What is NPS and How to Use It?

Loyal customers are more likely to bring new customers to the business. Whether the product or service they availed matched their needs or impressed with the customer service, customers turned avid fans will recommend based on their preference and experience. Companies measure this by computing the Net Promoter Score (NPS).

What is NPS?

The Net Promoter Score is a consumer satisfaction statistic that determines the chances of a customer recommending a product or service to someone, most likely to friends and relatives. The company has the option to ask if they would be recommending the company, the product, and/or the service provided.

Businesses that ask for a rating as a company in general usually offer multiple products and or services. They are more likely looking for feedback based on the management’s action and processes involved in the customer interaction.

NPS is collected by asking the customer the question: “How likely is it that you would recommend the company/service/product to someone?” by using a 0 – 10 scale. Using the scale gives an impression that the leftmost part represents 0 meaning ‘not likely’ and 10 means “most likely”. However, most still prefer having the instruction written on the form to make it easier to understand for respondents.

In the book published by Harvard Business Press by Fred Reichheld entitled “The Ultimate Question 2.0”, customers are classified into three based on the score they have given. The three categories are the following:

  • Detractors – those that gave a score of 0 to 6 are less likely to give a recommendation. They are disappointed customers who can damage the brand and hurt the business by spreading negative word of mouth.
  • Promoters – those that gave a score of 9 and 10 are likely to give positive referrals. They are devoted customers who will continue to purchase and drive growth by recommending others.
  • Passives – those that gave a score of 7 and 8 that falls between the detractors and promoters. They typically the satisfied but disinterested customers in giving a referral.

Some companies would also like to know why the customer has ended up providing that score. Additional space is provided to let the customer express freely what should be maintained and what should be avoided on their next visit.

How to Calculate NPS?

Calculating the NPS is relatively easy. The first is to know the percentage of Detractors and Promoters based on the total number of respondents. Now, deduct the percentage of Detractors to the percentage of Promoters. The result is not a percentage and should be positive or negative that is between -100 to +100. For better understanding, here is an illustrative example of the formula.

(% of Promoters) – (% of Detractors) = +/- NPS

Any positive numbered result is usually considered as good, with the scores reaching +50 and above is regarded as excellent. Negative scores would automatically mean that the company, product, or service needs improvement. NPS can be checked for a certain period of time to see how the company or business is working towards its progress and efforts.

How to Use It?

Net Promoter Score measures customer loyalty, but it can also track other scores such as experience, individual products or services, or even employees. Remember to be very specific when asking this question to the customer, but some may still give a score in consideration of other factors. Some customers might give a score that has been influenced by a specific action or detail.

Other than assessing the customer feedback, NPS can be used for the following:

1. Product Development and Creation

The feedback provided can be a valuable source of what the customer would like to see on the new product or services offered by the business. Customers may include additional feedback by providing suggestions that will encourage them to give a better score on the next one.

If the company’s research and development team will work together with the customer service department, these customer suggestions can be turned into reality. It will give the possibility of pioneering a unique product in the market or develop the existing offerings.

2. Reach Out to Customers

Use this opportunity to talk to customers and express how valuable their feedback is to the company. Send a message showing gratitude to customers that fall under the category of Promoters for their appreciation. Those that fall under Passives and Detractors should also be thanked for their feedback and will be considered to improve the product, service, or company. If done properly, this can also be used for marketing purposes and include customer contact on the mailing list.

3. Improve Customer Interaction

Some customers may provide additional remarks that could include the way they are served by an employee. This will point out behaviors that need to be corrected and those that have to be maintained. Proper analysis may also provide an insight into how processes can be improved to make them more customer-centric.

4. Inspiration for ENPS

Another variety of the NPS is the Employee Net Promoter Score (ENPS). Aside from gathering customer feedback, the same format is used for employee feedback. The score collected from staff will be used to evaluate the working conditions, the environment, and how the management takes care of its employees. It assesses the likelihood of the employees recommending the organization as a place to work.

Using the NPS results alone cannot guarantee that it will improve the way customers recommend the company and/or its product and service lineup. Information that has been gathered on this feedback format is often influenced by other factors. It can only be used as the starting point in beginning a customer process improvement program.

This is a very helpful tool as it provides a free advertisement from the customer’s experience, rather than creating ads that may need a more creative output to convince the target audience. NPS feedback can also serve as a reminder to customers to promote the business to others.

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