What Is Net Promoter Score (NPS)? A Complete Guide

When a friend or colleague takes the time to tell you about a product or service, you probably listen. Word of mouth is the most common way people hear about brands. But how do you know if existing customers like your company enough to recommend it to their friends? One way to find out is by tracking your Net Promoter Score (NPS).

But is NPS really the best way to measure customer loyalty? Some service leaders aren’t so sure. We wanted to explore the pros and cons of this popular (and sometimes controversial) metric by reviewing what it is, why it’s important and why some Service Trailblazers choose to measure loyalty in other ways.

First, let’s start with the basics. The Net Promoter Score is a customer experience metric that captures how likely a customer is to recommend your products, services or brand. It was created by Fred Reichheld in 2003 and has since been widely adopted.

To find NPS, businesses ask customers this question: “On a scale from 0 to 10, how likely would you be to recommend our company to a friend or colleague?” Typically, companies follow up with an open-ended question to learn why a customer chose their score.

People will be categorised as promoters, passives or detractors, depending on the score they give. Let’s break those down:

• Promoters (9 to 10): Loyal enthusiasts who will likely recommend your business to others and help attract new customers.
• Passives (7 to 8): These customers are satisfied but not devoted to your brand. They may switch to a competitor if presented with a better offer.
• Detractors (0 to 6): These represent unhappy customers who may negatively affect your business reputation and growth through bad word of mouth or public reviews.

A company’s NPS is the percentage of promoters minus the percentage of detractors. For example, if you have responses from 100 customers with 30 promoters and 18 detractors, your NPS is 12.

Companies use NPS to learn more about individual customers, as well as how their products, services and brand are perceived overall. NPS feedback helps you to make things right with individuals, improve your product offerings and put customer service principles to work.

If your company is improving in ways that matter to customers, your NPS should rise over time. A sudden drop in NPS is a warning that something is off and must be addressed.

A Net Promoter score can range from -100 to +100. One way of looking at it would say that anything above 0 is a good NPS, as it means you have more promoters than detractors.

While there’s a logic to that, a more sophisticated way to judge NPS is by industry. Different industries have different benchmarks for what makes a good, average or bad NPS. For instance, the average NPS in the insurance industry is 74, but in healthcare, it’s only 45, according to Retently. In fact, the average score across all industries surveyed varied widely, from a low of 9 to a high of 74.

So how do you know what a good score is?

First off, it’s obviously better to have more promoters than detractors. You want to be on the positive side of the scale. The creators of the NPS, Bain & Company, say that a score above 0 is good. Above 20 is favourable, over 50 is excellent and any score over 80 is considered world-class.

Again, many businesses use their industry’s benchmark as a barometer, giving them insight into how their customer experience compares to their top competitors. It’s worth noting that NPS scores do not take in account the size, industry and location of different businesses. So, if you’re a local small business, it isn’t necessarily useful to compare your NPS to that of a global corporation with worldwide name recognition. It’s a little like comparing apples and oranges.

Any NPS below zero would be considered objectively bad. Having more people say negative things than positive things about your organisation isn’t good, no matter how you slice it.

If your NPS is significantly lower than your competitors, it may be a sign to re-evaluate your customer service experience. What are your competitors doing or offering that has their customers singing their praises? Are there any obvious gaps in your customer experience that you can address? Most importantly, what are your customers saying about your business?

Listening to feedback from real customers can help you address issues head-on, improve weak areas and make customers feel heard.

The simple, one-question format of the Net Promoter score survey asks what some call “the ultimate question.” Measuring how likely a customer is to tell friends and family about your business can tell you a few things.

• Customer loyalty: NPS measures customer loyalty by directly examining their willingness to recommend you.
• Enthusiasm: The scoring format identifies middle-of-road customers from those who feel more strongly. This helps you to understand who’s likely to promote your business, who might detract and who probably won’t act one way or the other.
• Overall satisfaction: Because of the 0 to 10 format, you can understand, at least broadly, how satisfied customers are with their experience with your business.

The creators of NPS, Bain & Company, have also said that good Net Promoter scores are tied to a company’s long-term fortunes. Companies that achieve long-term profitable growth have an NPS twice higher than the average company, according to data.

Running an NPS survey is as simple as asking a single question, collecting the answers and calculating your NPS based on the responses. You can send the survey via email, text, in-store or online at checkout. You could also use a survey builder or NPS app for automated collection and response calculation.

Two important considerations to make before running an NPS survey are when to send the survey and if or how to ask a follow-up question.

When you decide to run an NPS survey is up to you and may vary depending on your experience with survey distribution, your industry type and other factors.

Some consumer-facing companies ask about overall satisfaction during the checkout process. This can be a great way to capture timely responses while you already have the customer’s attention.

Many companies send a survey each quarter to see how their score varies during different types of the year. Others survey a percentage of their customers on a rolling basis to better understand NPS over time.

Staggering NPS surveys over time can paint a more organic picture of customer satisfaction, but they require a bit of planning and ongoing work. This is where automated survey software makes the process much easier.

A simple and effective way to collect actionable feedback with your NPS survey is with an open-ended follow-up question. When someone completes your survey and rates your business, you might follow up by asking, “What’s the primary reason for your score?”

This open-ended format is easy to understand, can be done in a sentence or two and can provide invaluable insight into what makes your customers recommend you to others or not. This can help you to identify areas for improvement and highlight things that your customers are happy with.

