What is NPS? Everything You Need to Know About Net Promoter Score
Article
by
David Vranicar
Before we get to the shortcomings of Net Promoter Score® – and there are indeed a few shortcomings, like being required to include this ® symbol – let’s first dish out some props.
After all, Net Promoter Score, or NPS®, was hatched way back in 2003, and it’s still going strong.
NPS has been around so long, in fact, that the article first introducing it makes multiple references to AOL, including this one: AOL’s “customer service lapsed, to the point where customers couldn’t even find a phone number to contact company representatives to answer questions or resolve problems.”
In other words, NPS is from an era when AOL was a big player, and when customers’ primary way to contact companies was over the telephone.
NPS has been around longer than Facebook, longer than Gmail, and quite a bit longer than the iPhone. So good on Net Promoter Score for still plugging along despite being relatively ancient.
But as with most things from 2003, the last 15 years have introduced some better options, especially for scrappy online store owners. (Scrappy online store owners, of course, are another thing that popped up largely after NPS.)
Today we’ll go over everything you need to know about Net Promoter Score — including some alternatives that are a little more this decade.
Net Promoter Score, also known as NPS, is a gauge of customer satisfaction and loyalty. A business’ NPS hinges on answers to a single, specifically worded question asked to customers: How likely are you to recommend our product or service to your friends or family? Responses range from 0 (very unlikely) to 10 (very likely).
Customers are lumped into three groups based on their responses:
NPS Promoters, who answer 9 or 10
NPS Passives, who answer 7 or 8
NPS Detractors, who answer anything from 0 to 6
Once a company has a healthy number of responses — there is no minimum requirement, but the more the better – their Net Promoter Score can be calculated.
What Does Net Promoter Score Mean
Net Promoter Score measures the willingness of your customers to recommend your company, product or services to others based on their experience. As a gauge for customer satisfaction, your company can learn how to improve customer service and other important aspects of your business by understanding what your Net Promoter Score means.
For example, having a Net Promoter Score of less than 70 percent means that your company can do a lot to improve the services provided to your customers. While having a Net Promoter Score of more than 70 percent can mean that your customer support and sales teams are doing a great job. It can be hard to improve on this score without talking to customers more and delving into the minor details of the products or services that you provide.
NPS Survey Templates
As the Net Promoter Score has been around for quite a few years, businesses have adopted many different templates to gather scores. These vary from NPS survey templates for your website, NPS email survey templates, and NPS survey templates optimized for mobile. The main aim of all these NPS survey templates is to keep the appearance simple so users will not be dissuaded from filling out the short survey.
Calculating Your Net Promoter Score
The Net Promoter Score calculation can be confusing at first but once you have tried it a few times it is very easy. The Net Promoter Score calculation subtracts the percentage of NPS Detractors from the percentage of NPS Promoters. NPS Passives, those who answered 7 or 8, are not directly incorporated into the calculations, but they do impact the overall score.
If you have 60 NPS Promoters and 40 NPS Detractors, then your NPS is 20. 60 out of 100 is 60 percent, and 40 out of 100 is 40 percent. The NPS calculation looks like this: 60 – 40 = 20.
However, if you have 60 NPS Promoters, 40 NPS Detractors, and 50 NPS Passives, then your NPS would be a bit lower. Now you have 150 total responses instead of 100, so even with the same number of NPS Promoters and NPS Detractors, your final score isn’t as good.
60 out of 150 is 40 percent, and 40 out of 150 is 27 percent. Now the NPS calculation looks like this: 40 – 27 = 13.
So now you see that the Net Promoter Score calculation is quite straightforward!
What Is a Good NPS Score?
The higher a company’s NPS, the better. The max score is 100 percent and the lowest score can be -100 percent. This would mean that out those who took your NPS survey 100 percent were NPS Promoters without a single NPS Passive or NPS Detractor. A good NPS score though doesn’t need to be 100 percent. Anywhere from 50 to 100 percent is considered a good to excellent NPS score. Depending on your industry it could be almost impossible to achieve 100 percent so it is important to benchmark your NPS score against your industry when possible.
How to Improve Your Net Promoter Score
If you are a few points off a great Net Promoter Score, or you want to completely revamp your brand and drastically change your Net Promoter Score from a low to a high score there are many things that you can do.
