NPS: An Essential Tool for Measuring and Improving Customer Satisfaction
As a business owner, you know that recommendations from friends and family, along with online reviews, significantly impact your customers. In fact, 91% of people read online reviews regularly or occasionally, and 84% trust online reviews as much as recommendations from a friend. These statistics demonstrate that regardless of how you present your brand in the digital space, from your logo to your blog posts and social media descriptions, a negative customer experience with your brand can affect the perception of potential customers about your brand.
Did you know that most consumers are likelier to talk about a negative experience with a particular brand than a positive one? Therefore, collecting customer feedback and identifying problems is a necessary process that not only prevents negative experiences and reviews but also encourages customers to recommend your brand to their friends and family.
This is where Net Promoter Score (NPS) comes into play.
What is NPS and Why is it Important for Your Business?
Net Promoter Score (NPS) measures customer satisfaction and loyalty towards a company or service. It is based on a single question: “How likely are you to recommend our company/service to a friend or colleague?” The responses are then classified on a scale of 0 (not at all likely) to 10 (extremely likely), and the difference between the percentage of promoters (those who score 9 or 10) and detractors (those who score between 0 and 6) is calculated.
The importance of NPS in business is evident from its numerous benefits. By identifying customer satisfaction problems, companies can take adequate measures to remedy them and improve the customer experience. Thus, NPS increases customer retention and loyalty and enhances the brand’s reputation.
A high NPS indicates business success, showing that a significant percentage of customers are loyal and satisfied. This translates into a higher likelihood of receiving recommendations from them and, therefore, an increase in the number of customers and long-term profitability.
NPS offers a more transparent and simplified perspective on customer loyalty and satisfaction than other customer satisfaction indicators. Although not the only important metric, NPS is used in various industries and markets due to its universality and simplicity.
How to Calculate NPS: Formula and Examples
The NPS (Net Promoter Score) formula is a simple and effective tool for measuring customer satisfaction and loyalty toward a company, product, or service. The calculation formula for NPS is as follows: NPS = % Promoters – % Detractors. Promoters are customers who give a score of 9 or 10, indicating a high level of satisfaction and loyalty. Detractors provide a score between 0 and 6, while customers with scores between 7 and 8 are considered neutral and not considered in the NPS calculation.
To illustrate how NPS is calculated, let’s assume that a company has received 100 responses to a customer satisfaction survey. Of these, 60 gave a score of 9 or 10 (promoters), 20 gave a score of 7 or 8 (neutral), and 20 gave a score between 0 and 6 (detractors). To calculate NPS, we determine the percentage of promoters (60%) and detractors (20%). NPS = 60% – 20% = 40%.
The NPS score can be interpreted by comparing it with standard industry benchmarks. A negative NPS means more detractors than promoters, which indicates a serious problem in customer satisfaction and an opportunity for improvement. A positive NPS suggests that there are more promoters than detractors.
Segmenting the NPS results can offer additional information and specific actions to improve customer satisfaction in different groups. Data segmentation based on demographics, purchase history, or product type allows for identifying particular trends and behaviors of different customer segments and developing personalized strategies to address their needs and expectations.
Using NPS compared to other customer satisfaction measurement methods
Using NPS compared to other customer satisfaction measurement methods has advantages and disadvantages. NPS, Customer Satisfaction Score (CSAT), and Customer Effort Score (CES) are popular tools that focus on different aspects of the customer experience. NPS evaluates customer loyalty, CSAT measures immediate satisfaction, and CES analyzes the effort required to solve a problem.
NPS has advantages such as simplicity and ease of understanding, being ideal for evaluating long-term customer loyalty. However, it does not provide detailed information about the reasons for dissatisfaction. On the other hand, CSAT and CES focus on more specific aspects of the customer experience but can be limited in evaluating long-term loyalty.
The complementarity between NPS and other customer satisfaction measurement methods can help obtain a complete picture of business performance and customer experience. Companies can gain a deeper understanding of customer needs and expectations by using a combination of methods.
Choosing the proper method for your business depends on the industry you operate in, your relationship with customers, and the resources available for data collection and analysis. To decide which method or combination of methods is most appropriate, analyze your business’s specific goals and needs.
Integrating NPS into a customer experience management system can help monitor and improve customer satisfaction. Some platforms and tools allow NPS integration with other measurement methods, such as CSAT (Customer satisfaction score) and CES (Customer Effort Score). Using this collected information can inform customer experience improvement strategies.
Suppose you have an online business and want to collect feedback during delivery or post-delivery. In that case, Innoship provides a personalized tracking page with customized NPS questions, live tracking, and a feedback dashboard.
Contact us and find out how you can improve the quality of your sales process and increase customer satisfaction!