“How likely are you to recommend our product/service/company to a friend or colleague?”
That one question is at the heart of the Net Promoter Score (NPS), a simple metric for measuring customer satisfaction and loyalty. Designed by Fred Reichheld, a management consultant at Bain & Company, in 2003, the NPS has one goal and one goal only: to give companies a way to score customer satisfaction in a straightforward, easy-to-interpret way.
How does it work?
Customers are asked the one magic question and given a 0–10 scale to choose from: 0 being not likely at all to recommend the product, service or company, and 10 being extremely likely to recommend. Based on the number they give, customers can then be categorised as “Detractors” (those who gave a rating of 0–6), “Passives” (rating 7 or 8) and “Promoters” (rating 9 or 10).
Calculating your NPS score then comes down to a simple equation:
NPS = % of Promoters - % of Detractors
NPS scores vary from industry to industry so there’s no one magic number to aim for. However, as a general rule of thumb, anything over 50 means you’re doing very well.
The best thing about NPS is its simplicity. Asking one question is a quick, easy and affordable way to measure customer satisfaction. This makes NPS incredibly useful. Plus, NPS allows you to easily track your progress over time, which is especially powerful if you’ve introduced changes to your product or service and want to see how those changes are impacting customer satisfaction.
NPS is also better than most customer surveys because it can be benchmarked. Using industry NPS benchmarks, you can see how your NPS rating measures up against your competitors. This will give you a clear picture of your performance and customer satisfaction in relation to the rest of your industry.
Most large companies and brands are already using NPS and getting real value from it. Philips, for example, has embedded NPS right across the organisation, tying NPS performance to compensation packages, and using it to inform strategic decisions. And Airbnb has found NPS to be particularly useful, establishing a firm link between its NPS score and the likelihood that guests would book another stay and recommend the platform to others.
The main drawback of surveys of any kind is that they ask opinions instead of observing real-life behaviour. And the problem with asking opinions is that respondents can (intentionally or unintentionally) lie. Some people prefer to give undeserved positive answers because they don’t want to hurt anyone’s feelings. Others want to please the person or company asking the questions so they tell them what they want to hear.
The bottom line is, your NPS score is not necessarily a true reflection of actual customer behaviour. Customers may say they’re very likely to recommend your service to a friend or colleague, but that doesn’t mean they actually will. Perhaps they really think your service is too expensive and will switch as soon as they come across a cheaper competitor.
Then there’s the issue that NPS isn’t always implemented correctly. With such a simple tool, you might be hard pressed to imagine how it could go wrong. But it can. One of the biggest mistakes companies make is to not track changes in their NPS score over time, or only conducting the survey once a year. If you’re not measuring your NPS on a consistent and regular basis, how can you expect to spot trends in customer satisfaction? That’s not to say you should bombard customers with the same question over and over again. Once every two or three months should be enough to help you track changes.
Companies like using the NPS because it provides clear numbers that can be easily interpreted, which is all well and good. But what your NPS won’t tell you is why your score is what it is. For me, that’s the biggest problem with NPS. It doesn’t tell you what customers like about your product or service, and what they don’t like. To understand the reasons behind your score (good or bad), you need to ask customers additional questions. The trick is to do this without sacrificing the beautiful simplicity of NPS.
Making the NPS survey more effective
When I use NPS with my clients, I expand it ever so slightly – from one question to three:
Question one allows you to calculate an NPS score that can be tracked over time and benchmarked against the rest of your industry. And questions two and three allow space for free-form answers that can be analysed to glean valuable insights about what customers really value, and help you identify areas for improvement. Using what you learn, you can make changes that will boost your NPS rating in the future.
(Tip: when using these questions, it’s a good idea to alternate the order of questions two and three, just in case customers get bored and don’t answer all three questions!)
In conclusion, I’m certainly not against the NPS – it’s a fantastic indicator for measuring customer satisfaction. But this additional questioning makes the NPS much more powerful and delivers far richer insights that will help you improve your product or service offering.
Where to go from here
If you would like to know more about key performance indicators, check out my articles on:
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Bernard Marr is a bestselling author, keynote speaker, and advisor to companies and governments. He has worked with and advised many of the world's best-known organisations. LinkedIn has recently ranked Bernard as one of the top 10 Business Influencers in the world (in fact, No 5 - just behind Bill Gates and Richard Branson). He writes on the topics of intelligent business performance for various publications including Forbes, HuffPost, and LinkedIn Pulse. His blogs and SlideShare presentation have millions of readers.