Seventy-four percent of consumers identify word of mouth as a key influencer in their purchasing decisions. This shows you how powerful customer referrals are for businesses at different growth stages. Tracking your Net Promoter Score (NPS) is an effective way to know how likely customers are to engage in word-of-mouth referrals for your business.
This article answers the question, "what is a good Net Promoter Score?" Here, we will show you how to accurately interpret NPS survey results, how to calculate your Net Promoter Score, and vital tips that will help you improve Net Promoter Score for your business.
Net Promoter Score is a customer experience metric that organizations use to measure consumer satisfaction and brand loyalty. NPS surveys use rating questions to collect quantitative responses from participants.
Typically, businesses send out an NPS survey with a simple question like, "how likely are you to recommend our product or service to your network?" And they interpret survey responses to get a clear sense of where their customers stand.
Suppose the number of customers with positive responses outweighs those with negative answers. In that case, you are most likely to have good NPS, although this is subject to other factors like your industry benchmarks. More often than not, a bad NPS is a tell-tale sign of your business shortcomings across different touchpoints.
Whether you're a small business or an enterprise organization, you are always looking to acquire new customers. Referrals from your existing clients are one of the most viable customer acquisition channels for businesses. In fact, 92% of consumers believe suggestions from friends and family more than advertising.
NPS shows if your customers trust your brand enough to pass a vote of confidence and refer your business to their friends and family. But that's not all there is to this customer experience metric. Here, we'll walk you through 5 benefits of Net Promoter Score for businesses.
1. NPS helps you to identify customers who are unhappy with your brand in one way or the other.
Just like satisfied customers are willing to recommend your product to others, unhappy customers will not hesitate to tell others what your brand did wrong.
Once you identify dissatisfied customers, you can have a one-on-one with them, if possible, to know what went wrong and how you can improve their experiences.
2. Net Promoter Score also helps you to acquire new clients. If you have good NPS, you can go ahead to ask customers for reviews, testimonials, and referrals, or even share specific content about your business on social media.
3. The NPS is a management tool that delivers a deeper understanding of the customer and measures customer loyalty.
4. Tracking your Net Promoter Score regularly can help you to improve customer retention rates and reduce churn. You can implement feedback from existing customers to create better experiences for them. Happy customers are willing to buy from you repeatedly and recommend your business to others.
5. Net Promoter Score also boosts your customer lifetime value which is the total profit you get from a single customer during their lifecycle.
NPS surveys use a 10-point rating scale question to collect feedback from survey respondents. Their responses fall into three categories—promoters, detractors, and passives.
A promoter is anyone who opted for 9 or 10 on the scale in response to your question. These are the greatest cheerleaders of your business.
Detractors, on the other hand, are customers who are highly dissatisfied with your product or service. They go for options 0–6 because they are least likely to recommend your business.
Passives are in-between (7 and 8 on the NPS survey scale)—they think your product is okay, but they also have some reservations about it. This means they wouldn't go around recommending your business just yet.
The most significant variables for calculating your NPS are promoters and detractors. An organization's Net Promoter Score can be anything from –100 to +100.
NPS = % Promoters – % Detractors
Here's a simple real-life scenario to show you how this works. Let's say you sent out an NPS survey and you received 100 responses as follows:
The percentage of promoters is 50%, while the percentage of detractors is 10%;
NPS = 50% – 10%
So, your Net Promoter Score is 40%
When you're dealing with high volumes of survey responses, you'll need some help sorting out your survey data and calculating NPS. In this case, you can use a spreadsheet/Excel or an online NPS calculator. Most online survey tools have a helpful NPS feature for this too.
On paper, a good NPS is any score in the positive range, from 1–100. In practice, things can be quite different.
NPS differs from one industry to another, which means what you'd consider a good score in the consumer goods sector may pass as average or poor in ICT.
For instance, the average NPS in the technology industry is +35, while companies providing professional services have a Net Promoter Score of +43. Also, recent findings from the Temkin Study show that the average NPS of the automobile industry is between 20–39 while the average NPS for Internet Service Providers is 0, with the lowest being -16 and the highest 19.
At face value, an automobile business with an NPS of 23 seems to perform better than an Internet Service Provider with a Net Promoter Score of 15. However, we now know this isn't true. The big lesson here is you should never interpret your NPS without context.
There are two things you should check off your list to know if your business has a good NPS.
First, check where your score falls within the general NPS benchmark—any score theoretically above 0 passes for good NPS, a +50 NPS is excellent, and if you have a 70+ score, then your organization is simply world-class.
Next, you should consider the NPS average in your industry. Knowing the average Net Promoter Score in your industry helps you put things in perspective. You can go ahead to compare your score against that of your competitors to get a better sense of things.
Businesses within the same industry but with different geographical locations may have other NPS. Customers in European countries are less eager to rate enterprises high ( 9 and 10), even if they are very satisfied with their overall service delivery. On the other hand, US-based clients have no issue with rating a business 10/10 in NPS surveys.
Unlike CSAT that pays attention to customer satisfaction, NPS is the total of customers' experiences interacting with your brand. Failing or succeeding in one or more of these factors will impact your Net Promoter Score significantly.
For businesses looking to scale, an excellent Net Promoter Score strongly indicates you are doing many things right. NPS is a simple and effective way to measure brand loyalty. Calculating NPS is easy—you can do this manually with the formula or use an online NPS calculator, spreadsheet sheet, or survey builder with the NPS feature.
Many factors come to play to determine whether your NPS is good or not, and this is why you should interpret your Net Promoter Score within the proper contexts. Always consider your industry and business location to know if your NPS meets the standards.
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