Back in 2003, a man named Frederick F. Reichheld published an article in Harvard Business Review excitedly titled The One Number You Need to Grow.
In it, he announced his discovery of the end-all-be-all of customer service metrics.
He figured it out. Just listen to his closing statement:
“The path to sustainable, profitable growth begins with creating more promoters and fewer detractors and making your net-promoter number transparent throughout your organization. This number is the one number you need to grow. It’s that simple and that profound.”
Maybe a slight exaggeration. But Reichheld was on to something.
Before long, some of the world’s best customer service organizations, like Apple and Amazon, were tracking their Net Promoter Score.
Then it really caught on.
Nowadays, everybody in the world of customer service has heard about NPS.
In this post, we’ll go over everything you need to know about this popular metric, including: how NPS is defined, the formula for calculating NPS, industry benchmarks, and why NPS has received criticism.
Let’s get started.
What is Net Promoter Score?
Net Promoter Score is defined as a measure of how likely your customers are to recommend your business to a friend or colleague, expressed as a percentage.
How do you calculate Net Promoter Score?
The first step in calculating your Net Promoter Score is surveying your customers. Usually this is done on a quarterly or biannual basis. This survey contains one main question:
How likely is it that you would recommend us to a friend or colleague?
Customers respond on a scale of 0 to 10. The responses are separated into three categories:
- Detractors (0-6) → These are your unhappy customers. They have the power to spread negative word-of-mouth that could damage your brand.
- Passives (7-8) → These are your satisfied customers. But they’re not crazy about you.
- Promoters (9-10) → These people love you. They will continue buying your product. And they’ll even tell others about it. Their referrals are key to growth.
Here’s where it gets a little tricky — you don’t just simply find the average.
Rather, you take the percentage of promoters, then subtract the percentage of detractors. Hence, the net.
Visual learners, see the NPS formula below.
And if you want to manually calculate your NPS, there’s an app for that. Check out this free NPS Calculator.
What is a good Net Promoter Score?
Think about it this way:
Best possible NPS → 100% – 0% = 100%
Worst possible NPS → 0% – 100% = -100%
The higher your NPS, the better. A positive NPS means you have more promoters than detractors, while a negative NPS means you have more detractors than promoters.
Average Net Promoter Scores vary by industry. Here are some NPS industry benchmarks:
- Healthcare: 67
- B2B Service Providers: 60.5
- Technology: 60
- Education: 59.7
- Insurance: 42.6
- Consumer brands: 42.6
- Travel and hospitality: 38.9
- Telecom: 19.7
And here are some companies with high Net Promoter Scores:
- Amazon: 76
- Trader Joe’s: 73
- Costco: 71
- Apple: 71
Why has Net Promoter Score received criticism?
There’s been quite the debate over Net Promoter Score. One guy, Tim Keiningham, even conducted a study on NPS to prove that it isn’t actually an accurate predictor of growth or customer loyalty behavior. He claimed that:
“Based on the evidence we’ve compiled, it’s hard to imagine a scenario where Net Promoter would be classified as the superior metric.”
That’s a pretty bold statement. But other people seem to agree with him. Here are some of the most common criticisms of NPS:
- There’s significant bias, by default. The most satisfied customers are the most likely to respond to the survey.
- The scales are iffy. The 0 to 11 and -100% to 100% ranges are relatively wide, increasing the margin of error.
- The question could be better. It’s phrased positively, potentially skewing the results.
- Customers can’t predict the future. They don’t know if they’ll naturally have the opportunity to recommend a product.
- Customer Effort Score is a better predictor of customer loyalty.
Despite these criticisms, Net Promoter Score continues to prevail as one of the most popular customer service metrics. It is still used widely today by world-class customer service teams.
While it’s not perfect, NPS has proven to be an effective way to gauge customer loyalty and customer satisfaction. Looking at other customer service metrics, like first response time, time to resolution, and average handle time, along with Net Promoter Score will help you get a better understanding of the effectiveness of your team.
And if you want to improve your NPS, there are plenty of ways to do so — stay tuned for actionable tips.
Do you track your NPS? Why or why not? Reply in the comments below.
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In this article, you will find out everything you need to know about using the Net Promoter Score as a metric to guide your marketing efforts. Because it’s a long and complex article, here’s the structure (if you click on the sub-headlines, it will get you to that section):
Smart marketers know that the acquisition of loyal customers isn’t a hit-and-miss incident. It’s a deliberate, intentional process. Loyal customers who sing your praises aren’t going to drop into your lap.
