Net Promoter Score: What It Is, How It Works and Why It Isn’t Enough
When you’re choosing your next vacation destination or you’re in a bind with an urgent home repair need, there’s a good chance you turn to friends and online sources for recommendations. This is now the common first step.
Nielsen’s Global Trust in Advertising Report reveals that 83% of survey participants state that more than any other form of promotion, they trust recommendations that come from friends and family. While having people that will recommend you is well and good, those customers that aren’t happy are likely to be the most vocal. One study found that customers that had bad experiences are likely to tell 3X as many people as those who are satisfied.
One way that companies gauge customer satisfaction is by measuring and tracking their Net Promoter Score (NPS). While this is a useful measurement, it doesn’t provide the depth of understanding that you need to optimize the customer experience.
What Is the Net Promoter Score?
First devised by Fred Reichheld at Bain & Company in a 2003 Harvard Business Review article, the Net Promoter Score was referred to as “The One Number You Need to Grow.” Reichheld proposed the NPS as an alternative to the traditional customer satisfaction surveys and was able to validate his claims by showing a positive correlation between long-term company growth and the NPS.
So, what is the NPS? It’s a simple customer satisfaction benchmark derived from a single question: “On a scale of 0 to 10, how likely are you to recommend our product/service to a friend?” Higher scores, such as 9 or 10 are “likely to recommend,” and lower scores are “not likely to recommend.” Collect enough of these scores, and you will receive an overall idea relative to customer sentiment about your brand.
How Is Your NPS Calculated?
NPS is simple enough to calculate, even with a large sample size. The system divides respondents into three categories:
- Promoters: Customers responding to the question with a 9 or 10. These are loyal and enthusiastic customers who are highly likely to tell friends and family about your business.
- Passives: Customers responding to the question with a 7 or 8. These are indifferent customers who could either switch to competitors or later become detractors.
- Detractors: Customers responding to the question with a 0 to 6. These are dissatisfied customers. You not only risk losing them, they can also damage your brand by telling others about their poor experiences.
To calculate the score, simply ignore all of the passives. Then, subtract the percentage of detractors from the percentage of detractors. For example, if you surveyed 100 customers and 55% were promoters and 30% were detractors, you’d find your NPS with this calculation: (55%-30% = 25).
What Is a Good vs. Bad NPS?
Any company that tracks their NPS understandably wants to know what score should be the target. Obviously, the higher the score, the better; but how well you are doing will depend on your particular industry.
According to a recent study by Temkin, the average NPS for auto dealers is about 39, with the lowest being 20. But the average NPS for Internet Service Providers is much lower at 0, with a high of 19 and a low of -16.
In general, an NPS that is below 0 indicates that your company has some issues that it should swiftly address. Anything above 70 means that your customers adore you — but only at this moment, which brings us to some of the limitations of the NPS.
Why Your NPS Isn’t Enough to Measure Customer Feedback
While NPS provides an effective measure of customer sentiment at any given point in time, it doesn’t provide the depth you need to understand what’s working or what isn’t working along the customer journey.
You can fill in these gaps and achieve your goals with a comprehensive online reputation management program that has a broader focus. Instead of the one-dimensional “recommend” or “not recommend” data that you get from NPS, there is much more information available from online reviews, social media posts and customized surveys.
These are just a few of the elements that make up your company’s Reputation Score.
Using Your Reputation Score to Change the Game
Relying on the NPS alone won’t give your company the information it needs to make meaning changes to problem areas along the customer’s journey. Instead, your Reputation Score provides you with an accurate and comprehensive view of your brand’s online reputation, with insights you can use to take immediate action for necessary improvements.
Some of the key components of your Reputation Score include:
- Online listings accuracy and consistency
- Social engagement
- Star ratings
- Review recency, volume, spread and length
- Review response
- Search impressions
Reputation.com employs patented algorithms to calculate your score, which is instantly updated as there are changes to any components. You can make comparisons to others in your industry as well as best-in-class rankings.
More importantly, you can use the detailed insights in your online reputation management program to create action plans that will improve the customer experience, your business and your bottom line results. You also have access to custom survey capabilities, which allows your business to focus on the areas that need the most improvement or will provide the greatest value to customers.
To learn more about these solutions, download our free guide: What is Online Reputation Management?