What Is a Net Promoter Score (NPS)? A Guide to Increasing Customer Satisfaction

Net Promoter Score (NPS) is the pinnacle of customer experience metrics. Companies use it as a standard indicator to monitor, evaluate, and enhance customer loyalty. This customer experience indicator helps brands identify the areas they need to improve, making it closely tied to business growth.

But what is a Net Promoter Score, and how can you use it to improve the customer experience? Read our comprehensive guide to learn more about NPS, its calculation, and how tracking it may help your business.

Net Promoter Score Definition

A Net Promoter Score (NPS) is a customer loyalty metric that measures the willingness of customers to recommend a company’s products or services to others. The metric is based solely on one question: “How likely are you to recommend our company/product to a friend or colleague?”

Customers are asked to answer the question on a scale of zero to 10, with zero being “not at all likely” and 10 being “extremely likely.”

Developed by Fred Reichheld in 2003, Net Promoter Score has become the gold standard for measuring customer loyalty, which is widely used in business. It can help you identify unhappy customers, so you can make changes that will increase the likelihood of them doing business with your company again and referring it to others.

NPS Scoring Scale

The Net Promoter Score scoring scale ranges from zero to 10, with zero being the lowest and 10 being the highest. This scoring range is based on the primary NPS survey question.

However, some businesses prefer using a zero to 11 NPS scoring scale, which includes an extra rating option for a nuanced measure of customer loyalty. This additional option, 11, indicates that the customer will go beyond recommending a brand and go out of their way to promote it.

Importance of Net Promoter Score in Business

Companies with higher Net Promoter scores experience significantly faster growth than those with lower NPS scores. In fact, your Net Promoter Score is such a strong predictor of growth that it’s now considered one of the most important metrics for measuring the health of a business.

Here are some ways that Net Promoter scores are linked to business growth:

• Customer loyalty and retention: Satisfied customers are likelier to remain loyal to a business and continue making brand purchases. It increases retention rates and eliminates the need for costly customer acquisition initiatives.
• Referrals and word-of-mouth marketing: Satisfied customers often recommend or market the brand’s services or products to family and friends. Such recommendations can lead to more referrals and new customers, driving business growth.
• Profitability and revenue growth patterns: Loyal customers are willing to pay more for products. Also, a higher Net Promoter Score equates to a larger market share than competitors. These two factors contribute to increased revenue and profitability.

Types of Net Promoter Score Surveys

NPS surveys are critical components of the Net Promoter system. Companies use them to get consumer feedback on referring their organization, product, or service to others. There are three types of Net Promoter Score surveys, as highlighted below.

Relationship NPS

A Relationship NPS survey assesses overall customer loyalty and satisfaction with a company or brand. It is often used to elicit consumer feedback about their overall experience with the business and determine how likely they are to recommend it to others.

The goal of a relationship survey is to take a periodic check on a brand’s customers to comprehend how they feel about the business in general. This data may be used to compare customer health year over year and establish a baseline for business performance. Identifying unhappy customers — especially at scale — is crucial so you can address issues.

Transactional NPS

This Net Promoter Score survey is designed to assess customer satisfaction based on a single interaction or transaction with a business. It’s often used to collect customer feedback regarding their business engagements, like a purchase and a customer support contact.

Transactional NPS surveys require precise scheduling to get accurate data. Businesses should send an NPS survey to the customers immediately or soon after completing the transaction to get the customer’s feedback on the particular business process.

If you wait too long, the customer’s view may be affected by other encounters. You may easily spot weaknesses in customer interactions, generate customized solutions, and improve touch points throughout the customer lifecycle with transactional survey data.

Touchpoint NPS

This Net Promoter Score survey assesses customer happiness with a single touchpoint or encounter with a company. It shares the same dynamics with the transactional NPS but emphasizes various touchpoints across the business journey rather than a single transaction.

A touchpoint is any contact or interaction between a customer and a business. It includes customer support calls, website visits, in-store visits, and social media interactions. This type of survey is designed to gather consumer feedback on their experience with a particular touchpoint and to determine how likely the customers are to recommend the touchpoints to others.

Each type of NPS survey has a unique goal, but they all give useful information about customer loyalty and satisfaction. Businesses may acquire a more thorough knowledge of their consumers and discover specific areas to enhance the customer experience by employing different kinds of NPS surveys.

NPS Respondent Categories

The NPS survey categorizes respondents into three different categories to gain insight into the overall satisfaction of their consumer base.

In this section, we dive into the specifics of the Net Promoter Score system respondent categories.

Promoters

These are your best customers, as they’re either the most satisfied with your products and services or the heaviest users of your brand. These customers will provide a score of nine to 10 on the NPS question. Promoters will likely add value to your business by making more purchases, recommending others, or becoming lifelong customers, which improves your sales.

Passives

These customers give a seven to eight score on the NPS question. They’re typically pleased with their experience but not as enthusiastic as promoters. They are considered fairly loyal, yet competitors or market shifts may more quickly persuade them. Passives are not likely to spread negative word of mouth, but they’re also not as likely to spread positive word-of-mouth recommendations either.

Detractors

These consumers answered the NPS question with a score ranging from zero to six. Detractors are dissatisfied with their experience and would not recommend your business to others. They’re essential to monitor since they may aggressively dissuade others from doing business with your brand through negative word of mouth.