You have to earn them.
And in order for you to earn more loyal customers, you have to know where your customers stand with you right now, and how you can engineer experiences that convert them into promoters of your product/service.
This is why Net Promoter Score (NPS) is a key metric for any e-commerce business because it has a direct impact on earning loyal customers, predicting customers’ behavior.
What Is Net Promoter Score?
Net promoter score (NPS) is a metric that reveals how many customers are willing to recommend a product or service to other people. This is one of the most important KPIs a business should track since it gives a direct insight into customer satisfaction and brand loyalty.
When Andy Taylor, CEO of Enterprise Rent-A-Car, wanted to enhance customer loyalty efforts, he ditched the typical bulky customer satisfaction surveys. Instead, he used an approach that was aligned with the concept of the NPS.
The Enterprise team blasted out monthly polls that asked two simple questions; one about the quality of a customer’s rental car experience; and the other if they were likely to rent from the company again. Also, the only responses counted and accepted were those from the most enthusiastic customers.
Because of its simplicity, this produced valuable data, fast. The company had ranked results for 5,000 U.S. branches within a week, which gave them rapid, real-time feedback on their performance and areas of improvement.
Inspired by this, Fred Reichland dived deeper into this style of loyalty assessment, and after years of research and testing, the Net Promoter Score system was birthed.
The Net Promoter Score is a simple metric that is deeply concerned with one thing: gauging customer loyalty. It was introduced by Fred Reichland’s Harvard Business Review article “One Number you Need to Grow”.
In order to calculate NPS, you have to launch a survey to get answers to a single question:‘How likely is it that you recommend [the company/website] to a friend?’. In addition, for a more detailed analysis, you can ask ‘How likely are you to buy again from [the company/website]?’.
You can use Omniconvert to create your own NPS survey. With Omniconvert, you can design two types of surveys: pop-up surveys (you can customize the appearance, use multiple pop-up templates and collect leads) and widget surveys (it can be positioned either on the right side or on the left side of the screen).
Calculating NPS starts with identifying three types of groups: Promoters, Passives, Detractors. Use a 0 to 10 points rating scale to measure the NPS. (0-not at all likely and 10- extremely likely).
Promoters are very satisfied and loyal customers that will definitely recommend your website/company to others. It’s a known fact there are fewer costs involved in managing a long-term relationship with loyal customers than in the process of acquiring new customers. You can improve the relationship with promoters by constantly sending offers (vouchers, free ebooks, guides, etc.), post-order emails and a great delivery experience.
Passives are satisfied customers, but not very enthusiastic about their experience. Transform passives into promoters for a better NPS. Passives can also become detractors if not treated properly. Make sure this does not happen and do your best to deliver them an experience that will make them promote your website.
Detractors are unhappy customers, that will definitely not recommend your website/company to others. The negative Word of Mouth coming from detractors has a huge impact on profits because whenever a customer feels mistreated, sales go down. You might be meeting their needs at the moment, but they are prone to jumping ship if not treated properly.
The best way to go with detractors is to investigate why they had an unpleased experience and why they will not recommend you. Knowing the answer, you can solve and improve that certain aspect and, in this way, transforming a detractor into a passive customer or even a promoter. Make them an offer they can’t refuse!
Sujan Patel, VP of Marketing @WhenIWork uses the net promoter score to transform detractors and passives into raving fans:
“NPS is one of my favorite growth tactics. I use it two ways. First to fix detractors & passive (unhappy customers) problems by reaching out and offering help immediately after someone gives us 1-8 score. I found that 10-15% of people who answered 1-8 have small issues or user error that can be instantly fixed. It’s a very easy & a quick win. The second way I use NPS is to turn my promoters into advocates. After all, these customers are ready to promote you they just need to be told how or a small nudge. I offer these customers swag (free t-shirts, mugs, etc) and ask for help they can do quickly such as share on Facebook or Twitter, write an app store review, email a friend.”
How to calculate your NPS score
To calculate NPS, you have to use the following formula:
NPS = %Promoters – %Detractors
The NPS can have results between -100 (lowest NPS) and +100 (highest NPS). Having a negative NPS means the detractors outnumber the promoters of your company. A poor score might be a reason why companies cannot deliver high revenues and sustainable growth over years.
Survey tools like Omniconvert generate the Net Promoter Score automatically. You don’t have to do the math, but just interpret the results and take action based on the insights. Now that you have understood how to calculate NPS, let’s proceed to the next step.
