What is the NPS and why to use it?

Net Promoter Score (NPS) has become one of the most popular measuring tools among businesses, a standard to indicate satisfaction and loyalty in this subject matter

If you work in the digital industry, you have probably heard of the NPS (or Net Promoter Score) and perhaps you have used it to measure the user’s level of satisfaction. 

If you have never heard of it at work, chances are you have probably completed this type of survey. 
Clearly, those are two different types of readers. This article aims to explain what the NPS is and to generate interest for both opposing groups: the ones who are familiar with the methodology and those who have barely heard of it. 

Fundamental features
Before dealing with deeper matters, we would like to point out some basic aspects of the Net Promoter Score, which is the full name of what we call the NPS. 

It is a tool to measure the user’s level of satisfaction through a survey that focuses on one question: “What is the likelihood of you recommending this product/service to a friend/relative?”.

The answering options are presented on a scale from 0/1 to 10. The answers collected are classified into those who answer with 9 and 10 (“Promoters”); 8 and 7 (“Neutrals/Passive”); 6,5,4,3,2,1,0 (“Detractors”). 

With this triple classification, you will be able to define easily the level of engagement of your client. Promoters are the most satisfied and prone to mention your brand publicly in a positive way. The passive users are satisfied but not highly engaged with what your company is doing. And detractors are users that are not satisfied with your brand and are prone to affect your reputation by talking about your brand in a negative way.

Analyzing the business through the NPS
The NPS allows us to reach fast conclusions. The first is that the companies that have the most promoters are the ones that have the best image; and the image is a matter of business. 

Another finding of the NPS is that as it deals with such a simple metric it is easy to interpret. 
You can use the NPS to compare, with no distortions, the reputation of an area in your company with another one or compare two different products of your company. Or, better yet, one of your products with one of your competitors. 

In this way, we will summarize some of the perks of the NPS so that you can measure your client’s loyalty and satisfaction (the list is not exhaustive!):

  1. It predicts the growth of your business: As we have already mentioned, the NPS can be an excellent predictor of the company’s growth. If your NPS is high, your company clearly has an excellent relationship with its clients who will, in turn, promote and help your brand to keep growing. Having several promoters implies a higher chance of repeating sales.
  2. It reduces the “churn”: We have already talked about the “churn” in another article. Briefly, the NPS allows you to identify the customers that have a higher risk of abandonment. This, in turn, will be useful to avoid clients from deserting you and joining your competition. You can put into practice different methods: from communicating personally with them by listening to their concerns, to solving a problem or offering better customer support.
  3. It manages to obtain a favorable cost-benefit relation: The NPS is very simple and its implementation is rather cheap. The results are easy to analyze and share among different teams and sections. Besides, this type of survey is filled in fast, which increases the completion rate. Answering one particular question tends not to bother most users.
  4. It compares and evaluates (Benchmark): As it has already been mentioned, the NPS is used in several industries so that companies can easily compare one another. If your NPS is below average in the industry where your company is, you are probably doing something wrong. Measuring the NPS makes you analyze the general strategy for the customer’s experience and see if they can make any changes to improve the score.
  5. It discovers areas of improvement: NPS surveys are the trigger of a conversation with customers. The use of these campaigns is to know their needs and wishes and how to improve a product. It provides information on what needs to be improved to make sure your customers are happier. 
The history of the NPS
We will go back to a more technical analysis but, before that, let us go over the history of the NPS. 
Not everybody knows that this methodology was first conceived by Fred Reichheld (consultant in Bain & Company) and presented to the world in 2003 through the publishing of an article in Harvard Business Review dubbed "The One Number You Need To Grow".

In the article, Reichheld explained that, after years of investigation, he crossed the net promoters of each company (the percentage of promoters minus the percentage of detractors) with the growth rate of the company’s income. Thus, he discovered an astonishing correlation between the number of net promoters and the average growth rate of a company. 
The NPS was announced by Reichheld and his colleagues as the metric by excellence to measure the client’s loyalty in several industries. It was a simple measurement, but it proved a strong correlation with repeated sales and references and, in consequence, the business’ growth. 

Recently, it has become more and more popular and has turned into one of the most used metrics by all types of companies to know and quantify the customer’s experience. 

His question on “likelihood of recommending” is omnipresent in customer surveys online. Most of the clients are acquainted with it, even those who have never heard of it. 

