Everything you need to know about NPS – Net Promoter Score
With the Net Promoter Score – or NPS as it is often abbreviated – companies can easily find out what customers really think about the company. Customer satisfaction is directly related to how loyal your customers are, which in turn will affect sales and sales.
We will now take a closer look at what NPS is, how the score is measured and what you can use the information for.
What is NPS (Net Promoter Score)?
NPS or Net Promoter Score is a measure of how loyal a company’s customers are. The points system was developed in the 90s by the strategist Fred Reichheld, as well as the companies Bain & Company and Satemix, which specialize in management and analysis software, respectively.
Together they published the NPS method in the publication “The Ultimate Question”. The ultimate question is the following:
“Would you recommend X to a friend or colleague?”, Where X is the name of your business.
How to measure NPS?
To measure NPS, your customers need to answer if they want to recommend your company to acquaintances and this is done through a simple survey. This survey can be emailed to your customers.
Customers enter their answer based on a scale from 0-10, where 0 is “very unlikely” and 10 is “very likely”. Your customers’ satisfaction and loyalty will then be ranked as follows based on what they have responded to:
- 0–6: Critical customers
- 7-8: Passive customers
- 9–10: Customers who can act as ambassadors (promoters)
- NPS can then be calculated by taking the percentage of ambassadors and subtracting the percentage of critics.
NPS = Ambassadors (%) – Critics (%)
How often should the company measure the Net Promoter Score?
NPS should be measured at regular intervals, as the score is by no means static. Remember that customers’ perceptions of your business can change over time. If you measure NPS, you have points for customer satisfaction there and then.
If your company is launching new products, services or brands, it may be beneficial to conduct a Net Promoter Score survey. It may also be relevant to measure NPS after a customer has communicated with customer service.
Why measure NPS – Net Promoter Score?
There are many good reasons to measure your Net Promoter Score regularly. If you find that your company’s Net Promoter Score is bad, then you have an opportunity to do something about it. Why are many customers dissatisfied? What can be improved?
Most consumers appreciate being seen and heard and will find it positive that the company takes into account whether they are satisfied or not.
Another advantage of the NPS or Net Promoter Score is that the value is tangible and concrete. You have a number to relate to and it is easy to see if different measures increase or decrease customer satisfaction.
Why is high customer satisfaction so important?
Satisfied customers are important. Remember that only a negative customer experience is likely to lead the customer to choose a competing company next time. Dissatisfied customers also tend to spread the message further. A bad reputation spreads fast!
For example, it is not uncommon for dissatisfied customers to turn to social media or sites like Trustpilot or Google reviews to share their bad experiences.
At the same time, most of us trust our fellow human beings more than advertising. If someone recommends a company, the chances are greater that we choose the same company ourselves. As many as 83% of us trust the recommendations familiar parts.
By having satisfied customers, you can thus increase the probability that new customers will flock. With the help of the Net Promoter Score, you can ensure that you stay up to date on what consumers actually think of your company and find out if any action is urgent.
Are there any disadvantages to NPS?
Some people think that the Net Promoter Score can give some incorrect results, because the score can be the same even if different data is behind it. Imagine, for example, a company that has 65% ambassadors and 35% critics. This gives an NPS score of 30.
But a company can also get a Net Promoter Score of 30 if there are 30% ambassadors and no critics. Different bases can thus give identical points, which can be a challenge.
A Net Promoter Score also has the disadvantage that customers have a lower threshold for recommending companies to acquaintances in some industries than others. For example, it is more likely that someone recommends a carpentry company, than a company that supplies binoculars.
Feel free to ask follow-up questions when measuring NPS
In a survey where you ask customers if they would recommend your company further or not, you can also ask follow-up questions. Based on this question, you do not know what the good or bad customer experience is due to.
With follow-up questions, you can give the customer the opportunity to develop what should be improved and what works well.
What is a Good Net Promoter Score?
Many companies that measure NPS or Net Promoter Score end up with a score of just over 30. But if you want a good NPS, the score should preferably be 50 or higher.
The score can vary from -100 to 100. If you end up at -100, it means that all your customers are critical. However, if you get a score of 100, it will mean that all your customers are so-called ambassadors who will recommend the company to others.
Of course, it is difficult to just have satisfied customers. Even the best company can experience dissatisfied customers, whether it is because a product did not live up to expectations or something else.
Many people think that it is okay to set a goal for NPS, for example 50. This would mean that your company generally has very satisfied customers.
Do you want to measure NPS?
We have the tools you need to be able to measure NPS and customer satisfaction. Find out if you have satisfied customers, or if you should take action.
Contact us today if you want help measuring NPS!