Net Promoter Score : How to Calculate & Analyse it

‍What is NPS and how does it work? ‍

NPS stands for Net promoter Score and is a statistic that is utilised in customer experience initiatives. NPS calculates a customer's level of loyalty to a business. It is a metric that is used to assess a customer's level of loyalty and satisfaction with a business. Businesses can boost customer loyalty by enhancing service, customer support, delivery, and other areas with the use of aggregate NPS scores. NPS is a powerful tool for businesses to measure customer loyalty and satisfaction by quantifying the likelihood of customers recommending their products or services to others.

Why is NPS important?

Improves customer satisfaction

The ability to see firsthand customer satisfaction levels with your service is one of the primary advantages of the Net Promoter Score (NPS). All businesses want every one of their customers to be satisfied to improve customer retention and NPS allows you to assess this in a useful way. You can take action to raise satisfaction if you realise it's not where you want it to be.

Lower customer attrition

While it's vital to pay attention to how successfully your company generates promoters, it's even more crucial to concentrate on ways to lower customer attrition. Naturally, promoters are far less likely to leave, but by understanding your net promoter score (NPS), you may allocate more resources to delivering a remarkable customer experience that will entice critics and passives to switch to your business.

Creates more advocates for your brand

Customer advocates, those who spread the word about you to friends and coworkers come with being a loyal customer. In the world of high-budget digital marketing today, word-of-mouth advertising seems to be overlooked while being such a potent instrument. Fortunately, you will have a clear concept of how to increase customer advocates based on your NPS.

How to calculate NPS?

Net Promoter Score= (Number of promoter Scores/Total number of respondents)-(Number of Detractor Scores/Total Number of Respondents)

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Worked Example:

If a brand surveys 100 customers and the result leads to 60 promoters, 20 passives and 20 detractors, the NPS would then be 40%.

What is the Net Promoter Score Scale: Detractors, Passives, and Promoters?

The Net Promoter Score (NPS) scale categorizes respondents into three groups based on their likelihood to recommend a company's product or service. Here are the definitions for each category:

1. Promoters: Respondents who give a rating of 9 or 10 on the NPS scale. Promoters are considered loyal customers who can contribute positively to business growth through word-of-mouth. These are customers that are highly satisfied with a business and its products and services.

2. Passives: Respondents who give a rating of 7 or 8 on the NPS scale. These customers are generally satisfied with the product or service, but they are not as enthusiastic as promoters. Passives are somewhat indifferent and may not actively promote the business or product to others.

3. Detractors: Respondents who give a rating of 0 to 6 on the NPS scale. These customers are unhappy or dissatisfied with the product or service. Detractors may share negative feedback and experiences with others, potentially harming the company's reputation and growth.

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The NPS calculation involves subtracting the percentage of detractors from the percentage of promoters to arrive at a score ranging from -100 to +100. A higher NPS indicates a greater proportion of promoters relative to detractors, which is generally associated with higher customer loyalty and satisfaction.

How to analyse Net Promoter Score?

By following these steps, businesses can effectively analyze NPS to drive customer-centric improvements, enhance loyalty, and ultimately foster sustainable growth.

1.Interpret the Score: Understand what the resulting score means:

Positive NPS (above 0): Indicates more promoters than detractors, suggesting strong customer loyalty and positive word-of-mouth.
Negative NPS (below 0): Indicates more detractors than promoters, highlighting potential issues that need addressing to improve customer satisfaction and loyalty.

2. Segment Analysis: Break down NPS results by different segments:

Demographics: Analyze scores by customer demographics (age, gender, location) to identify if certain groups are more satisfied or dissatisfied.
Product or Service Lines: Compare NPS across different products or services to understand where improvements are needed.
Customer Lifetime Value: Analyze NPS based on the value and longevity of customer relationships.

3. Qualitative Insights: Review qualitative feedback:

Open-Ended Responses: Analyze comments from customers to understand specific reasons behind their ratings (positive or negative).
Themes and Trends: Identify recurring themes or issues that customers mention, which may not be captured by the NPS score alone.

4. Benchmarking: Compare your NPS with industry benchmarks or competitors:

Understand where your company stands relative to others in terms of customer loyalty and satisfaction.
Use benchmarks to set goals for improvement and track progress over time.

5. Actionable Steps: Based on your analysis, develop actionable steps:

Prioritize Improvements: Focus on areas with the greatest impact on NPS, especially those highlighted by both quantitative and qualitative data.
Implement Changes: Make adjustments to products, services, or customer interactions based on insights gained from the NPS analysis.
Monitor Progress: Continuously track NPS and related metrics to assess the effectiveness of changes and ensure ongoing improvements in customer satisfaction.

What is a good NPS score?

A good Net Promoter Score (NPS) can vary depending on factors such as industry norms, competition, and customer expectations. However, a good NPS would be one that is positive and above +50. This is considered excellent and indicates that a company has a large base of loyal promoters who are likely to recommend the business to others. Companies with NPS scores in this range typically enjoy strong customer loyalty and advocacy.

