What is Net Promoter Score?

Net Promoter Score is a customer loyalty metric developed by Fred Reichheld, Bain & Company, and Satmetrix in 2003. It measures the likelihood of customers to recommend a company’s products or services to others on a scale of 0-10.

Customers are categorized into three groups based on their responses:

  • Promoters (score 9-10): These are loyal customers who are likely to recommend your company to others and continue doing business with you.
  • Passives (score 7-8): These customers are satisfied but not enthusiastic enough to actively promote your company.
  • Detractors (score 0-6): These customers are unhappy and may spread negative word-of-mouth about your company.

The Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters. The resulting score can range from -100 to 100, with a higher score indicating a higher level of customer advocacy and loyalty.

How to Calculate NPS

To calculate your company’s NPS, you’ll need to conduct a survey asking customers to rate the likelihood of recommending your company on a scale of 0-10. The survey should also include an open-ended question asking for the reason behind their rating.

Once you have collected the responses, you can calculate your NPS using the following formula:

NPS = % of Promoters – % of Detractors

For example, if 50% of your customers are promoters and 20% are detractors, your NPS would be 30.

Employee Net Promoter Score (eNPS)

In addition to measuring customer loyalty, NPS can also be used to gauge employee satisfaction and loyalty. This is known as Employee Net Promoter Score (eNPS).

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Similar to NPS, eNPS measures the likelihood of employees to recommend their company as a place to work on a scale of 0-10. The calculation is the same, with employees categorized as promoters, passives, or detractors based on their responses.

eNPS can be a valuable tool for companies to identify areas for improvement in their employee experience and increase employee retention.

Candidate Net Promoter Score (cNPS)

Another variation of NPS is Candidate Net Promoter Score (cNPS), which measures the likelihood of job candidates to recommend a company as a place to work. This can be a useful metric for companies to assess their employer brand and improve their recruitment efforts.

Why is NPS Important?

NPS is important for several reasons:

Customer Satisfaction and Loyalty

Customer satisfaction

NPS is a direct measure of customer satisfaction and loyalty. By understanding how likely your customers are to recommend your company, you can identify areas for improvement and increase customer retention.

Customer Advocacy

Promoters, who make up the majority of your NPS score, are highly likely to recommend your company to others. This can lead to positive word-of-mouth and referrals, which can be a powerful marketing tool for your business.

Employee Satisfaction and Retention

As mentioned earlier, eNPS can help companies identify areas for improvement in their employee experience and increase employee retention. Satisfied and loyal employees can also contribute to a positive customer experience, leading to higher NPS scores.

Competitive Advantage

NPS can also provide a competitive advantage for companies. By consistently measuring and improving their NPS, companies can differentiate themselves from their competitors and attract more customers.

How Can I Improve My NPS?

Now that you understand the importance of NPS, you may be wondering how you can improve your score. Here are some best practices to help you increase your NPS:

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Act on Feedback

Feedback analysis

The open-ended question in your NPS survey can provide valuable insights into why customers are promoters, passives, or detractors. It’s important to analyze this feedback and take action to address any issues or concerns raised by customers.

Focus on Customer Satisfaction

NPS is a reflection of customer satisfaction, so it’s important to prioritize this aspect of your business. This can include providing excellent customer service, delivering high-quality products or services, and continuously seeking feedback from customers.

Collaborate with Other Departments

NPS is not just a metric for the customer service team. It’s important for all departments to work together to improve the customer experience and increase NPS. This can include collaborating with marketing to create targeted campaigns for different customer segments or working with product development to address any issues raised by customers.

Use NPS as a KPI

To truly improve your NPS, it’s important to make it a key performance indicator (KPI) for your company. This means setting goals and tracking your progress over time. By making NPS a priority, you can ensure that it remains top of mind for all employees and departments.

Real-World Examples of NPS in Action

Apple

Apple is known for its high customer satisfaction and loyalty, and this is reflected in its NPS score. In 2019, Apple’s NPS was 47, significantly higher than the average NPS for the technology industry.

Apple’s success can be attributed to its focus on customer satisfaction and loyalty, as well as its strong brand reputation and customer advocacy.

CircleCI

CircleCI, a DevOps product, used NPS to identify areas for improvement in its customer experience. By analyzing customer feedback, they were able to identify pain points and make changes to their product and processes to address these issues.

As a result, their NPS increased from 30 to 50, and they saw an increase in customer retention and satisfaction.

Who Can Benefit from NPS?

NPS can benefit any company that values customer satisfaction and loyalty. This includes businesses of all sizes and industries, from startups to large corporations.

NPS can also be used by non-profit organizations, educational institutions, and government agencies to measure customer satisfaction and loyalty.