Calculating the NPS

How do you properly calculate the NPS? It is essential to know this information to reach conclusions and findings based on the collected data. However, if you think you will need your old calculator or, even worse, paper and pencil, you are on the wrong path. 

Currently, the calculation is done automatically, either on online survey platforms or with NPS calculators which can be found on the Web for free. 

Anyhow, it is important to know how to calculate the NPS. 

Technically, the equation to obtain an NPS is:
NPS: (amount of promoters/total number of respondents) – (amount of detractors/total number of respondents)
For example, if you take a survey of 1000 customers and the result is composed of 700 promoters, 100 neutrals and 200 detractors, the NPS will be 50 (70% - 20% = 50%).

To obtain the necessary information to complete the equation, remember that, once we have collected the responses, we have to count how many were obtained in each of the three categories:
  • Promoters: people who answer with a score of 9 or 10
  • Neutrals: people who answer with a score of 7 or 8
  • Detractors:  people who answer with a score between 0 and 6
Now, we must find the percentage of promoters and detractors. Therefore, we need to divide the number of people who gave us a positive review by the total number of respondents. Then, we repeat this step for the people who gave us a negative review. 

Using the previous example, if we interview 1000 people and 700 give us a promoter score, we will have 70% of promoters. If 200 people give us negative reviews, we will have 20% of detractors. It is important to change the decimals into percentages. 

After that, we subtract the percentage of promoters minus the percentage of detractors to calculate the NPS. So, if we have interviewed 1000 clients and the result is composed of 700 promoters, 100 neutrals and 200 detractors; the NPS would be 50 (70% - 20% = 50%).

Analyzing the data
So, how do we use this data to improve customer satisfaction?

There are several aspects of the information provided by the NPS that will help us collect data about the clients that, generally, we would overlook. Nevertheless, the data is crucial for an NPS campaign to be effective. 

According to the industry experts, there are certain agreements based on the values provided by the NPS:
  • If the score is below 0, there are enough reasons to get worried. The company has more unsatisfied clients (detractors) than happy ones (promoters).
  • If the score is between 0 and 30, it means we are doing well, but we could do better.
  • If the score is between 30 and 70, this means the business is working really well in terms of customer satisfaction.
  • If the score is over 70, most of the clients support and love the brand
Good practices in the use of the NPS
The NPS is a tool that can be used in the most efficient way or not so much. 
In this way, we wouldn’t like to end the article without leaving some advice to make sure the implementation of the NPS surveys as a methodology for customer satisfaction is as effective as possible. Here are some ideas:

1. Survey all the users on the same touchpoint
We recommend using the NPS to survey the users on the same touchpoint to improve the accuracy of the results.
For example, you can carry out the survey immediately after the purchase. This will help avoid biased answers as all the customers will be interviewed at the exact same moment; therefore, the information will be analyzed in their prime.

2. Measure, measure, and measure
As it usually happens in surveys, the NPS measurements take a picture of the exact moment.
The picture begins to get old right away. Thus, we highly recommend turning the NPS into a continuous improvement process of customer satisfaction to be able to evaluate, analyze, improve, and repeat. 

3. Carry out segment analyses
As we have already mentioned, it is very important to classify and segment all the information through the NPS surveys. This will help the company comprehend the reasons why the customers love or hate your product or service. 
You will, therefore, be able to prioritize improving certain functions, adding new ones, or dealing with any weak point in the customer’s experience. 

4. Contact the detractors
We recommend keeping track of the detractors within the following 24 hours after the reception of their score. 
It is highly advisable to focus on solving the detractors’ problems as soon as possible so you can turn them into neutrals, or better yet, into promoters and avoid the situation from getting worse. 
As you probably already heard, unhappy clients may communicate their bad experiences to many people, and we seek the NPS to be a tool that aims to avoid that from happening. 

5. Share your comments with your company
One of the main perks of the NPS is that it is easy to understand and share among the different areas of a company. We suggest you share the results and analyses of the NPS with your company. 
For instance, if the NPS is carried out during the fidelity program and the results are not that good, the Marketing department that triggered it should get in contact with the Post-purchase department to evaluate how to improve the process. 

More and more digital companies are used to working in networks even though in practice that does not usually happen. Thus, it is essential for the NPS information to be transparent as the reputation is paramount in the company. 

Measuring customer’s satisfaction and their general experience through the NPS is becoming more and more common among companies. However, the potential of the tool is not always used to the fullest.

We hope this article helps you learn more about this popular methodology and that it becomes a useful resource to strengthen the positive relations with the users. 

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