How to Calculate Net Promoter Score

You can calculate the NPS of your business by subtracting the percentage of Detractors from the percentage of Promoters, as shown in the formula below:

NPS = Promoters % – Detractors %

Consider this example of the net promoter score calculation:

Suppose you distributed your NPS survey to 200 customers and got the following responses:

• Detractors: 40 customers awarded a 0-6 score
• Promoters: 120 customers gave a 9-10 score
• Passives: 40 customers gave a 7-8 score

To calculate the NPS, start by calculating the percentage of each respondent category as shown below:

• % of Detractors = (40/200) x 100 = 20%
• % of Promoters = (120/200) x 100 = 60%
• % of Passives = (40/200) x 100 = 20%

You can then use the formula above to calculate the NPS of your business as follows:

NPS = 60–20

NPS = 40

The NPS score ranges from -100 to +100, with a higher score illustrating a more positive customer experience. If you get a score of -100, every respondent was a Detractor, while a score of +100 indicates that all respondents were Promoters. Finally, A score of zero indicates an equal percentage of Promoters and Detractors.

Considering our example above, the NPS score is 40, a positive score. Typically, any score below zero to 30 is considered good, with a score between 30 and 70 being excellent, and an NPS score above 70 is considered outstanding.

However, the interpretation of NPS score data varies depending on the industry and other factors, so benchmarking against industry averages and tracking changes in the score over time is critical.

How to Analyze NPS Data

You can analyze Net Promoter Score data using qualitative and quantitative analysis methods.

Qualitative

Qualitative analysis of NPS score data entails assessing customer open-ended feedback in a survey. This feedback provides vital insight into the reason behind the customer responses, their experience with your brand, and the pain points they face. 

This involves segmenting data based on feedback patterns or themes to help you to develop segment-specific action plans. Text mining and content analysis are also part of qualitative NPS score data analysis.

Quantitative

Conversely, quantitative analysis of NPS score data entails evaluating the numerical scores provided by consumers in response to the survey. This analysis can give insights into customer loyalty, satisfaction, and retention.

Market segmentation in this analysis method entails fragmenting consumers into groups depending on their NPS score and other significant variables such as age, gender, or purchase frequency. Then, you can calculate the NPS for each segment to identify any trends or patterns. As a result, you’ll determine which consumer groups are the most satisfied and which require improvement.

NPS Best Practices

Improving NPS necessitates a customer-centric strategy prioritizing knowing consumer wants and preferences and providing excellent experiences. Here are some ideas for increasing NPS:

Ask Appropriate Questions in the NPS Survey

Besides the primary NPS survey question, you can ask other appropriate questions to get more context and insight.

These questions include:

• Follow-up question for Passives: “What could we do to improve your experience with the company/product/service?”
• Open-ended question: “Is there anything else you want to share about your experience with the company/product/service?”
• Demographic questions: “What is your age?” “What is your gender?” and “What is your occupation?”

Deliver Exceptional Customer Experience

Customer experience is directly linked to satisfaction and loyalty. It is key to increasing customer retention, reducing negative feedback, and building a strong reputation.

• Responding to customer complaints promptly: NPS feedback gives useful insights into consumer preferences; thus, acting on it is critical. It includes responding to customer complaints and taking action to enhance the customer experience.
• Continuously monitoring NPS over time: Frequent NPS progress monitoring is critical to ensure that NPS gains are sustained. This assessment includes tracking NPS scores over time, finding areas for improvement, and responding to concerns as they emerge.

Limitations and Criticisms of NPS

Net Promoter Score has been criticized for its simplicity and for being easy to manipulate, including its lack of predictive value, its failure to measure customer experience, and its inability to account for customer feedback. Familiarizing yourself with these limitations can help you use NPS more effectively and make better decisions for your business.

Oversimplification of Customer Feedback

The NPS system relies on a single primary question and lacks the depth and granularity required to comprehend the customer experience properly.

Cultural Differences in Rating Scales

Although the NPS system is based on a zero to 10 scale, cultural differences can influence how customers interpret and respond to rating scales, affecting the accuracy and comparability of NPS scores across cultures.

Survey Fatigue and Response Biases

Like most survey-based metrics, NPS is subject to response biases based on the customers’ positive or negative encounters with the business. Also, respondents may be reluctant to participate in another survey, resulting in less reliable data.

Limitations in Predicting Actual Customer Behavior

Although the NPS system measures satisfaction and the likelihood of recommending a product or service, there is no assurance that a customer who gives a high NPS score will become loyal or recommend the product or service to others.

Overcoming Limitations and Using NPS Effectively

To ensure you gauge customer loyalty accurately and effectively using the Net Promoter Score scale, follow the tips below.

Combine NPS With Other Customer Satisfaction Metrics

Other indicators, such as satisfaction, retention rates, and revenue growth, should also be tracked by businesses to acquire a complete picture of consumer behavior and the impact of their strategy.

Customize NPS Surveys for Different Geographic Regions

Businesses should tailor their surveys for different geographic locations to obtain accurate and relevant customer feedback and use that input to promote improvements in customer happiness and loyalty.

Update Survey Questions and Approaches Regularly

Businesses can guarantee they obtain the most relevant and actionable consumer feedback by constantly refining their survey questions and approaches.

Final Thoughts

The Net Promoter Scale score is an effective tool you can use to measure customer satisfaction throughout the customer journey. Its capacity to forecast business growth and profitability makes it a critical metric that every company should monitor.

However, NPS is a progressive improvement and monitoring process rather than a one-time effort. It must be tailored to business goals and consumer demands to improve NPS’s relevance and efficacy.