What is a Net Promoter Score, how is it calculated, and why do businesses use it to access customer experience?
Companies who consider customer experience when trying to improve revenue are way more likely to improve their bottom line—using NPS or a consumer's willingness to recommend products or services is a crucial part of enhancing CX and revenue.
There is an emotional connection between a customer's recommendations and reputation as customers who recommend a product or service place their reputation on the line. Most customers would only recommend a product or service if they felt intense loyalty. Consumers are much more likely to purchase products if someone they know has recommended them. Throughout this guide, you will learn about the origin of the Net Promoter Score, how it works, and why it's essential for your business.
The Origin
How was Net Promoter Score Created?
In 2003, Frederick F. Reichheld surveyed over 4,000 customers across six industries with 20 questions called the Loyalty Acid Test. Reichheld's customer loyalty survey effectively predicted repeat purchases or referrals, thus driving profitable growth by asking a straightforward question:
"How likely is it that you would recommend [this company] to a friend or colleague?"
Reichheld's study published in Harvard Business Review ultimately left readers with a compelling concept to consider: companies must convert satisfied customers into their marketing department to optimize profitable growth.
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The Definition
What is a Net Promoter Score?
Net Promoter Score gauges the likelihood of customers proactively recommending a business to people in their social circles. Generally, the score is obtained through a survey. NPS surveys measure the customer's loyalty to a company or brand (Relationship NPS) and the customer's experience during a specific engagement with a company (Transactional NPS). While there are many methods by which this survey can be administered to customers, recent data suggests that consumers prefer email over all other communication channels.
The Elements
What are Promoters, Passives, and Detractors?
| 🙂 | Promoters provide a score of 9 or 10 when responding to the NPS survey. They are happy, satisfied customers who have had a superb customer experience and are likely to return to your business and recommend it to their family and friends. |
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Passives score 7 or 8 when responding to the NPS survey. True to their name, Passives are passively satisfied customers who are neither likely to recommend your business nor likely to talk about your business negatively. |
| 🙁 | Detractors provide a score between 0-6 when responding to the NPS survey. They are unhappy customers who are likely to tell their friends, family, and colleagues about their poor experience with your business. |
The Score
How Do You Calculate Net Promoter Score?
When calculating NPS, only consider the percentages of Promoters and Detractors. Data shows that Passives are unlikely to discuss their experience with your business. They are not factored into the Net Promoter Score.
Subtract the percentage of Detractors from the percentage of Promoters to calculate your business' overall Net Promoter Score.
Let's calculate an example of 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. We have 100 overall customers, so we know that 70 percent are Promoters and 2 percent are Detractors. We subtract the Detractor percentage of 2 from our Promoter percentage of 70 to calculate an overall NPS of 68.
The Value
Why is Net Promoter Score so Valuable?
All companies claim that they value the customer above all. However, only 17% of companies use a standardized measuring system to analyze the customer experience they provide.
While it’s extremely impactful for companies to have Promoters essentially preforming free marketing services for your business, the true value lies in the ability to work with the Detractors or customers who were dissatisfied with their experience.
There’s no doubt that its hard work to change the mind of an unhappy customer, but the transparency that Net Promoter Score provides gives businesses a fighting chance to make things right when their product or services didn’t live up to a customer’s expectations. Additionally, it allows businesses to develop standard operating procedures when they learn about a customer’s negative experience. Integrating XAmplifier surveying software and data-driven actionable insights has proven transformational!
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“Our clients have seen incredible progress in improving their customer experience after seeing their NPS and implementing our recommendations.”- James Kropp, CEO |
The Proof
How does Net Promoter Score impact businesses?
Consider this recent example of a customer experience review for Capital Dermatology from a Promoter:
“I have seen Dr. Pacheco for more than a decade and have been totally happy with her and her staff the entire time. I have recommended her to many of my friends and I know that at least three of them now routinely see her.”
- Capital Dermatology Patient
This customer is raving about their outstanding experience with the doctor and staff in the review and recommending Dr. Pacheco to their friends, who are now regular customers.
Additionally, NPS provides companies with a significant advantage in capturing leads in their marketplace. High-performing reputation locations—or locations with a high NPS—have about twice as many calls and click-to-call/web inquiries and leads per month than low-performing reputation locations—or locations with a low NPS.
Implementing a Net Promoter Score is a simple and highly profitable way to measure the customer experience you provide daily. While many companies have tried to develop a DIY method for tracking Net Promoter Score, there are considerable advantages to contracting these services from an expert provider.
XAmplifier is a proprietary, cloud-based software designed to help businesses build their online reputation, optimize the customer experience, grow digital audiences and drive market insights.
If you're interested in learning more about Net Promoter Score or the proprietary XAmplifier software, contact us for a free consultation.
