Want to find out how happy your customers are? Wondering if they’d recommend you to a friend or a colleague? If so, it’s high time you popped the question!
“How likely are you to refer our business?” is the only question you need to ask your current customers when looking to calculate your company’s Net Promoter Score (NPS). As simple as that!
But before I go into more detail about how you can calculate your Net Promoter Score and what it actually means for your business, let’s just briefly explain the basic concept of NPS.
Spoiler Alert: We’re giving away a free Net Promoter survey template to all our users!
Don’t want to read, came just for the template? No problem, click here.
What is Net Promoter Score (NPS)?
Net Promoter Score (NPS) is the most used metric for measuring customer loyalty and satisfaction. It is a measure of how likely your customers are to refer your business and can be a strong predictor of customer satisfaction and future business growth.
In simpler terms, NPS shows how likely your current customers are to recommend your business to friends and colleagues.
NPS is measured using a single-question survey, where the customers rate their experience on a scale of 0 to 10, while the results are reported with a score from -100 to +100.
Don’t worry if those scores confuse you because I’m going to explain everything in as much detail as needed down below. So, now that we’ve defined the Net Promoter Score, let’s see how you can calculate it.
Net Promoter Score Calculation
The NPS score is derived from the Net Promoter Score question, which is usually something along these lines:
“On a scale of 0 to 10, how likely are you to refer our business to a friend or colleague?”
As obvious from the question above, the answers are given in the form of a number on a scale of 0 to 10.
Net Promoter Scale
Basically, the respondents answer the NPS question with a rating between 0 (meaning that they’re not at all likely to recommend you) and 10 (meaning that they’re extremely likely to recommend you).
Depending on their response, they fall into one of the three categories that are used to determine the NPS score:
- Detractors (0 to 6)
- Passives (7 and 8)
- Promoters (9 and 10)
The image below shows the Net Promoter scale along with the three customer categories and the Net Promoter Score formula:
Typically, promoters are considered to be the most loyal and most satisfied customers. They just love your company’s products and services! In many cases, they’re repeat buyers likely to recommend your business to other potential buyers.
Passives are generally satisfied with your service but not enthusiastic enough to be likely to promote you. They may be considered vulnerable to competitor’s offerings and are at risk of switching to another company if the opportunity arises. Still, they most probably wouldn’t go around bad-mouthing your business.
Detractors are considered to be unhappy customers not likely to purchase from you again. They are dissatisfied with certain aspects of your product or service and could damage your company’s reputation by spreading negative word-of-mouth in order to discourage others from dealing with you.
Once you have collected your NPS survey results, you need to analyze those and see how many detractors, passives, and promoters you have.
After that, you can simply calculate your NPS score using the Net Promoter Score formula:
% of promoters – % detractors = NPS (Net Promoter Score)
As can be seen from the NPS formula above, all you have to do is subtract the percentage of customers who have declared themselves as detractors from the percentage of those who can be considered promoters.
What is a good Net Promoter Score?
Ok, so you’ve conducted your NPS survey, gathered and analyzed the results and used them to calculate the Net Promoter Score using the formula given above. But what does it really tell you about your customers? And what is a good Net Promoter Score actually?
Theoretically, NPS can vary between -100 (if every single customer is a detractor) and 100 (if every single customer is a promoter). In practice, however, it’s highly unlikely that all of your customers will be either detractors or promoters.
Of course, in any case, a higher Net Promoter Score means better customer satisfaction. Lower scores mean that you should put more work into maintaining your customer satisfaction and loyalty.
Even though the notion of a good NPS varies across different niches, a general rule of thumb might be that a positive Net Promoter Score (the one higher than 0) should be considered good, an NPS of 50 should be considered excellent, while any NPS higher than 70 should be considered outstanding.
Another way to decide whether you should consider your NPS a good one is to compare it with competitors within your industry or niche. Here are the average Net Promoter Scores for some of the most popular industries for you to compare against:
- Department/Speciality Stores: 58
- Tablet Computers: 47
- Brokerage/Investments: 45
- Auto Insurance: 44
- Home/Contents Insurance: 42
- Grocery/Supermarkets: 39
- Hotels: 39
- Online Entertainment: 39
- Online Shopping: 39
- Smartphones: 38
- Credit Cards: 37
- Laptop Computers: 37
- Shipping Services: 35
- Banking: 35
- Airlines: 35
- Life Insurance: 31
- Cellular Phone Service: 30
- Drug Stores/Pharmacies: 28
- Software & Apps: 28
- Health Insurance: 18
- Travel Websites: 16
- Cable/Satellite TV Services: 7
- Internet Service: 2
And remember – even if your Net Promoter Score seems low to you, there’s no room for desperation. Just keep in mind that Apple has an NPS of 47, IBM 27, Google 11, Amazon 7, General Motors 3, while Walmart sits at a mere -4. Here you can check out the complete list of Fortune 500 Companies’ NPS benchmarks.
If you’re really into statistical calculations, you can also use t-tests to analyze the results of an NPS survey.
Of course, in order to analyze the results of an NPS survey, you need to conduct one first. Here’s something to begin with.
Net Promoter Score Survey Template
To make things as easy for you as possible, we have prepared a ready-made Net Promoter Score survey template for you. All you need to do is sign up for a LeadQuizzes account or log in to your existing one and you’ll be able to use this and many more pre-made templates free of additional charge.
So why not start using Net Promoter Score surveys to measure your customer loyalty right now? Just click on the link below and gain access to our NPS template!
How to improve customer experience based on your NPS
Ok, you’ve used our Net Promoter survey template to measure and calculate your company’s NPS, but the mere act of doing so won’t help your business much. Measuring your company’s NPS can just help you identify the current level of satisfaction of your clients and determine how hard you need to work to improve their customer experience.
But what exactly can you do to increase your organization’s NPS? Here are a couple of tips.
1. Leave room for comments in your NPS survey
Sure, knowing how (dis)satisfied your customers are is very valuable. But knowing the reasons for their (dis)satisfaction is crucial – it lets you know exactly what areas of your business need improvement, what your major pain points are, and what you’ve been doing well all along.
Still, responses in the form of numbers from 1 to 10 don’t really tell you much about that, right? That’s why we have included a long-form open-ended question in our NPS survey template that gives your customers the opportunity to speak their mind and let you know what they like and what they don’t like about your products or services.
2. Use the NPS data to fight customer churn and increase retention
In addition to helping you identify areas for improvement, your Net Promoter Score can help you reduce churn (percentage of customers canceling their subscription or not purchasing again from you) and retain your current customers.
Studies have shown that most of the revenue comes from existing customers. In fact, it is estimated that 80% of all your future revenue will come from only 20% of your existing customers. Add the fact that it can cost you up to 5x more to acquire new customers than to retain the ones you already have and you’ll start to appreciate the value of customer retention.
By observing the changes in the overall Net Promoter Score over a certain period of time, you can get an idea of how likely an average customer is going to be to recommend you or to churn.
For instance, if the number of promoters decreases and the number of passives increases, it could be a sign that customer churn is going to go up. On the other hand, the increase in the number of passives followed by the lower number of detractors could indicate an increase in overall customer satisfaction and a possibly higher level of customer retention.
Remember, the simplest way to increase your Net Promoter Score is to listen to your customers’ feedback and act upon it. Finding out why they would or wouldn’t recommend your business to friends and colleagues enables you to make the necessary changes and improve their overall customer experience.
To start collecting your customers’ feedback now, simply click on the image below!