What is a good NPS score?
SPG Consulting provides a rating scale in order to help people interpret the Net Promoter Score:
According to them, the average NPS is 34.3.
In 2011, the average Net Promoter Score was 21, with a range of -26 to +51. But keep in mind that to accurately measure your company’s position on the market, you’ll have to use an industry benchmark. As NPS scores vary depending on the industry. How else could you know if you have a good or a bad score? A 35 score can be a great NPS in the food industry, while in the fashion industry can be terrible?
Research from Bain and Satmetrix shows that Net Promoter overachievers are among the most successful companies in the world. Companies with the highest Net Promoter Scores include USAA (82%), Homebanc (82%), Harley-Davidson (81%), Costco Wholesale (79%), Amazon (73%), eBay (71%), and SAS (66%).
A Satmetrix industry benchmark report provides information about the NPS leaders in 2012 and 2011 from United Kingdom, United States of America, Germany and France. For example, Amazon.com scores 76 in 2012, in USA:
It’s interesting to see the variations of the NPS for the same company in different countries. For instance, while in USA and Germany, Apple has a 71 and 70 score, in UK it scores 67. In France, Apple has a 57 score, with 14 points less than in USA.
In a more recent report, published by Temkin Group, you can see the variations of NPS for 269 companies across 19 industries. Here are the overall results for the 19 industries:
Another study shows that the average NPS fluctuated in the context of the global financial crisis. These three financial services presented below are now back on the track and recovered from the NPS depth:
Customer Satisfaction Surveys VS NPS
Customer loyalty and satisfaction are skeletal essentials for business growth. And in order for you to assess growth, you need to measure both. This is where tools like the NPS and Customer Satisfaction Surveys (CSS) come in.
A high Net Promoter Score is associated with a high Customer Satisfaction Index. This happens because, most of the time, a happy and satisfied customer will tell about their experience to others. Remember that Word of Mouth is a free, fast and trustworthy tool to promote your services and products. Even though NPS and CSI are related, but totally different key performance indicators, marketers tend to confuse them.
They both use customer feedback to develop and improve a loyalty system, but they solve different problems. Customer Satisfaction Index provides information about customer experience, while Net Promoter Score keeps track of how willing people are to recommend a website to friends and family.
Customer satisfaction surveys are common tools used to gain feedback from customers. They are usually sent to a customer after completing an interaction with a company – like after using a product, or contacting customer service. Unlike NPS surveys, CSS usually feature a group of questions that ask customers to rate how satisfied they are.
Contrary to customer satisfaction surveys, NPS surveys just ask how likely – on a scale of 1-10, a customer would be to recommend a product/service. Then, depending on the answer, customers are divided into promoters, passives, and detractors, to give an overall NPS score to reflect general customer loyalty.
So which one is more accurate/better for driving growth?
According to research from Fred Richland, conventional customer satisfaction measures are a “less reliable” means of gauging loyalty…“satisfaction lacks a consistently demonstrable connection to actual customer behavior and growth.”
In his article on the Harvard Business Revenue, he cites a story where a car dealer spent millions on customer satisfaction surveys. After sending out the surveys, there was no strong correlation between the satisfaction rating of individual dealers, and dealer profits or growth.
Measuring loyalty with NPS surveys, on the other hand, has proven to be more consistent with a company’s growth. Various case studies, whitepapers, and research point to the same conclusion:
Companies with higher Net Promoter Scores show higher growth rates, and companies with lower Net Promoter Scores display lower growth rates.
Take for example in this figure below, which depicts the score of various airline companies and their long-term growth rates:
Fred also analyzed customer survey responses, and how they linked to a customer’s referral and repurchase behavior at 14 companies in six different industries.
As shown above, he discovered that:
- Contrary to his previous hypothesis, a single loyalty question was enough to gauge customer purchase and referral patterns across different industries
- The “likelihood to recommend” question proved to be the first or second correlate to actual customer behavior 80% of the time
- Customers who said they were likely to recommend a company to a friend or colleague generated word-of-mouth sales. And they were more likely to repurchase. Customers who said they were not likely to recommend the company, didn’t generate referral sales and were less likely to repurchase.
To clarify, there’s nothing wrong with satisfaction as a measurement. Satisfaction surveys offer customers a way to give you a quick thumbs-up or thumbs-down on their experiences. But for measuring profitable, long-term customer loyalty and growth, they’re not as effective and reliable as NPS surveys.
