According to Nielsen research, ‘The most credible advertising comes straight from the people we know and trust’ and the statistics speak for themselves:
- 83% of global respondents rely on personal recommendations from people they know,
- 66% of respondents worldwide trust consumer opinions posted online.
Image source: Nielsen.
This innate inclination to trust other people lies at the heart of a profound key performance metric. Ladies and gentlemen: time to talk Net Promoter Score®.
What is Net Promoter Score?
Net Promoter Score® (NPS) is a measure of customer loyalty based on feedback of its customers. Although seemingly simple, NPS is a complex metric providing you with instant awareness of:
- Customer loyalty & satisfaction levels,
- Growth potential,
- Quality of customer experience,
- Brand sentiment,
- Organizational performance.
NPS allows you to see your company through the eyes of your customers without the complexity of traditional surveys. Instead of going through lengthy questionnaires, customers are asked what is often referred to as ‘the ultimate question’:
How likely is it that you would recommend [company X] to a friend or colleague?
Why this particular question? In 2003, Frederick F. Reichheld introduced the concept of NPS in the seminal article in HBR ‘The One Number You Need to Grow‘. Following two years of research, Reichheld found out that the likelihood to recommend the company to your network ‘correlated directly with differences in growth rates among competitors’ (in comparison to other questions he examined in the course of his study, such as ‘How strongly do you agree that [company X] deserves your loyalty?’, ‘How strongly do you agree that [company X] sets the standard for excellence in its industry?’ and ‘How satisfied are you with [company X’s] overall performance?’). If you’re interested in NPS, I strongly recommend reading Reichheld’s article in entirety as it was a stepping stone for the industry.
The power of open-ended verbatim
Dig deeper by asking a follow-up question:
‘Why?, or ‘What is the reason for your answer?’ (or something along these lines).
This type of questions allows you to elicit why customers feel about your business one way or another. From a much broader question, you go vertically and get feedback which is more actionable and more specific.
As former Director of Product at LinkedIn, Sachin Rekhi rightly argues “the most actionable part of the NPS survey is the categorization of the open-ended verbatim comments from promoters & detractors”. It’s good to know how high you score is, but even more important to understand why it is what it is so you can make improvements to customer experience.
How to calculate Net Promoter Score?
Answers to the NPS question are scored on a 0-10 scale and NPS ranges from -100 to +100.
Based on the scores given, customers are divided into three groups:
Image source: Usability Hour.
9 – 10: Promoters
These are your most loyal customers who are not only likely to come back, but also recommend you to their peers and publicly sing your brand’s praises. What is more, Promoters tend to make recurring purchases even if your pricing is not the best they can find around.
7 – 8: Passives
This group is the hardest to activate. Passives are typically “satisfied but unenthusiastic customers who can be easily wooed by the competition.”
0 – 6: Detractors
Detractors are unhappy customers who are most likely to switch to your competition at the earliest opportunity. Sadly, they are also the ones who tend to share most.
Once you have your Promoter and Detractor percentages ready, you can easily calculate NPS:
NPS = % Promoters – % Detractors
A result greater than 0 is considered satisfactory, and those north of 50 are considered very good. However, even companies with top NPS scores (approximately 70) still have room for improvement. Check out the graph below to learn the range of NPS across industries based on insights from 10,000 U.S. consumers:
Data collection methods
Email surveys use hyperlinks embedded in HTML code of your email. A response is counted whenever someone clicks a given link in the survey. Email surveys can be typically sent from regular inboxes like Gmail or via mailing software or marketing automation software like Intercom. The latter is very useful when you want to survey customers after they’ve performed a certain activity, i.e. post-purchase.
Answers are recorded in a database of your survey tool (like our very own Survicate) which takes away the manual work and makes them easy to analyze and compare over time and across segments.
Email surveys have a high response rate because they require very little time and effort on the side of the respondent. They also don’t need any code to the site to run so they are super simple to implement even for non-technical staff. The main drawback is that you need email addresses to get started – if you want to get feedback from a broader audience, you might be interested in running a targeted website survey.
Although this approach steps away from the traditional email surveys, a lot of our customers use it with great success.
The good thing about website surveys is that they can be conducted on a much larger scale because you don’t need email addresses to proceed. They are often used by bloggers and news sites who don’t typically ask for addresses and have no “customers” in the traditional sense. However, if you do have traditional customers, the good news is that you can target them via your browser cookies which makes the results reliable.
Due to their unobtrusive character, website surveys come with high response rates (up to 58%). Another advantage is that they can be precisely targeted at various visitor segments, i.e. based on how often they visit or how they got to your site. They can also be freely customized in terms of what they look like to the user and where they appear (left, right, bottom, top or in the center of the screen).
