When many businesses consider profitability, they don’t tend to think about customer experience and satisfaction. But it turns out that customer satisfaction or loyalty can be one of the best indicators of profitability, compared to a business’ competitors.
Net Promoter Scores measure customer experience with one simple question, and that score can be the strongest sign of the business’ customer loyalty, which, in turn, can signal the difference between a thriving business and one that’s struggling to keep its doors open.
What is a Net Promoter Score (NPS)?
A Net Promoter Score, or NPS, is a customer experience score given to a business, based on one question commonly asked to consumers, “How likely are you to recommend this business to a friend?”
What are Promoters, Passives and Detractors?
- Promoters are happy, satisfied customers, who have had a superb customer experience and are not just likely to return to your business but also likely to recommend your business to their family and friends. Promoters rate your business 9 to 10 when asked whether they would recommend your business to a friend.
- True to their name, Passives are passively satisfied customers, rating the business 7 to 8, who are neither likely to recommend your business nor likely to spread word of a poor customer experience.
- Detractors, on the other hand, are unhappy customers, who rate your business 0 to 6 and are likely to bad mouth your business to their friends and family.
How Do You Calculate Your Business’ NPS?
When calculating NPS, only take into account the percentages of Promoters and Detractors. Ignore the percentage of Passives when calculating your score, because studies show that Passives neither positively nor negatively impact your business’ overall customer loyalty or profitability. Simply subtract the percentage of Detractors from the percentage of Promoters to calculate your business’ overall net promoter score.
NPS = % of Promoters - % of Detractors
Let’s calculate an example NPS together. Say a company has 70 Promoters, 28 passively satisfied customers and two Detractors. To calculate the business’ NPS, ignore the 28 Passives, since they don’t affect customer loyalty either way. We have 100 overall customers, so we know that 70 percent are Promoters and 2 percent are Detractors. We simply subtract the Detractor percentage of 2 from our promoter percentage of 70 to calculate an overall NPS of 68.
NPS = 70 (% of Promoters) - 2 (% of Detractors) = 68
Why Should You Care?
It’s not enough to simply have more Promoters than Detractors. You need to have enough Promoters out there recommending your business to offset the effect of Detractors telling everyone they know to stay away from your business.
Moreover, NPS is one of the strongest signs of customer loyalty, and research shows that this customer loyalty is one of the greatest indicators of profitability, because it shows whether or not you have enough happy customers willing to refer new customers to your business.
Discover your own business’ NPS and contact xAmplifier today!