Net Promoter Score (NPS): Everything you to know about

Welcome to our comprehensive guide on NPS: The go-to market research metric for discerning the likelihood of customers recommending your product, service, or brand to their peers. 

This invaluable index, measured on a scale from -100 to 100, hinges on a pivotal question within the NPS survey, "How likely are you to recommend this company?". Delving into the intricacies of customer satisfaction, respondents provide ratings on a scale ranging from 0 to 10. Join us as we unravel the significance, methodology, and impact of NPS, demystifying its role in shaping customer loyalty and driving business success.

Create and track an omnichannel customer support strategy and see your NPS score improve with Freshdesk Omni.

What is the Net Promoter Score (NPS)?

When you are selling any product or service, how do you know if your customers are satisfied with your services?

Or how likely are they to recommend you to others?

This is what the NPS score helps you with. 

In 2003, Fred Reichheld, a partner at Bain & Company, introduced a novel approach to assess how effectively an organization engages with the individuals it impacts, emphasizing creating relationships deserving of loyalty. This customer service metric was termed NPS, short for Net Promoter Score.

While selling a product or service, understanding customer satisfaction and their inclination to recommend your offerings is crucial. NPS in customer service serves as an important customer satisfaction metric, assessing the probability of customers recommending your business to their network.

By implementing a survey, you can capture NPS scores, delving into the likelihood of customers recommending your product on a scale of 1 to 10. A higher score signifies a greater likelihood of endorsement, while a lower score indicates dissatisfaction. Additionally, this survey can unveil insights into the reasons behind recommendations or discontent, offering valuable feedback for improvement.

Why is NPS important?

As we just discussed, NPS for customer service holds an important role in understanding customer satisfaction levels. But apart from that, it also gives great insights into business growth. Understanding this importance is essential for companies aiming to thrive in today's competitive landscape.

1. Indicator of customer loyalty: At its core, NPS serves as a powerful indicator of customer loyalty. A higher NPS implies a greater likelihood that customers will not only remain loyal but will actively promote your products or services to their network. This loyalty is a key driver of business referral strategy.

2. Word-of-mouth marketing: Word-of-mouth marketing is a potent force in the modern business landscape. NPS directly taps into this phenomenon by assessing the willingness of customers to recommend your brand. Positive word of mouth can amplify your reach and influence potential customers, contributing to organic growth. Whereas negative word of mouth can be detrimental to your business.

3. Identification of areas for improvement: The dual nature of NPS, capturing both positive and negative sentiments, provides a nuanced understanding of customer satisfaction. You can leverage this information to pinpoint areas that require improvement. Uncovering the reasons behind low scores allows for targeted enhancements in products, services, or customer experiences.

4. Customer-centric decision-making: NPS encourages a customer-centric approach to decision-making. By prioritizing customer satisfaction and actively seeking feedback, businesses can align their strategies with the preferences and expectations of their target audience. This customer-centric focus enhances brand perception and fosters long-term relationships.

5. Quantifiable benchmark: NPS provides a quantifiable benchmark for customer satisfaction. The standardized scale, ranging from -100 to 100, allows businesses to measure their performance consistently over time. This benchmarking facilitates comparisons within the industry and sets clear targets for improvement.

6. Early warning system: NPS for customer service acts as an early warning system for potential issues. A sudden dip in scores may signal emerging problems that, if addressed promptly, can prevent customer churn and negative reviews. Proactive engagement based on NPS feedback can turn potential detractors into satisfied customers.

How to calculate NPS?

Calculating the Net promoter score is straightforward. The formula is derived by deducting the percentage of detractors from the percentage of promoters, with passive respondents having no impact on the final score. 

NPS calculation

For example, suppose you conduct a survey with a sample size of 100 customers. Within this sample, 15 individuals rate your business between 0 and 6, 25 rate it as 7 or 8, and 60 assign a rating of 9 or 10. 

Given that the total sample size is 100, each group represents a percentage. To compute your NPS, you subtract the percentage of detractors (15) from the percentage of promoters (60), resulting in an NPS of 45. It's crucial to note that the net promoter score is not a simple average of the received responses.

What is a good NPS score?

