detractors
NPS calculation is based on the percentage of promoters (those that answer with a 9 or 10) subtracted from the detractors (those that answer under 6). The net promoter score uses a stable and calculated net promoter score scale. So, what are the 3 net promoter score (nps)?
- Detractors (0-6) - who are most likely not going to recommend your product or service. They may not return to your product or service and may also specifically discourage others from using your product/service.
- Passives (7-8) - who may not recommend you but also won’t necessarily bad-mouth your brand. They usually enjoy the product or service but are open to competitors in your market and also uninterested in promoting your brand.
- Promoters (9-10) - who are actively promoting your brand. They are loyal customers that act as brand ambassadors. They enjoy your product or service and will come back for more while also spreading the word and increasing your growth.
How to interpret a Net Promoter Score?
The net promoter score calculation is determined between -100 and 100. Any score of negatives means there are more detractors than promoters whereas a score of positive means there are more promoters than detractors.
-100-0is a bad NPS score
0-30is a good NPS score
30-70is a great
70-100is an excellent NPS score
However, the net promoter score varies according to industry. For example, a leading firm averaged the NPS score for Healthcare in India to range from 31 to 20, with the lowest score being 20. The highest value for the Communication Media sector was 20 and the lowest was -6, according to the same company. These were businesses that were doing well and were market leaders in their respective industries. In fact, in 2018, industry leaders and global corporations such as Netflix had an NPS score of 64, Paypal 63, Google 53, Amazon 54, and Apple 49. Nobody has ever gotten a perfect score of 100! A negative NPS score, on the other hand, is bad in every company and necessitates significant improvement in the product/service and the company as a whole - a perfect reason to consider customer experience as a long-term engagement.
How to collect an NPS feedback?
There are 2 major ways to collect an NPS score. You can choose to do so randomly while a customer is looking at your product or service or after they have made a purchase.
- Website surveys: done while the customer is exiting your page or after completing a purchase. If a customer picks between 0 and 8 (detractors - passives), companies usually apologize for the negative experience and trigger another question “What can we do to improve the experience? If they are a promoter they follow up further with questions like “What’s the main reason for your score?”. Companies also ask what they would like to be added to better their experience.
- Email surveys: sent after purchase or interaction with a business. They are more complex because they require the customer to be redirected to a different page and also take more time with no certain guarantee that it will be filled out. There is also a significant chance of delay. However, that may turn out to be beneficial because companies can get a full picture after a customer has completed their journey temporarily.
Why is NPS score important?
- Word of mouth: businesses always rely on word of mouth traffic to be the best form of advertising. Nothing comes next to a happy customer that openly advocates for your brand. In fact, 92% of customers in the U.S say that they listen to the advice of their family and friends when it comes to choosing a brand. NPS tells you exactly how many people would do that for a business and how likely it is for you to have that type of customer loyalty.
- Customer perspective: we have already accomplished the fact that the customer is king and should be put on a pedestal which is why companies continuously work on checking the churn rates and the number of repeat purchases. Although a business invests time in meetings that discuss numbers and graphs, it so happens that the customer perspective is left behind. NPS is the perfect way to bring about the customer perspective where businesses can directly work on what can be changed – saving time and effort.
- Real-time update for product/service improvisation: real-time customer feedback is incredibly valued. The negatives of your business can be recognised very easily with real-time updates and that can trigger you to make swift changes in the product/service. It is an added plus point that NPS is a numerical rank with a qualitative question.
- NPS is easy: it doesn’t consume too much of your customer’s time which is why they are more likely to answer the survey. It barely takes a couple of clicks and also gives you a clear idea of where you, as a business stand. Customer feedback softwares are also easy to install on your website. It can be triggered at any point of the customer journey hence issues can be identified at various stages and touchpoints.
If you want to expand and give your rivals a tough fight, you need a high net promoter score for your company to achieve customer experience transformation. It assists you in determining in real-time where to focus your time and energy while giving your consumers a sense of involvement in the process, ultimately boosting customer satisfaction, customer loyalty, and sales.
Our CX solutions are focused on transforming the total customer experience through surveys, metrics, analytics and auditing by using the CXM framework to combine physical measurements with digital Platformation™ capabilities. We are committed to finding the right customer experience strategy that can lead to a competitive advantage.
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