Dinesh Thiru, VP of Marketing @Udemy, emphasizes the power of NPS:
“We have two top level goals: revenue and student happiness. […] The metrics we look at on the revenue side are pretty straight-forward – actual purchases. […] On the happiness side we look at NPS: the NPS of Udemy and the NPS of a course. We found that NPS was one of the strongest indicators for us of student happiness and ultimately found out that folks who enroll into better courses, higher NPS courses have higher LTVs(Lifetime Value) on Udemy.”
Supercharge your NPS surveys with lead collection forms
Stats will only give you an overview of the website’s users opinion overall. Although this is already very helpful, you can get exponentially more insights by using a lead capture form. By associating each answer with an email address, you will be able to check the customer’s history in your database.
The “What’s in it for me?” of applying this insight is the ability to know more and more about your customers.
Once you figured out exactly who your Promoters, Detractors, and Passives are, you will have to:
1. Do them more favors – create a loyalty program by developing further surveys to know them better. Find out more about how to do it in this post dedicated to the topic
2. Create dedicated experiments on your website
The pallet of CRO tactics is so diverse and fabulous that sometimes I’m wondering how can someone run out of ideas:
- personalization experiments with pop-ups triggered only to the top customers
- test the copy, design, and incentives included in the pop-ups
- A/B testing on the pages with the most expensive products visited by your most important customers
Real World NPS Examples and Case Studies
- Charles Schwab Entrusted with $113 Billion in Net New Assets (While Other Firms Starved)
Financial services firm Charles Schwab, was struggling to stay afloat in 2004. Their costs were spiraling out of control, and stock price nosedived from $40 to $6. Things were looking bleak…
To combat this, Charles Schwab came out of retirement to take back the steering wheel. “We had lost our connection with our clients—and that had to change,” said Schwab.
Four years later the tables turned. They reclaimed their authority as industry leaders and tripled their stock price. Revenue was lifted by 11%, the number of new brokerage accounts increased by 10%, and their NPS scores made a 25% leap. Schwab clients even entrusted $113 billion in net new assets to the firm. And the most surprising thing?
All this occurred while the financial services industry was facing choppy waters.
The NPS system played a key role in Charles Schwab’s revival, according to CEO Walt Bettinger:
“The beauty of Net Promoter is that it helps to simplify complex issues and helps people to make the right decisions. [It] makes people ask themselves: Is this the right thing to do for our customer, and is it economically appropriate for the firm?”
- NPS Helped Optus Reduce Churn And Lift Profits By 91%
In 2012, after losing 64,000 subscribers, telecom company Optus needed to change their direction of growth. The telco lost 134,000 mobile customers in the last 12 months, with average revenue per user dropping 4.4%.
In response, the company launched customer-focused initiatives and worked on initiatives and worked on improving NPS.
New complaint numbers dropped by 50%, postal return went down 1.4% and their Net Promoter Score jumped up by six points. Optus said ““This has put Optus’ benchmarks for customer experience into positive territory for the first time in a number of years”.
- Rackspace Continually Reaping Benefits From The Net Promoter System
Rackspace is a company in the wildly competitive cloud computing and hosting business. In 2011, their revenue exceeded $1 billion and annual growth went up over 30 percent. The key point of difference that separates Rackspace from competitors, says CEO Lanham Napier, is the “fanatical support” it offers customers. And guess what?
The process used to measure and manage “fanatical support” is the Net Promoter system. “The goal of fanatical support is to create customers who are promoters. The creation of loyal promoters not only reduces customer acquisition costs, it improves retention rates and inspires our Rackers [employees]. We have witnessed these results firsthand.”
4. Bfashion used the net promoter score to improve the business plan and develop a personalized approach for loyal customers.
They used Omniconvert to drive this optimization plan. First, we measured the Net Promoter Score with a survey. Then, we analyzed the results and realized that we needed to focus on the most loyal customers.
Therefore, we helped BFashion create a loyalty program based on the RFM Model, including 12 benefits such as:
- personal virtual assistant;
- priority support for specific customers;
- review on the new collections;
- printed thank-you letters;
- courtesy call post-order.
We were able to personalize the customer experience on site with our advanced segmentation engine and the personalization feature that allowed us to target only specific sub-segments of traffic.
Finally, the Net Promoter Score increased the second time we measured it due to the actions that BFashion took to improve their relationship with their top customers. Here’s how it changed:
How Net Promoter Score Can Be Used To Drive More Growth
Regularly assessing the NPS of your company will help you consistently improve. You’ll glean valuable insights from every single question, and because the process is simple, you’ll get actionable insights faster than satisfaction surveys.