Determining what constitutes a good NPS involves more than just considering individual ratings. While any score above 7-10 is generally deemed favorable, it doesn't provide the complete picture. On a general rule, any score above 70 is considered excellent and any score between 50 to 69 is considered good.

But consider this instance, a company boasting an NPS of 50 might initially believe it reflects strong customer satisfaction. However, the assessment becomes nuanced compared to industry competitors scoring between 55 and 75. Without a comprehensive industry view, a company could mistakenly perceive itself as leading in its competitive set, leading to complacency. On the other hand, a low absolute score might lead to the belief of trailing competitors and result in overinvestment. There's also the risk of being blindsided by a market insurgent with a genuinely disruptive product or service.

Therefore, interpreting a good NPS score requires careful consideration of both absolute values and industry benchmarks.

What is a bad NPS score?

Identifying a bad NPS involves focusing on responses falling within the range of 0-6. Customers providing scores within this bracket are considered unfavorable, signifying a lower likelihood of recommending your products or services.

Such scores often indicate underlying issues with your offerings that need attention and improvement. Understanding and addressing the concerns voiced by customers within this range becomes crucial to enhancing overall customer satisfaction and positively impacting your NPS.

Also, remember any score below 0 is clearly a red flag, and any score below 49 means that your services need improvement.

Step-by-step guide to benchmarking NPS?

Ensuring your NPS is effectively benchmarked involves a systematic approach. Here's a step-by-step guide to benchmarking your NPS score:

Step 1: Industry comparison

Begin by comparing your NPS with other companies in your industry. Understanding how your score stacks up against industry standards provides valuable insights into your competitive position and performance relative to peers.

Step 2: Regional analysis

Extend your comparison to the local area or region where your business operates. Regional variations can significantly impact customer perceptions and preferences. Assessing how your NPS in customer service fares locally helps identify any geographic nuances that may influence customer feedback.

Step 3: Source of feedback

Reflect on the source of the feedback you received. Was it related to a specific product, service, or location? Pinpointing the origin of feedback allows for targeted improvements in areas that may be contributing to specific NPS trends.

Step 4: Establishing internal standards

Consider your initial NPS as a baseline or internal standard. Use this starting point to gauge your progress over time. Consistently monitor changes and trends in your NPS, aiming for continuous improvement and alignment with evolving customer expectations.

By following these steps, you can holistically benchmark your NPS, gaining comprehensive insights to enhance customer satisfaction and loyalty.

How to conduct surveys and gather NPS feedback?

Effective collection of NPS feedback involves strategic survey methods. You can take the survey anytime on the customer journey, even when they are new customers. But this survey would be more aligned with their onboarding experience. Here are two impactful ways to conduct surveys and gather NPS feedback:

1. Website survey and chatbot integration

You can implement a website survey by incorporating a pop-up directly on your site. This instant feedback tool allows customers to provide their NPS score seamlessly. Alternatively, leverage a chatbot embedded in your website, extending its functionality to gather scores from customers. For enhanced accessibility, integrate the chatbot across platforms where your customers are most active, such as WhatsApp.

2. Email surveys 

Leverage email surveys to gather detailed feedback from your customers. Send targeted emails containing the NPS survey, encouraging customers to share their experiences and sentiments. Email surveys provide a structured format for customers to express their opinions and contribute to a more comprehensive understanding of their satisfaction levels.

How to read your NPS results?

You have already seen how you can categorize your NPS score. Now let’s get a deeper understanding of how you can use them by reading them right.

Calculation and comparison

To evaluate your NPS in customer service effectively, follow a two-step process. Begin by calculating your NPS: This numerical representation serves as a snapshot of overall customer sentiment. Next, enhance the interpretative power by comparing your NPS against industry benchmarks. This contextual analysis illuminates your competitive standing and informs strategic decision-making.

Trend analysis

Unlock the full potential of your NPS by embracing trend analysis. Tracking the trajectory of your NPS over time unveils patterns and shifts in customer sentiment. A consistent upward trend suggests positive changes, reflecting improved customer satisfaction. Conversely, a declining trend signals areas warranting attention, prompting proactive measures to rectify and enhance customer experiences.

Segmentation analysis

Refine your understanding of customer satisfaction by conducting a segmentation analysis. Break down NPS scores based on customer segments, products, or regions. This granular approach provides nuanced insights into specific areas of strength and weakness within your business. Armed with this detailed perspective, tailor your strategies to address unique challenges and capitalize on opportunities.

