The Importance of your Net Promoter Score
Often referred to as the ‘Ultimate Question’, the Net Promoter Score (NPS) is used as customer satisfaction indicator, forming part of a range of customer satisfaction measurement tools.
Recognised as a simple, effective and robust measurement tool, it is flexible enough to be used across multiple organisations and in different industries.
As a universally understood measurement tool – it is important that organisations understand what their NPS score is, and combine it with robust customer service support to ensure their customers receive the best customer support available.
Mystery Shopping Agency Tern works with many industries and the NPS is often used as a key indicator in our reporting statistics, alongside other industry recognised measurement techniques, helping businesses to establish how they are performing in regards to customer satisfaction.
How is Net Promoter Score calculated?
The NPS question is always the same, “How likely are you to recommend company/brand/product X to a friend or relative?”
The respondent is invited to grade their response on an 11 point scale (i.e. Zero to 10) with 10 being most likely. Respondents are then framed into three categories: Promoters, Passives and Detractors.
This is done using the following metric;
Score of 0 to 6 = Detractor (A person who does not promote the store – they may negatively talk about the experience)
Score of 7 to 8 = Passive (A person who is neutral in regards to the experience)
Score of 9 to 10 = Promoter (A person who recommends the experience to friends and family)
Net Promoter Score Formula
The NPS is calculated in the following manner: detract the percentage of your Detractors from the Percentage of your Promoters. Respondents who fall into the Passive category are disregarded.
The NPS result is described as an absolute number and not a percentage. The number can be anywhere between +100 and -100. Your own NPS needs to be taken in context of your industry and peer group but be aware, the range of NPS scores in a given sector are generally dynamic and can have a big range due to the calculation method. A typical business may well generate a figure of -10 to +10 whereas sector leaders may generate a score of +60 or even more.
The NPS is essentially a tracking tool and so your initial score is effectively your own benchmark. On this basis, where your NPS is going is arguably more important than the initial score. NPS scores generally do not flatter a business and are best suited to organisations serious about changing the customer experience rather than businesses that want to publish positive statistics.
Why should you use a Net Promoter Score?
Of course, when you have the answer to the ‘Ultimate Question’ you need to understand how you got there and what you can do about it – this is the real purpose of the NPS score.
The NPS is designed to help understand the motives of Detractors and Promoters, but to do this you will need to introduce further questions to gain information that you can actually use to make changes and drive your score up.
This may typically involve making quick follow-up calls to your Detractors or working on moving more Passives into Promoters, a well thought out NPS survey/process often assists in such situations.
How to use the Net Promoter Score?
The NPS isn’t recognised as a perfect system so it is always Tern’s recommendation that it should be used in conjunction with other measurement methods.
Users of the NPS need to be aware of the following factors:
It has been considered too simple for complex markets, it is best used in markets where customers have tendencies to ask for recommendations rather than markets where a recommendation is not a leading factor in decisions.
There is also the formula itself. Many companies do not like the fact that respondents giving a score of 7 to 8 are disregarded especially when a business may well have congratulated itself in the past when a customer scored them 8 out of 10.
Customers giving a satisfaction rating of 7 to 8 are still in the zone of indifference and whilst generally satisfied, cannot be relied upon as ‘loyal’.
The formula also ignores score distribution in a way that would horrify many data analysts:
For example, if business A has 60% Promoters and 20% Detractors and business B has no Detractors and 40% Promoters then they both generate an NPS of +40. Understanding score distribution and motives of those in each category is clearly essential if NPS tracking is going to generate any advantage.
In conclusion, NPS used in the right framework and with the appropriate sample size can be a highly effective tracking tool and can be used to drive change provided the basic question is backed-up with further fact finding and analysis.