Using NPS, you can drive more growth by:
Historically, “divide and conquer” has been a great way to gain political power.
It’s also a great way to boost marketing power.
A testament to the power of segmentation comes from the online retailer, Totes Isotoner.
They noticed most online shoppers came to their site and repeatedly visited one category more than others. So they reached out to those shoppers with segmented email marketing pitches about their favorite category. Their results were astonishing, to say the least…
They received a 7000% increase in email marketing revenue.
Also, when Mailchimp analyzed the open rates of 9 million emails, they found that segmented campaigns have a 14.4% better open rate than non-segmented campaigns.
By breaking down your customer loyalty levels into 3 different groups, NPS surveys leave you primed to better identify with the pains and desires of your customers. Allowing you to maximize ROI when sending marketing messages.
Grohe, a European manufacturer of premium kitchen and bathroom fixtures, wanted to measure whether new approaches its sales reps were testing worked. Once these new approaches were proven to yield results, they would either be eliminated or rolled out systemwide.
In one example, the company recorded how often sales reps visited their customers, and what effect the number of visits had on NPS.
It found that three visits were optimal, and scores began to drop with more frequent contact. Using this information, Grohe cut back on unproductive calls and freed up nearly 25% of its selling capacity. Not bad, right?
- Fixing The Most Painful Problems
It’s hard to find something that details the step by step example of how NPS improved a company. Fortunately, Groove has published one.
Founder Alex Turnbull documents the insights and lessons learned from measuring Groove’s NPS for the second time. He learned a ton about how users perceive Groove, how they compare it to competing services, and what irritated them the most.
After fixing problems that detractors mentioned in a previous NPS survey, he bumped his NPS score up by 46%.
(Image from Groove Blog)
- Motivating Your Team To Perform Better
The NPS system is all about customer loyalty, which is paramount in any business. Customer loyalty can be described as the skeleton, the scaffold, the superstructure, for growth. But creating a company that maintains loyalty isn’t an overnight thing…
Every pore of your company must be receptive to your customers and improving their experiences. And that includes employees in every department.
During Enterprise’s period of tweaking and improving, CEO Andy Taylor wasn’t satisfied. He felt branch scores were not improving quickly enough. There was also a large gap between the best – and worst – performing regions.
To overcome this, Andy and the team used a system where field managers would not be eligible for promotion unless their branch matched or exceeded the company’s average scores.
Sounds extreme, doesn’t it? Giving customers veto power over managerial promotions and pay rises?
Well, this step closed that costly gap and significantly boosted the company’s growth. In his article, Fred Reichland reports that “Taylor cites the linking of customer feedback to employee rewards as one of the most important reasons that Enterprise has continued to grow, even as the business became bigger and, arguably, more mature.”
Enterprise didn’t just look at the NPS system of emphasizing loyalty as something separate to the company. They infused the ethos into their company; and let it saturate important interactions, causing their growth rate to soar.
You must do the same.
To gain the maximum benefit out of the NPS system, make your employees embrace the NPS spirit by tying their actions and performances to it.
How to implement the NPS Survey with Omniconvert
If you’re reading this, chances are you want to gain conversion-boosting customer feedback and optimize your website. If so, there’s no better tool than Omniconvert (I’ll tell you why in a second).
But first, I’d like to show you an example…
Here’s how online marketing community Inbound.org, can find out their Net Promoter Score In 3 simple steps:
1. Log into Omniconvert. Then, simply go to Surveys > Create New Survey. Choose how you want your survey to be displayed, as a popup or a widget:
2. Type in your question and choose NPS type of survey, then customize or hit publish:
3.This is how the NPS pop-up survey will appear on the Inbound.org website:
It’s easy as ABC. Let’s recap how to check your NPS with Omniconvert:
Click the GIF
What differentiates Omniconvert from other NPS Tools is that it’s actually not just an NPS tool. It’s a complete conversion rate optimization tool that lets you run A/B Tests, advanced surveys and website personalization experiments.
Which means, not only will you find out your NPS, but – with our all-in-one package – you’ll be primed to immediately implement tweaks based on valuable customer feedback. And you won’t have to waste time hopping between different testing tools.
The Net Promoter System isn’t some magically charged method for boosting loyalty. Its effectiveness comes from uniting employees under the umbrella of doing what’s best for the customer and being responsible for that. It allows companies to not just gather data, insights, and feedback, but to act on it. That’s where its power lies.