Educate People Within the Business: By informing people within the business about what the Net Promoter Score is and how it affects the company you can improve the way that your company does things. If customer support or sales is a department that is lacking this could motivate them to do more. Run competitions to give departments more reasons to improve the service they provide to your customers.
Engage with Influencers on Social Media: Identify your main influencers who love your brand and start conversations with them online. This way the followers of your influencers will see the conversation and it can spur them to purchase from you.
Turn NPS Detractors into NPS Promoters: Actively find and talk to your NPS Detractors to find out their qualms and try to rectify them. If you work hard enough you can turn them into positive experiences for your customers, thus turning them into NPS Promoters.
Plan a follow-up NPS Survey: Once you have calculated your NPS score, make a plan for how you would like to improve on your Net Promoter Score. Set your plan in place where you can track and plan another survey in the future to measure the improvements to your Net Promoter Score.
Why Is the Net Promoter Score Important
You might cringe a little bit when you read stuff like this from Frederick Reichheld, who helped create NPS: “This number is the one number you need to grow. It’s that simple and that profound.” Riiiiight.
Net Promoter Score is definitely a little stuffy compared to other goodies in the ecommerce store toolkit. Even so, NPS does have some strengths. Let’s look at three biggies.
There are a few reasons that the Shopify app makes that beautiful ka-ching sound every time you make a sale but is dead silent every time you have a happy customer.
First off, sales are the main goal or your store and every store. They should be celebrated. Second, sales are quantifiable in a way that customer happiness isn’t: A purchase is recorded with the click of a button. Happiness isn’t quite as cut and dry.
That said, customer satisfaction, customer retention, and customer loyalty are vitally important. And Net Promoter Score reminds us that customers are still relevant after the ka-ching. They can choose whether or not they buy again, for one thing, and keeping existing customers is cheaper than going out there and finding new ones.
In addition, past customers can have a big impact, good or bad, on how your brand is perceived. Maybe an unhappy customer’s nasty tweet is the second thing that pops up when someone searches for your account on Twitter.
Net Promoter Score is helpful in forcing us to remember there is a world after the purchase.
Identify trends
The real world is not as cut-and-dry as the NPS world. Here, for example, is how NetPromoter.com describes “NPS Promoters” versus “NPS Passives”:
NPS Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
NPS Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
It’s not like NPS respondents are thinking in these terms when they answer. An 8 could be just as satisfied as a 9, yet one is considered unenthusiastic while the other is fueling growth.
But even if we admit NPS isn’t science — and it’s not — it’s still valuable for identifying trends. If you get enough responses over a long enough period of time, then patterns emerge. So if a Net Promoter Score of 27 is, for all practical purposes, identical to a Net Promoter Score of 28, these numbers gain meaning when compared to scores from last quarter, or last year.
Sure, 29 by itself doesn’t mean anything. But 29 definitely means something if that number used to be 15.
The NPS Process
The inherent weakness of NPS is that at the core it’s too simplistic — treating 6s the same as 1s, for example. But we can twist this weakness into a strength, as well.
By lumping people into three groups, oversimplified as they may be, NPS responses become actionable.
You know that anyone who answers 0 to 6 isn’t super excited. This single NPS group includes “totally furious and talking trash on social media” and “not mad but also not that happy.” Those are very different attitudes. But either way, we know that there is room for improvement.
NPS Detractors require some nurturing (or maybe even some apologizing). NPS Passives require a little nudge to turn them into true fans. And NPS Promoters, meanwhile, require maintaining the status quo. And thanks to NPS, there are clearly defined groups to work with.
Once you figure out how you want to address different NPS groups, you can cook up an NPS process with campaigns to do exactly that. And there are tools to help you.
For example, Customer.guru is an app in the Shopify app store that you can use to ask that magically worded NPS question on your website. It then automates what happens next based on the responses you get. Your NPS process can differ depending on the NPS group in order to tailor for their needs.
Someone who answers “7” can be directed to a landing page for NPS Passives — where maybe they find a discount code — while your NPS Promoters get directed to a different landing page — where maybe they’re asked to write a review. You can also push your NPS data from Customer.guru to Facebook and AdWords to customize your ads and bids for different NPS groups.
Email providers can also has some simple ways for you to leverage NPS answers according to your NPS process. You can use the small business-friendly email tool to ask the NPS question — just embed it directly in an email — and then use the responses to create segments. Then tailor your next round of messages based on those NPS segments. Send one campaign to your NPS Detractors, another to your NPS Passives, and then roll out the red carpet for your NPS Promoters.
