Word of mouth is incredibly powerful.
In fact, 74% of consumers say word of mouth is a key factor in making a purchase decision. This is even more true for Generation Z and millennials. 63% say they trust what influencers say about brands more than what brands say about themselves in their advertisements.
Given the frequency of online research before trying a new product or service, your business can be just a tweet away from attracting or repelling future customers. The same goes for recommendations (or warnings) from friends, family, and colleagues.
Keeping up with the times, how your customers are feeling and how loyal they are to your brand is the key to your company’s success. But how exactly do you measure that?
A Net Promoter Score, also known as an NPS score, can help here.
Bonus: Get a Free, Easy to Use Customer service report template that helps you track and calculate your monthly customer service efforts in one place.
What is an NPS Score?
An NPS score is one of the most important customer service metrics that companies should track when measuring customer satisfaction. An NPS score calculation shows you how likely it is that your customers will recommend your company to others with whom they interact.
It was originally developed by Fred Reichheld, a corporate strategist who researches and writes about loyalty.
Reichheld spent about two years researching survey questions about customer behavior, such as: Associate, for example, recommending and buying products with business growth. He was surprised to find that the most effective question wasn’t directly about customer satisfaction or loyalty. Instead, it was about how likely it is that someone will recommend a product, service, or company to friends, family, and colleagues.
When someone makes a strong recommendation, it means they are putting their own reputation on the line. This can be a good indicator of both customer satisfaction and loyalty. For most companies to grow their business effectively, this customer loyalty is vital. In order for companies to be successful, they usually need regular customers and recommendations, depending on the offer.
Why the NPS Score is important and how to use it
The biggest advantage of the NPS is that it’s proven Increase customer loyalty. This is important because it is much cheaper to retain customers than to keep attracting new ones.
NPS makes it clear who your promoters are. That means you have the opportunity to reward them for their loyalty and to build your relationship with them.
Rewards can come in the form of perks, referral codes, and much more. Simply reaching out to them and showing their loyalty will earn you brownie points too.
On the flip side, you also have the ability to get in touch with your critics quickly and reach them out before their opinion of your brand hardens.
Regardless of how you fare, regular NPS surveys should uncover the exact interactions your promoters and critics are generating. With this level of specificity, you can quickly identify the areas you need to invest in to keep your customer base (and hopefully turn some critics into promoters).
How to calculate your Net Promoter Score
Marketers can calculate a net promoter score by asking a single question: On a scale from 0 to 10, how likely is it that you will recommend our company / product / service to a friend or colleague?
The NPS survey is that simple.
After asking the NPS question, you can divide respondents into three different categories:
Promoter (score 9 to 10): Promoters play a key role in your company. They are loyal customers who conjure up your products and services for those around them. They can essentially act as an extension of your marketing department.
Passive (score 7 to 8): Passives are happy customers, but they don’t exactly sing your praises. You could eventually become a promoter or be influenced by competition.
Critics (score 0 to 6): Critics are dissatisfied with your company and are less likely to become regular customers. Worse, they can damage your brand’s reputation by sharing their negative experiences with others.
To find your net promoter score, subtract the percentage of critics (your dissatisfied customers) from the percentage of promoters (your loyal customers). Passives are not included in the formula. Your bottom line will be anywhere between -100 and 100.
You can also include other questions in your survey. Some common ones are:
- How did you hear about our company?
- Did you find what you were looking for today?
- How easy was it to find?
- How was your overall experience with our company?
However, avoid overloading your customers with questions. The nice thing about the NPS survey is that its brevity results in a higher response rate than traditional surveys.
In addition to your NPS score, you can add user interaction metrics such as time spent on the page, average session time, and bounce rate to your analysis. This way, you have more insight into your customers’ journeys – without bogging them down with survey questions.
When should you take an NPS survey?
The simplicity of the NPS formula has made it such a crucial factor in the marketing world.
Rather than asking customers to fill out long, general surveys about your business, the NPS can potentially capture their opinions every step of the journey.
So how does it work in practice?
When it comes to the NPS, timing is everything. You want to make sure that you reach customers after every important activity they do.
However, if there are many steps in the customer journey, Harvard Business Review recommends offering the survey to customers at random to stave off survey fatigue.
That way, you’re recording the entire user experience, capturing both the good and bad aspects of the trip – with an emphasis on the good things. Maybe you create ‘Wow!’ Moments for your customers and don’t even notice.
Technology makes it easier than ever to attract customers at the right time. The most popular channels for NPS surveys include:
- Instant messaging (Facebook Messenger)
You will likely want to use more than one of these channels to get feedback. There are many answer templates out there to help you get started.
What is a good NPS score?
The NPS values are somewhere between -100 and 100. The higher the score, the better and vice versa.
Bain & Company, which owns the hallmark of the NPS system, defines any score above 0 as a step in the right direction. The fact that you are not in the negative integer range shows at least some level of customer loyalty.
Of course, you probably won’t be happy with a single-digit score. Any score over 20 is considered “cheap,” a score of 50 is considered “excellent,” and 80 or more is “world class,” according to the company.
However, deciphering the meaning of your NPS can be difficult.
First, as with any survey type, you should make sure that the sample is large enough. Every industry is different, so there is no single answer to how many answers will be enough. What is known is that more is definitely better, and this is especially true when you have a limited customer base. With a high score, you should definitely be skeptical after only interviewing a dozen or so customers.
It’s also common for people to be surprised at how low their company’s scores are. A low score is not always an immediate cause for concern and may have more to do with the business environment in which you operate.
For example, the location of your consumers affects your NPS score. Research shows that respondents in Europe tend to be more conservative in their ratings. On the flip side, customers in the United States give more generous grades even though they’re not avid promoters in real life.
It’s also important to consider industry norms. Some industries, especially those with difficult customer relationships such as debt collection agencies, tend to score low on the NPS scale.
Benchmarking data can help you understand where you stand compared to your competitors.
Some of the lessons you can learn from benchmarking data include threats and opportunities to your business, and seeing if a competitor recently introduced a change that increased their NPS. You can investigate whether it is worth repeating this process.
To find out what the NPS benchmark score is for your industry and location, you can purchase this type of data from an outside research firm.
If you’re in an emerging industry where NPS scores are not yet available to competitors, determining your NPS score is still a worthwhile exercise. In this scenario, you would use your past performance as a benchmark.
It’s important to note that any improvement in score is an indicator of future growth. The opposite is of course also the case.
Free NPS calculator
If you’re not ready to invest in professional NPS tools just yet, there are free options for you to explore. Our free customer service performance report template includes an NPS calculator and calculators that you can use to measure other business metrics, such as:
- Customer churn,
- Customer acquisition costs,
- Customer Lifetime Value,
- Net Promoter Score,
- And more.
Best of all, it’s completely free.
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