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Word of mouth is incredibly influential.
In reality, 74% of consumers says word of mouth is an important factor in making purchasing decisions. This is even more true for Generation Z and millennials. 63% say they rely more on what influencers say about brands than what brands say about themselves in their ads.
Given how often it is to do online research before trying a new product or service, your business can be a tweet way to attract or repel future customers. The same goes for referrals (or warnings) from friends, family and co-workers.
Keeping your finger on the pulse of how your customers feel and how loyal they are to your brand is the key to keeping the lights on for your business. But how do you measure it exactly?
This is where a Net Promoter Score, also an NPS score, can help.
What is an NPS score?
An NPS score is one of the top customer service statistics businesses need to see if they want to determine customer satisfaction. With an NPS score calculation, you can know how likely your customers are to recommend your business to others with whom they communicate.
It was originally developed by Fred Reichheld, a business strategist who researches and writes loyalty.
Reichheld spends about conducted two years of research questions that link customer behavior, such as referral and purchase of products, to business growth. He was surprised to discover that the most effective question was not directly about customer satisfaction or loyalty. Rather, it is about the likelihood that someone will be able to recommend a product, service, or business to friends, family, and co-workers.
If someone gives a strong recommendation, it means that they are jeopardizing their own reputation. This can be a good indication of both customer satisfaction and loyalty. For most businesses to grow their business effectively, it is important that you gain customer loyalty. For businesses to succeed, depending on their offering, they usually need repeat customers and referrals.
Why the NPS score is important and how to use it
The biggest advantage of the NPS is that it has been proven increase customer retention. It matters because it’s the way cheaper to retain customers than to constantly acquire new ones.
NPS makes it clear who your promoters are. This means you have the opportunity to reward them for their loyalty and build your relationship with them.
Rewards can come in the form of benefits, referral codes and more. If you just reach out to them and acknowledge their loyalty, you will also earn brownie points.
On the other hand, it also gives you the chance make quick contact with your apostatesreach them before hardening their opinion about your brand.
Regardless of the score you achieve, regular NPS surveys should show the exact interactions that your promoters and your apostates create. With that specific specificity, you can quickly identify the areas in which you need to invest to maintain your customer base (and hopefully make some apostates promoters).
How to calculate your net promoter score
Marketers can calculate a net promoter score by asking a single question: What is the probability that you will recommend our company / product / service to a friend or colleague on a scale of 0 to 10?
The NPS survey is really as simple as that.
Source: MailChimp
After asking the NPS question, you can group respondents into three different categories:
Promoters (Score 9 to 10): Promoters play a key role in your business. They are loyal customers who have rushed your products and services to the people around them. They can essentially serve as an extension of your marketing department.
Passive (score 7 to 8): Passive customers are satisfied, but they do not exactly sing your praises. They may eventually become promoters, or they may be influenced by the competition.
Opponents (Score 0 to 6): Insults are dissatisfied with your business and are less likely to be repeat customers. Worse, it can diminish your brand’s reputation by passing on their negative experiences to others.
To find out your net promoter score, subtract the percentage of scammers (your unhappy customers) from the percentage of promoters (your loyal customers). Passive is not included in the formula. Your final score will be between -100 and 100.
You can also include more questions in your survey. Some of the most common include:
- How did you hear about our company?
- Did you find what you are looking for today?
- How easy was it to find it?
- How was your overall experience with our company?
However, avoid your customers too much with questions. The beauty of the NPS survey is that its brevity leads to a higher response rate than traditional surveys.
In addition to your NPS score, you can add user engagement statistics, such as page time, average session duration, and bounce rate, to your analysis. This way, you have more insight into the journey of your clients – without fixing them with survey questions.
When should you do an NPS survey?
The simplicity of the NPS formula is what made it such a game changer in the marketing world.
Instead of asking customers to fill out lengthy, general surveys about your business, the NPS may be able to gather their opinions at every step of the journey.
So, how does it work in practice?
When it comes to the NPS, timing is everything. You want to make sure you reach your customers after every major activity they perform.
However, if there are many steps in the customer’s journey, Harvard Business Review recommends offering the survey randomly to customers to prevent fatigue in the survey.
This way, you can map out the full user experience, as well as the good and bad aspects of the trip, with an emphasis on the good stuff. You may be creating ‘Wow!’ moments for your customers and not even realizing it.
Technology makes it easier than ever to capture customers at the right time. Some of the most popular channels for NPS recordings include:
- Instant Messaging (Facebook Messenger)
- Text
- In-app
- Chatbots
You will probably want to use more than one of these channels to request feedback. There are many formulated answers available on the internet to help you get started.
What is a good NPS score?
NPS scores fall somewhere between -100 to 100. The higher the score, the better, and vice versa.
Bain & Company, which owns the trademark of the NPS system, defines any score above 0 as a step in the right direction. The fact that you are not in a negative integer range shows at least some customer loyalty.
Obviously, you would probably not be satisfied with a score in the single digits. Every score above 20 is considered ‘favorable’, a score of 50 is ‘excellent’ and 80 or higher is considered ‘world class’, according to the firm.
However, deciphering the meaning of your NPS can be difficult.
First, as with any type of survey, you want to make sure you have a large enough sample. Every industry is different, so there is no clear answer as to how many answers are enough. What is known is that more is definitely better, and this is especially true if you have a limited customer base. You should definitely be skeptical about a high score after examining only a dozen or so customers.
It is also common for people to be surprised at how low their company’s scores are. A low score is not always an immediate cause for concern, and it may have more to do with the business environment in which you work.
For example, the location of your consumers will affect your NPS result. Research shows that respondents in Europe tend to be more conservative with their ratings. On the other hand, in the United States, clients give more liberal high marks, even though in real life they are not avid promoters.
It is also important to consider the industry standards. Some industries, especially businesses that have difficult customer relationships, such as collection agencies, tend to be low on the NPS scale.
Benchmarking data can help you understand where you stand compared to your competitors.
Some insights you can gain from benchmark data include threats and opportunities for your business and see if a competitor has recently made a change that boosted their NPS. You can investigate whether it is worth repeating the process.
To find out what the default NPS score is for your industry and location, you can purchase this type of data from a third-party enterprise firm.
If you work in an emerging industry where NPS scores for competitors are not yet available, determining your NPS score is still worth it. In this scenario, you use your past performance as your yardstick.
It is important to note that any improvement in the score is an indication of future growth. Of course, the opposite is also true.
Free NPS Calculators
If you are not yet ready to invest in professional NPS tools, there are free options you can explore. Our free Customer Service Performance Report Template includes an NPS calculator, as well as calculators to help you measure other business statistics, such as:
- Customers deviate,
- Customer acquisition costs,
- Life value of the customer,
- Net promoter score,
- And more.
Best of all, it’s completely free.
Easily manage all your social media profiles using Hootsuite. From a single dashboard, you can schedule and publish placements, engage your followers, monitor relevant conversations, measure results, manage your ads, and more.
Manage every customer query on a single platform with Sparkcentral. Never miss a message, improve customer satisfaction and save time. See it in action.
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