What is NPS?

What is NPS or Net Promoter Score?

Net Promoter Score or NPS is a metric that indicates the customer satisfaction or loyalty. It a measure of how well your product/service is gauging customer satisfaction and loyalty. In general, it is measured by asking customers the rating for how likely they will recommend your services to others on a scale of 0-10. However, many other factors are crucial to judge your product performance. Aggregate NPS scores play a vital role in defining the success, performance and quality of your product/services. They help in strategizing business decisions influencing service quality, support, delivery for improved customer satisfaction.

The formula for NPS is:
NPS = Percentage of Detractors – Percentage of Promoters

Why is NPS Crucial for a business?

NPS is critical to a business success as it plays an important role in helping to know business success. It acts as a predictor of your business growth in the long run. The higher the NPS, the more likely it is that that your company is doing well on the market level. High NPS means your company has a good customer base, and your business is likely to thrive on the word of mouth and recommended-to-others basis.

How is NPS calculated?

The percentage of customers who answer the NPS question with a score of 6 or below (referred to as “detractors”) is subtracted from the percentage of customers who answer with a score of 9 or 10 (referred to as “promoters”) to determine the net promoter score (NPS).

What are detractors in NPS?

In simple terms, detractors are unhappy customers who show dissatisfaction in your product. However, in NPS, detractors are NPS survey respondents who rate your SAAS product within 0-6 range out of 10. Detractors can harm your business reputation by writing negative reviews, criticizing your product on social media sites and ask friends and family to avoid buying your products.

What are passives?

In the NPS, passives are survey respondents that rate your product as 7-8 out of 10 when asked how likely they are to recommend your product or service to a friend. They are moderately satisfied customers, and cannot be considered as promoters. This group is crucial as they are neither satisfied nor dissatisfied and can help by offering suggestions and valuable feedback for service improvement.

What are NPS promoters?

Promoters are your company’s most loyal customers. They are the most loyal segment of your NPS survey. They are the ones who rate your services as 9-10 and are likely to become brand ambassadors. Promoters can aid in improving online reputation of your business by recommending your product/services to others. They are critical to your business success and strategic decision making.

How the Net Promoter Score should be interpreted?

When a company has more critics than promoters, its Net Promoter Score is negative; when the converse is true, it is positive. The score is always represented as a number between -100 and 100.
Average scores in the Net Promoter System differ significantly by industry:
According to a survey conducted in the US, average NPS values ranged from 0 for TV and internet service providers to 39 for auto dealers.  NPS ratings ranged from -1 (Internet service providers) to 65 (department/specialty stores), according to another research conducted in the US.
Understanding industry-specific NPS averages provides further context for what constitutes a “good” or “bad” score and aids in understanding the performance of major rivals in a certain market.

What is a good NPS score?

Any score above 0 is interpreted as “good” because it shows that a company has more supporters than critics, given the available range of -100 to +100. No one has ever received a perfect score of 100, which means that every poll participant would suggest a business to others.

What is considered as Bad NPS score?

If a company’s score is less than zero, it means that its critics outnumber its supporters. This is where industry NPS standards, such as the ones listed above, come in handy: an NPS score of -3 can appear poor on its own, but it’s difficult to understand without comparing it to ratings from important industry participants. If the industry average was -10, for example, the score would appear less dreadful.

Nevertheless, a negative NPS indicates that a company needs to make significant efforts to repair the situation, lower the number of dissatisfied consumers, and attract additional promoters, even if the threshold is set low.

How to run NPS surveys and collect customer feedback?

As the primary step you must begin by conducting an NPS survey to know the scores and how well your product is performing. There are two options for conducting the survey: You either ask for current feedback or collect it if a customer had an experience with your company at some other point of time. There are two types of NPS surveys: Transactional NPS surveys and Relational NPS surveys.

What is Transactional NPS survey?

Transactional survey is a kind of NPS survey that helps measure customer loyalty at granular level after certain customer interactions. Tnps surveys are crucial as they allow you to collect real time customer feedback when they have recently used your product. Moreover, these surveys offer insights about the pain points of customer’s journey and how you can correct them. They also allow you to interpret the plus points of your business and enhance them for new sign-ups of your services.

What is Relational NPS survey?

Businesses utilize relational NPS to gather data often and on a big scale, in contrast to transactional NPS surveys, which are touchpoint-specific. This kind of survey is intended to collect data regarding the state of your customer relationships and brand identity. It’s ideal for internal benchmarking as well. It allows businesses to track changes in customer satisfaction over time and make data-driven decisions to improve their products and services.

How to read your NPS survey results?