And so this is where we can quote Reichheld again — not to roll our eyes, but to highlight something that is spot-on: “In short, a customer feedback program should be viewed not as ‘market research’ but as an operating management tool.”
NPS can be a valuable management tool to push the right buttons with your different groups as long as you have a well thought out NPS process behind it with the aim to increase your NPS over time.
Why NPS is Far From Perfect
Okay, so that’s the good side of NPS, and there are a lot of good things to come from it.
There are limits to NPS, however. Now for the not-as-good.
The whole idea of “recommending” has changed
Let’s revisit that NPS question again: How likely are you to recommend our product or service to your friends or family?
NPS hinges entirely on the verb recommend. And just think about how much the meaning of that word has changed.
What did it mean to recommend something in 2003? No, seriously, I don’t remember.
NPS predates today’s biggest recommendation platforms like Facebook, Twitter, Instagram. The rest of our recommendations these days seem to come from algorithms. Shows on Netflix, songs on Spotify, products on Google Search.
The NPS meaning of ‘recommend’ is from an era when “word of mouth” literally meant speaking aloud to someone about a recommendation.
“How likely are you to recommend…” is 2003 speak for How likely are you to click a Like button? How likely are you to post a picture? How likely are you to click the smiley emoji?
It’s not designed for small ecommerce businesses
NPSBenchmarks.com held an “Ask me anything” session with Jørgen Bo Christensen, author of the book Next Generation Net Promoter. In the session, Christensen was asked how frequently a company should give NPS surveys to its customers.
He replied, “First my short answer: We recommend to survey customers four times a year or more.”
What?!
This answer shows the disconnect between the aims of NPS and the realities of your online business. Most online store owners would be pleased if someone makes four purchases over the course of a year. And even if you hit that ambitious mark, a 1-to-1 ratio between purchases and NPS surveys seems a bit out of whack.
Whoever this four-times-a-year advice is intended for, it’s not merchants running small ecommerce stores.
Benchmarking your Net Promoter Score
Regularly carrying out your NPS survey with customers can be frustrating but even if you do it twice a year you can compare results to see how you compare to the previous findings. The need to benchmark your NPS from previous results is so you can see if the number of NPS detractors are decreasing and if your score is improving.
You can also benchmark your NPS with other companies in your industry through tools like NPS Benchmarks.
There are better uses of your time
Which brings us to this: If you want to accomplish what NPS sets out to accomplish — increase customer loyalty and leverage happy customers to spread the word about your brand — then there are more impactful ways you can spend your time.
Store owners know better than anyone that there are opportunity costs to every campaign, improvement, and channel that gets launched. So use your time and energy to get customers to do stuff that will be more impactful than answering the NPS question.
What’s more impactful than answering the NPS question? Take your pick:
Ask customers to write product reviews, and hook them up with discounts when they do
Optimize the notifications that customers get at different stages of the sales funnel — cart abandonment, order confirmation, shipping update, follow-up thank you after delivery, etc.
Make your website better, whether that means creating more content, writing fresh product descriptions, or doing some SEO homework
This list could go on for a while before we get to “Ask your customers the NPS question, compare your score to last quarter, and launch marketing campaigns for your three NPS groups.”
Net Promoter Score Recap (tl;dr Version)
Alright, let’s quickly go over what we’ve learned about NPS. That way, when we ask, “How likely are you to recommend this post to your family or friends,” you’ll answer 10.
What’s NPS Again?
NPS is a system used to quantify customer satisfaction and loyalty. Answers, given on an 11-point scale from 0 to 10, are plugged into a Net Promoter Score calculation that gives businesses their Net Promoter Score. Respondents are lumped into three groups — NPS Promoters, NPS Passives, and NPS Detractors — based on how they answer.
Why NPS Is Important?
NPS can be a valuable tool. It forces businesses to consider satisfaction, not just sales and revenue. It also helps identify in which direction your customer satisfaction is trending so you know whether you should double down on what’s working or trying something new. And finally, even though the different NPS groups aren’t scientific, they give you something to work with as you craft your campaigns.
What’s Less Cool About NPS?
The biggest thing here is that there are better ways to cultivate customer satisfaction and loyalty. These days — 15 years after NPS was created — you can use social media, apps, email, and lots more to make your customers so happy that they recommend your product or service to friends and family.