Why you need skip logic in your life
Skip logic allows you to ask the smallest number of highly relevant questions possible, as well as create a personalized experience.
Respondents are asked questions based on answers they’ve previously given, which increases response rate. Thanks to skip logic, you can disqualify candidates who don’t meet your criteria or generate leads by asking survey participants to leave their details if they wish to be contacted. However, the biggest advantage of skip logic is that you can get a true understanding of your customers by means of follow-up questions which let you inquire into the implications of their answers.
Here’s what skip logic looks like in action:
To learn how to collect feedback with survey logic, make sure to read this post.
The benefits of researching Net Promoter Score
The beauty of NPS lies in its dual nature – although “the ultimate question” feels easy to respondents and requires very little time, its implications are quite complex and leave loads of room for improvement for the marketer.
However, there’s a catch.
NPS allows you to remove guesswork from your business decisions based on one condition: you need to act upon the insights gathered in the process. As Nichole Elizabeth DeMeré argues, you should “think of NPS, or Net Promoter Score, like rocket fuel. If you leave it alone, it won’t do much. But when you load it into a responsive, proactive, customer-driven company: blast off.”
If you do so, NPS can have a number of benefits both for the company and the respondent:
- The system intuitive and simple to implement even for non-technical staff,
- It’s easy to comprehend and share across teams and departments. It also doesn’t need to be explained to respondents,
- It’s an operating management tool – because the results are so actionable, it reflects the strengths and weaknesses of any team faster than other KPIs do,
- It’s got a high response rate and is time-efficient both on the side of the responder and the surveying party,
- It’s comparable over time & easy to benchmark. As long as you keep the survey contents intact (wording, order of questions, number of questions etc.), you can compare results with great accuracy,
- It’s actionable. Although going through individual comments of respondents takes a lot of manual work, they are an absolute goldmine of customer insights. It is generally advised to categorize answers given by survey participants (both positive and negative) to detect strengths and weaknesses of the assessed product or service.
- Finally, NPS allows you to identify customers at the risk of churning so you can step in and give them a helping hand.
At this point it must be emphasized that NPS should be an addition to the performance, acquisition, and monetization KPIs, but cannot be treated as their substitute.
Why NPS works
- Firstly, it’s because of the ways our brains are wired. NPS puts the customer in the centre of the survey – notice it’s “How likely is it that YOU would recommend [company X] to a friend or colleague?” and not “How did [company X] do?”. According to University of Liverpool research, people spend approximately 30% – 40% of their conversations talking about themselves, and based on findings of Harvard University research, they get a “biochemical buzz from self-disclosure”. We are programmed to enjoy sharing our views and opinions, and NPS makes use of this tendency.
- Secondly, NPS is so powerful because it’s simple. In fact, the shorter the survey, the more actionable it tends to be because results are easy to interpret.
- What is more, NPS is a data-driven approach relying on customer insights. Because it’s consumer-centric and organized, it allows to look at the right pieces of the puzzle (and not random ones).
- Finally, people hate long surveys. They just do and you’re probably not an exception. Time is a commodity which we’re not eager to give away easily.
Long surveys tend to yield low response rates and volatile results. Due to the number of questions, results may be ambiguous, difficult to interpret and even harder when it comes to translating feedback into action.
10 best practices for NPS
- Turn feedback into action
Categorize positive and negative feedback to see underlying issues and attend to them as they arise.
- Don’t focus on detractors only.
Look for what Sachin Rekhi calls “magic moments”. Deduce when customers are truly activated and focus your optimization efforts on getting as many of them to that point.
- Measure continuously.
According to Rob Markey and Fred Reichheld, “Accurate Net Promoter scores depend on a constant flow of data.” It’s the only way to get in-the-moment insights, track unexplained variations, and see how your customers feel about the changes you’re introducing in real time.
- Report continuously.
Find a tool which allows you to see your results in an easily digestible way, like this beauty here:
- Survey gently & in context to avoid frustration.
- Resolve problems on the purchase path which you find in your categorized answers.
- Get instant notifications of low scores so you can react in real time.
- Remember to use skip logic to ask relevant questions only.
- Be consistent – it’s the only way you can ensure results are comparable over time. Every change you introduce matters, including question wording and order they appear in.
- Say “thank you” at the end of your survey. Remember – time is a commodity, and someone just gave you a little bit of their time. It’s only fair you thank you for the gift.
Although NPS shouldn’t be treated as the only source of knowledge about the state of your business, it’s definitely worth adding it to your KPI repertoire. Remember to start with a general question and add follow-up ones as you go to get more specific feedback. Make sure you turn your feedback into action – don’t let your data just sit there.
Net Promoter® and NPS® are registered trademarks of Bain & Company, Satmetrix Systems, and Fred Reichheld.