Net Promoter Score (NPS): The Gold Standard Customer Experience Metric

Net Promoter Score

In their quest for accurate results, customer experience (CX) experts needed a simple, baseline metric they could use to measure customer loyalty.

The purpose of this metric would be to give businesses perspective on how satisfied their customers were both in general and relative to industry competition. 

They came up with a simple equation, from which they could pull results using survey analysis

The question they decided on aimed to measure loyalty by asking customers how likely they were to recommend the product/service to others; it asked:

“On a scale from 0-10, how likely are you to recommend this company to a friend or colleague?”

Just like that, the Net Promoter Score (or NPS survey) was born. NPS surveys quickly became the gold standard of CX metrics due to their bottom-line impact, competitive relevance, and versatility. .

Within this exploration of all things Net Promoter Score we will define NPS, explain the nuts and bolts of calculating your score, outline the economic impact of NPS, break down the components of an NPS survey, and lay out the most powerful tools available to achieve a ‘good’ NPS score in 2021

Let’s jump right in – feel free to click around to the section most valuable to you.

  1. What Is a Net Promoter Score?
  2. How to Calculate Your Net Promoter Score
  3. The Importance of NPS: NPS Economics
  4. What Is a Good NPS Score?
  5. How to Implement NPS
  6. How to Improve Your Net Promoter Score
  7. Takeaways

What Is a Net Promoter Score?

What is NPS

Net promoter score, or NPS, is a customer experience metric designed to gauge customer loyalty by asking them how likely they are to recommend a company on a scale of 0-10.

Your responses, once gathered, are then divided into three groups: promoters, passives, and detractors, according to the following criteria:

  • Detractors (scores 0 - 6): Unsatisfied customers that could potentially share negative feedback about your business.
  • Passives(scores 7 - 8): Indifferent customers that are open to competitive offerings.
  • Promoters(scores 9 - 10): Loyal customers that are very likely to promote your company through word of mouth.

Once grouped, you’re then ready to derive your NPS score using its simple formula.

How to Calculate Your Net Promoter Score

Calculating NPS relies on a basic formula  – you subtract your percentage of detractors from your percentage of promoters.

Image showing the NPS formula.

For instance, if you have 30% promoters and 20% detractors, 30 - 20 = 10, you have an NPS of 10.

It makes sense. If you have more detractors than promoters, your NPS will be negative; more promoters than detractors, your score will be positive. 

Regardless of what your result ends up being, any successful organization will use its NPS to arm customer facing teams with actionable, feedback-driven insights.

Your NPS is of the greatest value in context, meaning relative to how you could be performing and relative to your respective industry.

Here are some helpful data points to contextualize your NPS calculation:

  1. Per HBR, drawing from 400 companies across 28 industries, the median NPS was only 16. That’s a low bar, and underlines the high standard that NPS requires.

  2. Reinforcing this, a 2018 Satmetrix study found NPS averages ranging between -1 (Internet service providers) and 65 (department/specialty stores). That’s a low scatter of scores again underlining the difficulty of attaining high NPS.

  3. While any score above 70 is considered an ‘excellent’ NPS, even powerful, global brands consistently fall short – per Verint’s ForeSee Digital Experience index in 2018, Netflix had an NPS of 64, PayPal scored 63, Amazon 54, Google 53, and Apple 49.

  4. Finally, it is worth noting that a perfect NPS of 100 has never been achieved by any company that has been surveyed using the metric. 

So, that is the lay of the NPS landscape – let’s get into why you should care.

The Importance of NPS: NPS Economics

Importance of NPS

NPS’s true value lies in the impact of a loyal customer to your bottom line. 

CX experts from Bain & Co. developed NPS to be a customer experience metric, and specifically one that measured customer loyalty, due to loyalty’s outsized impact on revenue.  

Loyal customers aren’t just important in preventing churn. Loyalty, because it indicates an emotional bond between customer and company, has massive importance to further growth.

According to Bain & Co, a higher-than-competition NPS score accounts for 20-60% of a company's organic growth, with industry leaders consistently accruing NPS scores more than double that of their competitors.

The root cause? According to Fred Reichheld of the Harvard Business Review, when customers form an emotional tie with a company (i.e. become ‘loyal customers’), [these] promoters essentially become the company’s marketing department”

NPS’s massive impact on companies’ ability to remain competitive also stems from game theory: NPS is a zero sum game because customers can only occupy one group. Thus, turning a detractor into a promoter brings about a double point swing effect per-capita. Situations where this is possible should be given as much attention as possible.

All told, any future-savvy company should move improving NPS to the top of their priority list. Here are some measures you can put into action to drive your NPS upwards. 

What is a Good NPS Score?

Maintaining a ‘good’ NPS in 2021 can be difficult as product availability reaches unprecedented highs due to online marketplaces.

Let’s look at what constitutes a ‘good’ NPS score both in general and in context relative to industry, then move on to the single best technique to improve your NPS. 

In general, good NPS is any positive score, aka any score above 0:

NPS bar scale titled “What is a good NPS score?”. The scale is from -100 to +100. The red section is labeled as “NEEDS IMPROVEMENT” (from -100 to 0), the yellow section is labeled as “Good” (from 0 to +30), the light green section is labeled as “GREAT” (from +30 to +70), and the dark green section is labeled as “EXCELLENT” (from +70 to +100).

A positive score means you are on track, i.e. not actively hemorrhaging customers, as you have more promoters than detractors. 

