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NPS Score: Definition & Importance in Customer Satisfaction

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<p>Have you ever wondered why some customers silently slip out of your loyal customer pool? Or what makes someone choose you over the guy next door who has similar offerings?</p>
<p>Customer satisfaction and connection are crucial for any business, and calculating your net promoter score (NPS) is a simple way to track it. In this article, we’ll go over what an NPS rating is, how to calculate it, and how to use it to boost customer loyalty and joy.</p>
<h2>What is net promoter score?</h2>
<p>NPS stands for net promoter score. This <a href="https://www.podium.com/article/nps-vs-csat/">score</a> measures customer loyalty and satisfaction, and you calculate it based on direct feedback from your customers. It is just one metric that all companies should use when measuring customer loyalty.</p>
<p>NPS is crucial and can give you insight into the future of your business. According to <a href="https://www.cxtoday.com/contact-centre/how-does-nps-work-with-a-definition-and-formula/#:~:text=Reichheld%20referred%20to%20NPS%20as,it%20is%20likely%20to%20grow.">Reichheld</a>, it’s the most important number in determining business growth. A high NPS means you have a healthy relationship with your customers. This, in turn, means you are likely to expand.</p>
<h2>Why is NPS important?</h2>
<p>As we mentioned, NPS serves as a <a href="https://www.podium.com/article/customer-satisfaction-metrics/">key metric</a> that reflects the overall health of the relationships in and around your business. It measures the quality of your customer experience, identifies areas for improvement, allows you to compare your performance against market benchmarks and competitors, predicts your future success, and can even improve your employee engagement, making it a critical element in your business improvement strategy.</p>
<h2>How to Calculate NPS</h2>
<p>To <a href="https://www.podium.com/article/customer-success-kpis/">calculate</a> your NPS, start by polling your customers. You might ask a question such as “How likely are you to recommend our product/service/company to family or friends?” Then ask respondents to rate their answers on a scale of zero to 10 and aggregate the responses.</p>
<p>After collecting responses, calculate your NPS by dividing your responses into “detractors,” “passives,” and “promoters.”</p>
<ul>
<li style="font-weight: 400;" aria-level="1">Promoters are those who are extremely likely to recommend your business, giving you a 9 or 10 on the rating scale.</li>
<li style="font-weight: 400;" aria-level="1">Passives sit in the middle with scores of 7 or 8.</li>
<li style="font-weight: 400;" aria-level="1">Detractors are unlikely to recommend your company and give you a 6 or lower.</li>
</ul>
<p>You will need to calculate the percentage of your respondents who are promoters and the percentage who are detractors to calculate your NPS. Then, use the following formula:</p>
<p><i>NPS = Percent of respondents who are promoters – percent of respondents who are detractors</i></p>
<p>Your final NPS will be any number between -100 and 100.</p>
<p>Once you’ve performed your NPS score calculation, you should check your industry average to see how you compare. You should also track your NPS over time to confirm it stays the same or improves.</p>
<p>The fact that the average NPS varies by industry is crucial. It means that even if you have a seemingly high NPS, it may not be as good as you think compared to the rest of your industry. It also means that even a slightly lower score may not be as bad as it seems if it’s still better than your competitors’ scores.</p>
<h2>Three NPS Survey Questions</h2>
<p>Now that we’ve covered the basics, here are some fundamental NPS survey questions. Unlike <a href="https://www.podium.com/article/nps-vs-csat/">CSAT</a> questions, these questions are based on a scale of 1-10 and focus on customer experience and brand loyalty rather than just satisfaction.</p>
<ul>
<li>On a scale of 0 to 10, how likely are you to recommend us to [target audience]? This is the fundamental NPS question that respondents typically answer on a scale from 0 (not likely at all) to 10 (very likely). However, it specifies the recommendation to your target audience, increasing its relevance and efficacy.</li>
<li>What is the reason for your score? This question is an open-ended follow-up question. It gives you more qualitative feedback into what aspects of your product or service influenced your customer’s rating, allowing you exclusive insights into what’s working and what’s not.</li>
<li>Why did you opt for our service over our competition? This question helps you understand what makes you stand out from competitors, or what your “edge” is in customers’ minds–what makes customers choose you over other businesses like you. In essence, it helps you identify your unique strengths so that you can continue to emphasize them.</li>
</ul>
<h2>How Your NPS Can Help Improve Customer Satisfaction</h2>
<p>NPS and customer satisfaction go hand-in-hand. Simply put, the more satisfied your customers are, the more likely you are to have a high NPS. After all, satisfied customers are more likely to recommend your company to others.</p>
<p>The following are a few specific ways you can use your NPS to improve customer satisfaction and take your business to new heights.</p>
<h3>1. It Helps You Discover What Customers Think of Your Brand</h3>