Measuring your NPS isn’t a one-time project. It’s a metric to track and work strategically to enhance. To improve your company’s NPS, you’ll want to take a dual approach. First, focus on each customer who responds to your NPS survey. Second, you need to take a broad view of your company’s score and its various components. Consider these strategies:

Customer perceptions are always shifting. An NPS survey gives you a view at that moment in time, which is why you’ll want to repeat and analyse regularly. Quarterly may be a good cadence to survey each buyer, as more often could lead to customer fatigue. You may also want to time your survey to align with certain marketing or product initiatives. And many businesses send out NPS surveys after customer service interactions to track sentiment on a more granular level.

Once you have results, it’s time to analyse. Pay attention not only to the overall NPS, but also to the percentage of customers in each category. Shifts in the share of promoters, passives and detractors over time help you to understand how NPS is trending.

For instance, if your share of passives is increasing, that could be good or bad. If detractors simultaneously decrease, that’s great - you’re turning detractors into passives. However, if the rise in passives is matched by a decline in promoters, that’s not good - loyal customers are becoming less satisfied.

Another way to glean insight from NPS scores is to look at them for different customer groups. You could segment based on how long respondents have been customers, how much they have purchased or demographic factors like age and gender.

The open-ended portion of your NPS survey — where customers explain why they scored as they did — is especially valuable. Perhaps customers are consistently telling you there’s a problem with your website or that they want fewer automated emails. Maybe your stringent return policy causes them to defect to a competitor. Perhaps your customer service team does not respond quickly enough. Or, feedback on specific products may help you to improve them.

If NPS is a key business metric, then everyone - from marketing to sales to customer support - needs to understand what it is and why it matters.

Certain departments may choose to include NPS as a key metric. Your company may even incentivise teams based on NPS, in addition to more traditional metrics like revenue. Sharing comments from NPS surveys helps teams who don’t interact directly with customers better understand the customer experience.

Service agents can certainly be helpful in improving NPS. They can flag problems and are often the team responsible for following up with customers after NPS results roll in. It’s a good idea to offer customer service training for this type of interaction, so agents have the needed skills.

Support teams also help their company improve overall NPS by doing what they do best: creating top-notch experiences. After all, 80% of customers will forgive a company for a mistake after receiving excellent customer service. And 94% say a positive experience makes them more likely to purchase again.

Detractors in particular are a key group to engage. When someone gives your business a 0 rating or even as high as a 6, support should keep in touch to try to improve the situation. Winning back the customer’s goodwill could prevent poor word of mouth. It also could save money, since keeping a customer is less costly than recruiting a new one.

If you can’t win the customer over, at least have agents document the situation and share with relevant teams, so a repeat can be prevented in the future.

Promoters — customers who answer your NPS survey with a 9 or 10 rating — are your most valuable customers. You may want to reward them with perks, like early access to new products or services or invites to special events. Allow them to bring friends and you may even gain new customers. Offering a referral bonus could encourage promoters to recruit others and also help your business better track referrals.

Make sure that you get feedback from promoters to understand why they are such big fans. Explain that you’re asking because they are your most valued customers. Promoters’ insights may surface new information about your strengths, which you can build on to make the customer experience even better.

"The NPS question should always be followed by additional questions. That’s where you can gather further context and actionable insights."
— Christina Nava, Director of Salesforce strategy, Gaggle

Passives — customers who answer your NPS survey with a 7 or 8 rating — are neither loyal fans, nor upset with your company, so it’s easy to ignore them. But if you do, they may jump ship.

Think about it. Passives are lukewarm - and thus well-positioned to help you to improve. They may have a specific issue that keeps them from recommending you. If you learn about and fix it, you could improve your offering and turn passives into promoters. But if a competitor learnt about your passives’ grudges with your company, it could address the issues and steal your passives away.

Passives are really important but as they’re less passionate, they may be less likely to bother filling in a survey. If you aren’t getting meaningful feedback from passives through NPS surveys, you may want to commission a market study for deeper insight.

Tracking customer referrals and quantifying their financial value does offset the squishiness of NPS. But it isn’t necessarily easy. After all, when you tell a friend during a Saturday coffee chat about your favourite clothing brand, how often do you bother to then tell the company you made a referral? And how often does your friend first try the brand and then take the time to let the company know you referred them?

No metric is perfect. NPS simply gives you a snapshot view that may be worth considering. “I’ve always liked NPS as the first question you can ask your customers,” says Christina Nava, director of Salesforce strategy at Gaggle. “It gives you a quick glance at their overall feelings toward your company — but many people forget that it’s only a glance. The NPS question should always be followed by additional questions. That’s where you can gather further context and actionable insights.”

To get started with NPS at your company, invest in an NPS survey software that integrates with your customer relationship management (CRM) platform. It can help to look for one that allows you to automate survey distribution. This allows you to connect NPS survey information with your existing data.

You can automate workflows to trigger notifications when a low NPS score comes in. Or you might trigger NPS surveys when certain events occur, such as a customer upgrading from freemium to a paid plan.

Beyond the technical requirements to send out NPS surveys, you’ll need to designate who is responsible for keeping in touch to customers after surveys and who is responsible for analysing NPS and presenting insights to the broader organisation.

Your Net Promoter Score is important when you consider how it can affect your business, both positively and negatively. However, the score itself is less important than the insights it provides.

When it comes to NPS, follow-through is everything. Measuring your score is a great first step towards engaging with your customers and delivering a better experience.