NPS (Net Promoter Score) is one of the most widely-used customer satisfaction indicators among companies. It’s used in every industry by companies providing B2C or B2B goods and services. Let’s take a closer look at this essential tool for gauging customer satisfaction by exploring its strong points and areas for improvement.
First mentioned at the end of 2003 by strategy consultant Fred Reichheld, this indicator is based around a simple concept: gauge overall customer satisfaction levels and more broadly, examine the customer-brand relationship. Basically, NPS is a score, calculated as the result of a very specific question on the intent behind a recommendation:
Would you recommend Critizr to your friends or family?
AN INDICATOR TO CATEGORISE CUSTOMERS
Based on a simple scale of 0-10 (0 meaning “definitely not” and 10 meaning “definitely”), this question means that participants can be placed into three main categories:
1. “Detractor” customers who gave a score of 0-6
These are potentially the most “harmful” customers to a brand. Disappointed or frustrated clients are likely to share their dissatisfaction via the various communication means available, particularly social media, which can have a very negative impact on a brand’s image in the process. Once these customers are identified, they must be followed up with targeted action and monitoring plans to prevent any significant damage from occurring.
2. “Passive” customers who gave a score of 7-8
Passive customers are generally content but haven’t seen enough yet to put all of their trust into the brand. There is still a high risk of them turning to competitors.
3. “Promoter” customers who gave a score of 9-10
Promoters are the most loyal and enthusiastic customers and can sometimes even act like ambassadors of the brand among their peers. A score of 9/10, which qualifies entry into this category, means they have deliberately given a high score to ensure that other customers become true fans of the brand’s products or services. This customer category is of high value to a brand and should be pampered as such.
HOW IS NPS CALCULATED?
A Net Promoter Score (NPS) is not the average result drawn from the recommendation question, but an actual score. It is calculated as follows:
This calculation can give an NPS score from -100 (all detractor answers) to +100 (all promoter answers). A score between +45 and +60 is considered “good.”
Sometimes a second question can be added to the recommendation question, often giving the participant a chance to explain their answer: “What made you give this answer?” This second question allows the brand to identify the main satisfaction/dissatisfaction motives via semantic analysis. The brand can then learn from this information and use it to implement an appropriate action plan.
In over-saturated and highly-competitive markets, the customer is your biggest tool to make you stand out. NPS is a great tool for measuring how likely your customers are to recommend you and to identify their satisfaction level (promoter, passive, detractor, etc.). As such, action plans are essential for capitalising on promoters or reigning in detractors that could harm your business.