What is NPS?
To answer the question of what is NPS, let’s first focus on your business. There are a couple of questions that are often on the mind of many business owners. First, they want to know if their customers are happy. And second, they want to know the growth potential of their business. There is one metric that touts the ability to capture the answer to those two pressing questions and that is the Net Promoter Score (NPS).
While NPS isn’t a perfect predictor of satisfaction or growth, it can be a valuable tool to help businesses know where they stand with their customers and if they’re headed in the right direction. Over the course of this post, we’ll cover the basics of NPS to help you decide if it is the right fit for your business.
What is NPS?
NPS is a loyalty metric that was developed by Fred Reischheld, Bain & Company, and Satmetrix. So what is NPS? Simply put, a business’ Net Promoter Score is based on responses to the question, “On a scale of 0-10, how likely are you to recommend us to a family or friend?” Based on their answer to the question, customers are divided into three categories: Promoters (9-10), Passives (7-8), Detractors (0-6). Your Net Promoter Score is calculated by subtracting the percent of promoters from the percent of detractors and multiplying by 100. Next time you’re asked what is NPS, you’ll know.
NPS Promoters are the customers that love your business. They are individuals who you can target for testimonials. You can also most likely rely on them for repeat business and to help you drive new business in the form of referrals. Passives have lukewarm feelings about your business. They are neither loyal or unloyal and could be easily lured away by your competition. Because of this, it might make sense to conduct outreach to them to see what you can do to turn them into Promoters.
NPS Detractors aren’t satisfied with the product or service you provided and could do damage to your business through negative word of mouth. Businesses that collect NPS data, should proactively reach out to all Detractors and dig deeper to pinpoint the root of the problem and identify ways to fix it.
What is NPS and Why You Should Use It
One of the biggest reasons you should use NPS is because of how simple it is for survey respondents to understand the question. You’re not trying to trick them to manipulate the data. You simply want to know the likelihood that they would recommend your business to their family and friends.
Additionally, because of the way your Net Promoter Score is calculated, it’s easy for you to interpret the results and create a plan of action based on responses.
Another reason NPS is an effective tool for measuring satisfaction and growth is it can easily be benchmarked and monitored over time. You just need to make sure you are making use of the NPS data you collect. If you don’t plan on using the information to identify what you’re doing right through your Promoters and areas you can improve through your Detractors, then you probably shouldn’t start an NPS program.
Tips for a successful Net Promoter Program
Only one piece of the puzzle: As we mentioned, NPS can be a valuable tool to understand the growth trajectory of your business and satisfaction of your customers. But, it should just be one tool in your customer feedback arsenal. We suggest using NPS along with online reviews, customer satisfaction surveys, and market research. All of these things combined will help you better understand your business as a whole and help you make better-informed decisions about your business.
Collect NPS data regularly: There are a couple of approaches you can take when conducting an NPS survey. One is dividing your customers into batches and sending out surveys monthly or quarterly to different groups of customers. Another approach is sending an NPS survey for each transaction. Collecting NPS data on a regular basis will limit the likelihood of the data being skewed by specific events so the results will be more representative of your actual experience as a whole.
Don’t just concentrate on your overall score: Knowing what your overall score is over time can be helpful, but you should also be watching for trends in your Promoters, Detractors, and Passives. Is there something that connects the members of each of those groups? Is the percentage of each group fluctuating or consistent over time? Knowing these trends will give you an understanding of whether your efforts to improve NPS are working while also helping you to refine your operations.
So to recap, what is NPS? NPS is a loyalty metric based on promoters and detractors of your business.
Check out these articles for more on NPS and Customer Feedback: