What is a Net Promoter Score (NPS) and why is it important?

NPS (Net Promoter Scores) are used as a customer satisfaction metric to determine whether a customer is likely to recommend a brand / product / service to a friend or colleague.

It’s important because it lets you know how many customers are likely to act as a brand ambassador.

Increasing brand loyalty

Word of mouth has been shown to have the potential to increase brand loyalty.

The Wharton School of Business has reported that referred customers are between 16% and 24% more loyal on average.

This means that a positive NPS score not only ensures that a customer is on your side, but it means the people they recommend may also become loyal to your brand.

How is a net promoter score calculated?

A net promoter score is calculated first by asking a customer: How likely is it you would recommend [the product, service, or brand] to a friend or colleague? Next, you take the percentage of promoters and subtracting the percentage of detractors.

For example:

• 7 out of 10 customers recommending you = 70%.
• 1 out of 10 customers not recommending you = 10%
• Net promoter score (70 – 10) = 60

No industry is the same, so even a lower number isn’t necessarily bad. It needs to be judged in context with other in your industry.

It is said that the consulting industry’s average is as high as 62, while the logistic & transportation industry’s average is as low as just 3.

So you will only know how good your NPS score is if you benchmark it against your competitors.

It’s also a good idea to track your NPS score performance over time, making it form part of your KPI reports.

Net promoter score as a KPI

A net promoter score as a KPI makes sense because you can track your performance over time and understand whether you’re improving, maintaining or (let’s hope not) getting worse at serving your customer’s needs.

Whether it goes up, down or stays level, it’ll help you gauge the way customers feel about each interaction with you.

Net promoter score and customer satisfaction

There is an overlap between a net promoter score and customer satisfaction.

NPS scores are obtained via surveys that are given to anyone who uses a product, service, or brand after each interaction.

Naturally, this falls under the umbrella of customer satisfaction.

An NPS score is a great metric to use, but it’s used best as part of an overall customer satisfaction strategy that includes other tools, such as:

• Customer satisfaction surveys
• Digital marketing analytics (such as year-on-year web traffic)
• Customer churn rate
• Footfall to a premises
• Year-on-year sales
• Customer retention rate

This strategy will give you a wider view of how customers feel about your product, service, or brand.

Net promoter score advantages and disadvantages

The big advantage of a net promoter score is it’s quick and easy for a customer to respond to, helping to boost response rates. The disadvantage of a net promoter score is you don’t get detailed feedback. You only learn the what – not the why or the how.

It’s the why and the how that is crucial to improving and keeping customers on board.

An NPS score more than merits its place in your customer satisfaction strategy. It suits the customer who doesn’t feel compelled to give feedback (likely because the experience wasn’t either horrible or beyond amazing) but doesn’t mind giving you a quick rating. It also gives a non-confrontational customer the chance to at least let you know something was wrong.

The disadvantage of NPS is you won’t know exactly what was wrong (or right).

So be sure to include NPS as part of your wider customer satisfaction strategy.