Feedback analysis

Go beyond numerical scores and delve into qualitative feedback for a deeper understanding of customer sentiments. Analyze the reasons behind scores by identifying recurring themes and actionable insights. This feedback-driven approach ensures a continuous improvement loop, allowing your business to evolve in alignment with customer expectations.

How to use NPS surveys?

You can use NPS surveys not just to get a better understanding of your customer loyalty and business growth but also for the following analyzes:

• To pinpoint areas for improvement and enhance overall customer experience.

• Get insights into strategic decision-making processes to align your business goals with customer preferences.

• Compare your NPS scores with industry benchmarks to gauge your competitive standing and identify areas for growth.

• Tailor marketing campaigns based on NPS feedback, focusing on areas that resonate positively with your customer base.

• To gauge employee satisfaction, linking a happy workforce to improved customer interactions.

• Foster a culture of continuous improvement by consistently monitoring and acting upon NPS trends and customer feedback.

Examples of NPS survey questions

Designing NPS questions is crucial for obtaining valuable insights. Consider these examples:

• Main Question: "On a scale of 0 to 10, how likely are you to recommend our [product/service/brand] to a friend or colleague?"

• A follow-up question for promoters: "What specific aspects do you find most valuable or exceptional about our [product/service/brand]?"

• A follow-up question for passives: "What improvements or enhancements could we make to elevate your experience with our [product/service/brand]?"

• A follow-up question for detractors: "We're sorry to hear that. Can you share the main reasons behind your [product/service/brand] rating and what we can do to address your concerns?"

• Customer satisfaction drivers: "Which specific features or services played a significant role in your overall satisfaction with our [product/service/brand]?"

• Future expectations: "What expectations do you have for us in the future, and how can we better meet them?"

Ensure your questions are clear and concise and elicit actionable responses to derive meaningful NPS insights.

Want to make your Net Promoter Score (NPS) survey more actionable by building trust? Click here.

How can the business use NPS to grow better?

Leveraging NPS as a strategic tool empowers businesses to drive continuous improvement, cultivate customer loyalty, and stay competitive in their respective markets. You can harness NPS to foster growth and enhance customer relationships:

• Utilize NPS feedback to identify specific areas requiring enhancement, ensuring a continual focus on customer satisfaction.

• Gain insights into overall customer satisfaction levels, allowing businesses to gauge the effectiveness of their products and services.

• Identify loyal customers who provide high NPS scores, nurturing them as potential brand advocates who can amplify positive word-of-mouth.

• Identify and engage with detractors to understand concerns and implement corrective measures, transforming negative experiences into positive ones. This helps in customer retention.

• Benchmark your NPS against industry competitors to gauge your standing and strategically position your business for growth.

How does the Net Promoter Score (NPS) differ from Customer Satisfaction (CSAT)?

Net Promoter Score (NPS) and Customer Satisfaction (CSAT) serve distinct purposes in gauging customer sentiment.

1. Recommendation vs. interaction satisfaction

• NPS assesses the likelihood of a customer recommending your offering, focusing on overall brand advocacy.

• CSAT, on the other hand, measures satisfaction with a specific interaction, providing insights into immediate service or product experiences.

2. Scale variance

• CSAT employs a scale typically ranging from 1 to 5 or 1 to 10 to capture nuanced satisfaction levels for a specific transaction.

• NPS adopts a broader scale of 0-10, emphasizing the customer's inclination to recommend and fostering a more comprehensive outlook.

How to implement an effective NPS strategy?

Implementing a successful NPS strategy involves thoughtful execution. Consider these tips:

• Keep NPS surveys short and straightforward to encourage higher response rates and ensure customer engagement.

• Use open-ended questions to delve deeper into customer insights, providing qualitative data that complements numerical scores.

• Prioritize follow-ups with customers who give low scores to understand their concerns and proactively address issues, demonstrating a commitment to improvement.

• Share NPS scores internally with your team and stakeholders to foster a collective understanding of customer sentiment and encourage a customer-centric approach.

• Integrate NPS seamlessly into your broader customer experience strategy, ensuring alignment with overall business goals and continuous improvement.