To read your NPS survey results you can opt for the following:

Observe data segments

As the initial method of getting insights. NPS score varies across various segments such as age group, gender, long term customers, higher spending customers. By observing this segmentation, you can ensure a smooth analysis in a newly established business. However, as you advance, you can go into more detailed KPIs.

Performance track

Tracking performance and trends in customer use of your service can be helpful. Don’t worry if not everyone responds to your NPS surveys. When you do get a good response rate, use those results as a benchmark to improve for the next survey.

Track how your NPS changes over time. Then, try to figure out what caused those changes. This will help you make informed decisions to improve your business.

Understand intent: With one-to-one interviews, follow-up sessions, you can delve into specific issues, and understand what can and should be improved, and focus your efforts in a customer-centric path.

What is website survey?

Website surveys in terms of NPS represent on page or pop-up survey that appear on your business website. You can set this up in a way that it appears on your main page after a purchase is completed. For this type of survey, you may begin by asking on a scale of 0-10 how likely are you to recommend our services to friends and colleagues?

In case, the customer picks up 0-8 rating, you can ask further about any recommendations to improve your service. If they offer 9 and above rating, you can inquire about the reason behind the score. This can help in further enhancing that plus point to maintain standard of service.

How to improve your NPS survey results?

In order to improve your NPS results you can try these 4 ways:

Audience segmentation: Sending emails at varying steps of a customer’s journey can help gather feedback. You can send in emails, right after purchase, after abandoning a shopping cart, 3 months after a purchase is made of a few months later than that.

Customize questions: You can alter questions to personalize them for detractors, promoters and passives.

Simplify queries: By keeping the questions simple, you can make it easier for customers to respond.

Brief Survey: If your survey is precise and limited to one rating question, and one open-ended question, people stay engaged and often complete the survey.

How do businesses typically use the feedback from passives in NPS surveys?

Passives offer a more layered expression of how well your business is performing. It helps to navigate whether marketing expenses are enough to drive customer acquisition and satisfaction. By correlating passives’ feedback with Customer Lifetime Value (CLV), businesses can gain insights into the potential loyalty and value of customers. This information can be used to:

• Refine marketing strategies to target passives and convert them into promoters
• Identify areas for improvement in the customer experience
• Inform product development and enhancement decisions
• Develop targeted retention programs to prevent passives from churning
• Set realistic expectations for customer growth and revenue projections

What is the ideal frequency for conducting relational NPS surveys?

The frequency of conducting relational surveys depends on factors including business goals, customer journey, industry norms and market conditions, as well as your competitor activity, resource availability and survey fatigue. Your surveys can be quarterly biannual, monthly, weekly, or annual.

What is the significance of benchmarking in NPS surveys?

NPS benchmarking a means to compare your business performance against industry standards, and other competitors. It allows informed decision-making by analyzing the current trends. By doing so, you can understand your NPS scores and determine if your performance is below or above industry averages. It can allow making adjustments as per need about resource allocation, customer satisfaction initiatives, and business strategy. Benchmarking allows you to stay adaptive to industry trends and set achievable targets for NPS improvement.

How can NPS data be used to inform product pricing strategies?

NPS information can also be used to guide product price strategies since it offers relevant customer value perceptions and price sensitivity information. Based on NPS ratings, companies are able to determine whether consumers would be ready to pay extra for their product as well as see where potential opportunities for cross-sell and upsell may arise. 

Moreover, NPS information can be used to guide tiered pricing strategies, competitive benchmarking, and price elasticity, enabling companies to maximize their pricing strategies and make them seem reasonable to customers. Finally, leveraging NPS information to guide pricing decisions can enable companies to find a balance between revenue objectives and customer satisfaction, leading to loyalty and retention.

What are some common pitfalls or biases to avoid when conducting NPS surveys?

Avoiding common pitfalls in your NPS survey is crucial to make the most of the outcomes and customer feedback. Some common pitfalls are emotional manipulation through language, scale manipulation, and reverse ordering. Interactive design bias, hidden negative options, limited emotional range, visual and emotional cues, and friction for negative feedback.

Can you explain the concept of “NPS churn” and its implications?

NPS churn is basically the number of detractors that are unsatisfied with your service and are at risk of leaving or have already left a company. It’s a measure of the number of dissatisfied customers who are likely to churn, or stop doing business with a company.

NPS churn has significant implications for businesses as it can lead to:

Revenue loss: Churned customers take their business (and revenue) elsewhere.

Negative word-of-mouth: Detractors can harm your brand reputation by sharing their negative experiences with others.

Increased acquisition costs: Replacing lost customers with new ones can be costly and time-consuming.

Competitive disadvantage: High NPS churn can indicate a competitive disadvantage, making it harder to attract and retain customers.