Industry-relative good NPS varies, especially due to a mitigating factor known as customer tolerance level, which we will explain. In general, according to a 2020 survey by Retently, industry average NPS is as follows:

A graph titled “Retently 2020 NPS Benchmark, showing NPS scores by industry.

Source

These industry relative scores are a direct reflection of customer tolerance level.

Customer tolerance level is a metric that reflects how likely customers are to become angry if they feel that their needs aren’t met by a company/service:

  • Low-tolerance industries (such as healthcare and airlines) have customers who are very likely to become angry if they are dissatisfied. 
  • High-tolerance industries (industries operating at lower stakes such as online fashion retailers and other luxury goods) have more tolerant customers who will likely just say ‘meh’ and move on if dissatisfied.

Customer tolerance level is joined by the following factors which also significantly impact NPS:

  1. Timing – When the survey is delivered can impact results.
  2. Channel – How you deliver the survey directly relates to response rate.
  3. Location and Culture – Different cultures have different standards of satisfaction – this is a geographic and cultural subcategory of customer tolerance level.

You can read more in depth explanations of all three of these influencing factors as well as how some companies have subverted expectations in our guide to achieving good NPS in 2021.

Let’s break down the components of an NPS survey so that you can fine-tune your NPS approach to be the best it can be.

How to Implement NPS

Implement of NPS

An NPS survey is made up of two components. The close-ended question (explained above), that gives you a score between 1 and 10, and an open ended question, meant to contextualize their quantified response.

Essentially, the close-ended questions give us results and the open-ended question helps explain these results. This is the key driver behind why great NPS is best achieved by a listening-then-adapting approach. While issues are detected in the close-ended portion of your survey, the open-ended qualitative responses lend in-depth info that can be transformed into valuable nuggets of customer insight.

Helpful survey delivery software can make delivering surveys to your customers simple. Let’s take a look at Hotjar and SurveyMonkey, both great options, and how they can streamline and upgrade your NPS implementation.

SurveyMonkey

SurveyMonkey is a simple-yet-powerful survey integration platform for businesses who are taking their first steps into feedback collection. NPS surveys are just the tip of the iceberg of what SurveyMonkey is capable of. Its survey offerings are vast and can be sent forth to collect whatever customer data strikes your fancy. From there, the data it collects can be plugged into a more advanced feedback analysis platform to unlock limitless customer insight results.

Hotjar

Hotjar

Hotjar, on the other hand, uses behavior analysis to inform your NPS implementation. Their software complements a customizable survey distribution interface with user behavior trackers like their heatmap software (tracking mouse movement, scroll, and time viewed per user) in order to give you a complete, nuanced picture of how users are interacting with your site. 

With a focus on delivery and behavior respectively, SurveyMonkey and Hotjar give you the power you need to tailor your NPS to specific customer groups and see how they respond. Simply put, and with pre-made templates on offer if you get stuck, these services make sending NPS surveys easy. By using them your teams will have all the data they could ever desire. 

Next, the challenge becomes analyzing said data – let’s look at why a purposeful and comprehensive listening approach can be a game-changer and how AI can supercharge your path to great feedback analysis. 

How to Improve Your Net Promoter Score

Improve of NPS

The single best technique to improving your NPS score is listening more effectively to your customers

This means moving away from the numeric, close-ended half of your NPS score and examining your open-ended, written component. It’s in this additional comments box that your customers will explain the ‘why’ behind their rating. Accurately assessing and addressing their comments is key to unlocking their happiness. 

Actionable customer feedback analysis is part of any successful company wide voice of customer approach. Turning open-ended text feedback into quantified, actionable insights is the key to effective listening and unlocking NPS improvement.

However, going through large amounts of raw text by hand is both resource intensive and prone to error. Data scientists themselves find manual analysis tedious and your team members could be doing far more with their time, such as developing and integrating strategy. 

Luckily there is a solution - automated text analysis, via machine learning, has transformed feedback analysis by allowing teams to scan and mine their feedback for insights at scale and in real time. 

The goal of any text analysis AI is to turn large amounts of raw text responses into results your customer experience teams can act upon. This process of turning responses into results is known as customer experience management (CXM).

Automated CXM platforms have changed the game, allowing companies to leverage their feedback at a higher clip than ever before with significantly more accurate results. 

These platforms are essentially hacks to NPS improvement, taking the reins to both how you send your surveys and how you analyze the results – let’s explain the form and function of a great CXM option - MonkeyLearn - and how its suite of tools can revolutionize your NPS approach. 

MonkeyLearn

When it comes to text analysis, MonkeyLearn boasts the power and versatility to outdo all competitors – MonkeyLearn’s AI was specifically built for text analysis and is both powerful enough to handle any response archive and customizable enough to cater to any CX team’s wildest ponderings.

Couple this with a highly compatible API and top-of-the-line data visualization with the MonkeyLearn Studio (dashboard pictured above, click through here to see in action), and you have an industry leading software package custom-built to raise your NPS. 

Takeaways

No matter what way you shake it, NPS is the future differentiator for online business, which will soon be the majority of business. 

Implementing automated NPS tools now, will help future-forward customer experience departments get the leg-up on competition for years to come – a key advantage in the rapidly transforming digital market. 

It’s never too early to start making brand loyalty a priority.

To jumpstart your NPS improvement journey browse MonkeyLearn’s suite of feedback analysis tools, or try out the full suite for free today

Unsure how it will fit with your specific company? Sign up for a complimentary demo and one of our automation professionals will walk you through it. Or, continue your learning about the big, bad world of feedback analysis via our blog.

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