<p>At the most basic level, calculating your NPS lets you see what customers think about your brand. There is no more accurate way to know what customers believe than to ask them, and your NPS allows you to do so in a qualitative way. If your NPS is higher than the industry average, you are likely doing well in terms of customer service. But if it is lower than the NPS of your competitors, you likely have room for improvement.</p>
<h3>2. It Shows You Where There’s Room for Improvement</h3>
<p>In addition to helping you determine what customers think of your brand, NPS also allows you to gather feedback about specific improvements your customers wish to see.</p>
<p>For example, you can reach out to your detractors and ask them what they would change about your business. Or you can calculate the NPS as part of a larger survey that looks at satisfaction in various parts of your business. But don’t just reach out to the detractors; also reach out to passives. Remember that passives have a higher risk of silently churning, but reaching out can change that.</p>
<h3>3. It Measures the Likelihood of Repeat Business</h3>
<p>In addition to measuring customer satisfaction and likely referrals, your NPS also measures how likely you are to have repeat business. After all, it’s safe to assume that someone willing to recommend your brand to others will be a repeat customer.</p>
<h3>4. It Lets You Engage Promoters</h3>
<p>Speaking of satisfied customers who are likely to recommend your business and be repeat customers, calculating your NPS also helps you engage these promoters. For example, if someone rates you a 9 or 10 on the NPS survey, you might ask for a testimonial or review. Or you could tell them about your referral marketing program.</p>
<h2>What is a good net promoter Score?</h2>
<p>A good NPS score is typically any number above 0, as this suggests that there are more promoters (customers who’d recommend you) than detractors (customers who wouldn’t). A score above 20 is often seen as “great;” it reflects a higher level of customer satisfaction and customer loyalty. Achieving a score above 50 is truly exceptional and indicates that a substantial majority of your customers are enthusiastic promoters, meaning you have an outstanding level of customer advocacy and loyalty. Local businesses with NPS scores in this range are likely to enjoy strong word-of-mouth recommendations and sustained customer relationships.</p>
<h2>How To Improve Your NPS</h2>
<p>As you <a href="https://www.podium.com/article/nps-software/">improve</a> your NPS, you’ll also be improving your customer satisfaction. So, how do you go about doing both of these things? The following tips should lead to better responses to your next set of net promoter score questions.</p>
<h3>1. Focus on Providing a Better Customer Experience</h3>
<p>The absolute best way to improve your NPS is to improve your customer experience. Remember that people with a positive customer experience are more likely to rate you highly and recommend you to others.</p>
<p>The challenge here is knowing <i>how</i> to <a href="https://www.podium.com/article/customer-retention-tips/">improve your customer experience</a> (and your net promoter scores in the process). That’s where the next strategy comes into play.</p>
<h3>2. Encourage Customer Feedback So You Know Where to Improve</h3>
<p>We mentioned that you can use NPS to boost customer satisfaction by looking for areas of improvement. But this requires feedback. Unsurprisingly, <a href="https://www.podium.com/article/customer-feedback-loop/">encouraging customer feedback</a> is one of the many ways to improve your NPS. Ask customers to fill out surveys and write reviews. Send follow-up emails about satisfaction with products or services. Send a quick text survey to see where you went wrong and where you got it right.</p>
<h3>3. Improve Customer Support</h3>
<p>As you work to boost your customer experience, don’t forget about customer support. Make sure your team is easy to reach and has the training and information necessary to answer customers’ questions. For example, offer <a href="https://www.podium.com/webchat/">Webchat</a> or support via <a href="https://www.podium.com">text</a>. Ask unhappy customers how they would like to be reached.</p>
<h3>4. Use NPS Feedback in Training</h3>
<p>Once you identify areas for improvement based on the feedback from your NPS surveys, share that information with your team. They can’t improve unless they know there’s an issue and how to address it. In other words, incorporate all feedback from NPS into your training.</p>
<h3>5. Be Willing to Make Other Changes</h3>
<p>The usefulness of feedback from your NPS customer surveys goes beyond training employees. It can also help you pinpoint areas where you need to make structural changes and shifts. Of course, you don’t want to make any major changes without a fair amount of feedback and careful analysis indicating it’s a good idea. But your NPS survey can help you find areas that may need this attention.</p>
<h2>Happy Customers Mean Happy Business</h2>
<p>Your net promoter score helps you measure and understand the quality of your relationships, giving you important insights into your business and what you need to succeed in the future. You should always strive to improve or maintain your net promoter score so that it can continue to help you accurately predict your company’s growth. And that’s where we come in.</p>
<p>Use Podium to get the most out of your communications and offer the best experience possible to your loyal customers. With Podium’s enterprise marketing and reputation management <a href="https://www.podium.com/industry/large-businesses/">software</a>, you can get customer feedback at the drop of a <a href="https://www.podium.com/product/surveys/">text</a> with world-class survey tools.</p>


NPS Score: Definition & Importance in Customer Satisfaction

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