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What is a bad NPS score?

A NPS score significantly below -30 indicates a severe issue with customer satisfaction and loyalty.

It suggests widespread dissatisfaction among customers, potentially leading to high churn rates and difficulty in acquiring new customers.

Businesses in this range may face serious reputational risks and need to take immediate and comprehensive actions to improve customer experience management.

How to conduct surveys to calculate NPS?

Conducting surveys to gather Net Promoter Score (NPS) feedback involves a systematic approach to ensure you collect valuable insights from your customers. Here’s a step-by-step guide on how to conduct surveys and gather NPS feedback effectively:

1. Define Survey Objectives

Purpose: Clearly define the goal of your NPS survey, such as measuring overall customer satisfaction, identifying areas for improvement, or tracking changes over time.
Audience: Determine the target audience for your survey (e.g., all customers, specific segments, recent purchasers).

2. Design Your NPS Survey

Single Question: Use the standard NPS question: "On a scale of 0-10, how likely are you to recommend [company/product/service] to a friend or colleague?"
Optional Follow-Up: Include an open-ended question to gather qualitative insights into the reasons behind the ratings.

3. Choose Survey Distribution Channels

Email: Send surveys via email to your customer database. Personalize the email and include a clear call to action.
Website: Integrate the survey into your website, such as through a pop-up or after completing a transaction.
In-App: For mobile apps, incorporate the survey within the app interface at appropriate touchpoints.
Phone: Conduct surveys via phone calls for personalized interactions or B2B relationships.

4. Timing and Frequency

Transaction-Based: Send surveys shortly after a transaction or interaction with your company to capture immediate feedback.
Periodic: Conduct regular surveys (e.g., quarterly or annually) to track changes in NPS over time and measure the impact of initiatives.

5. Ensure Survey Accessibility and User-Friendliness

Clear Instructions: Provide clear instructions on how to complete the survey and explain the rating scale (0-10).
Mobile Compatibility: Ensure the survey is mobile-friendly for customers accessing it on smartphones or tablets.
Short and Simple: Keep the survey short to encourage higher response rates and minimize respondent fatigue.

6. Collect and Analyze Responses

Aggregate Responses: Gather responses and categorize them into Promoters (9-10), Passives (7-8), and Detractors (0-6).
Calculate NPS: Use the formula to calculate your Net Promoter Score.
Analyze Insights: Review quantitative results (NPS score) and qualitative feedback (from open-ended questions) to understand customer sentiment and identify trends.

7. Act on Feedback

Prioritize Actions: Based on survey findings, prioritize areas for improvement that can have the greatest impact on customer satisfaction and loyalty.
Implement Changes: Develop action plans and initiatives to address feedback and enhance customer experience.
Communicate Results: Share survey results and action plans with relevant stakeholders to ensure alignment and accountability.

8. Monitor and Iterate

Track Progress: Monitor changes in NPS over time to assess the effectiveness of implemented improvements.
Iterate: Continuously refine your survey approach based on feedback and industry best practices to optimize response rates and insights.

How to interpret your NPS result?

By interpreting your NPS results effectively, you can gain valuable insights into customer perceptions, prioritize actions for improvement, and ultimately enhance customer satisfaction, loyalty, and business growth.

1.Comparative and Contextual Analysis

Benchmarking: Compare your NPS score with industry benchmarks or competitors to understand your company’s performance relative to others in your sector.
Trends: Track changes in your NPS over time to assess improvements or declines in customer sentiment. Identify trends to determine the effectiveness of initiatives.

2. Qualitative Insights

Open-Ended Responses: Analyze qualitative feedback from open-ended survey questions to understand the reasons behind the ratings.
Themes and Trends: Identify recurring themes or specific issues that impact customer perceptions and influence your NPS score.

3. Segmentation Analysis

Demographics: Break down NPS results by customer demographics (age, gender, location, etc.) to identify if certain groups have different levels of satisfaction.
Products/Services: Analyze NPS scores for different products or services offered to identify strengths and areas for improvement within your offerings.

4. Actionable Insights

Prioritize Improvements: Focus on areas identified by both quantitative (NPS score) and qualitative (feedback) data as critical for enhancing customer experience.
Implement Changes: Develop action plans based on insights to address issues, improve customer satisfaction, and foster loyalty.
Monitor Progress: Continuously monitor NPS and related metrics to evaluate the impact of implemented improvements and adjust strategies as needed.

5. Communicate Results

Internal Communication: Share NPS results and action plans with relevant stakeholders across the organization to ensure alignment and support for customer-centric initiatives.
External Communication: Use positive NPS scores as a marketing tool to showcase customer satisfaction and loyalty. Address negative scores transparently and demonstrate proactive steps taken to improve.

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