What do JetBlue, Sony, and Lego all have in common?
An airline, a technology manufacturer, and a toymaker. Three diverse industries, but they all share one important trait: they use Net Promoter Score (NPS) to measure customer loyalty.
Global consulting firm Bain & Company developed NPS in 2003, and it’s exploded in popularity in the 20 years since. Over two-thirds of Fortune 1000 use NPS today, all with the aim of measuring and improving their customer experience to drive greater loyalty and retention.
So what’s all the hype about? Why has NPS found such a strong foothold across the globe?
Let’s talk about how to measure and read your Net Promoter Score. You’ll walk away with clarity on how you can put NPS to work in your organization and get a few practical examples of NPS in action.
How do you measure NPS?
One of the reasons Net Promoter Score has taken the world by storm is its simplicity. Long surveys leave customers feeling overwhelmed or frustrated, often leading to lower response rates and less of the valuable data you’re hoping for.
NPS solves this problem by focusing on one question:
“What is the likelihood that you would recommend [your company] to a friend or colleague?”
Your customers respond by picking a number ranging from 0 (not likely to recommend) to 10 (highly likely to recommend).
While this is the only question you’ll need to measure your Net Promoter Score, most companies follow it up with something like, “Why did you choose that answer?” or “What would it take to improve your answer by one point?”
This powerful one-two punch gives you data to measure your customer loyalty and helps you understand the key drivers of satisfaction and dissatisfaction for your customers.
To calculate your Net Promoter Score, you’ll subtract the percentage of detractors (ratings from 0-6) from the percentage of promoters (ratings of 9 or 10). For example, say you had 100 people complete your NPS survey and the results looked like this:
- 12 Detractors
- 48 Passives
- 40 Promoters
You’d plug your promoters (40%) and detractors (12%) into the formula, giving you an NPS of 28.
It’s straightforward math, but beware of falling into the trap of only focusing on your overall score. NPS can move up or down due to many factors, and obsessing about small changes won’t serve your team or customers well.
You should absolutely track your NPS over time, but instead of only focusing on the score, dig deeper. Look at the underlying reasons why customers are detractors, passives, or promoters. Look at movement back-and-forth between those categories. What stands out?
Generally speaking, an NPS score over 0 is considered decent. A positive score means you have more promoters than detractors, which is a solid place to be. If you want to aim for world class NPS results, your goal should be 70+.
Why should you measure Net Promoter Score?
Let’s be blunt. There’s no such thing as a perfect metric.
NPS has its strengths and its weaknesses, just like any other metric. And while being popular doesn’t necessarily mean something is a good choice—like smoking in the 60s—popularity can be an indicator of usefulness.
The worldwide adoption of NPS as a customer loyalty metric is a strong signal that many businesses find value in it.
Here are a few reasons why you should measure NPS and how it can help your company grow:
- NPS helps you understand which customers love you (and why). Every company wants to achieve product-market fit. Identifying your promoters is a great step towards doing so. When customers are actively referring your product to their friends, you’ve clearly solved a pain point for them. The more you understand these customers, the easier you’ll find it to identify and sell to similar prospects. Your promoters are also great candidates for case studies to help drive future sales!
- NPS helps you understand who is likely to churn (and why). Detractors—especially those replying to your NPS survey with low scores like 0 or 1—are your most unhappy customers. They’re the most likely to churn. Spending some time understanding their issues and nurturing those relationships can improve retention and lifetime value.
- NPS helps you compare yourself to your competition. Since NPS is so widely used, it’s easy to find benchmark data that allows you to understand how you’re doing relative to your competitors. This data can influence your customer experience strategy over time.
- NPS helps you get funding. Many investors and venture capitalists want to know your NPS results before they’ll consider investing in your company. A commitment to measuring and acting upon NPS demonstrates you take the Voice of Customer (VoC) seriously and use data to inform strategy. It’s also a great indicator of product-market fit and retention, as noted above.
Taking NPS seriously can bring a host of benefits to your company, but these are a few of the common benefits recognized by many organizations.
Practical examples of measuring NPS
They say that a picture paints a thousand words, so let’s get practical. Here are two real-world examples that take NPS out of the hypothetical realm to show where NPS has made an impact.
Travel experts AirTreks exist to deliver great experiences to world travelers. They’ve always measured NPS, but they never did much with it. NPS was just another metric on the dashboard, reviewed occasionally but never acted upon.
AirTreks knew they needed a way to put customer feedback in the spotlight. As part of a broader customer experience initiative, they overhauled their approach to NPS. First, they split it into two different versions: B2B and B2C, which better aligned with their customer segments. They also chose strategic moments in their customer journey to send the NPS survey—after a purchase, after a cancellation or failure to purchase, and after a completed trip.
This reimagined approach has done wonders when it comes to integrating NPS feedback into their corporate culture. AirTreks now sees feedback as a key tool in cultivating meaningful customer relationships and curating life-changing travel experiences.
Read the full AirTreks story here.
Test prep company Magoosh finds NPS to be a perfect fit with their combined focus on being data-driven and making customers happy. Magoosh uses NPS to analyze if students like their customer service and UI, but also to measure their product’s effectiveness.
They typically measure NPS after students take the exam they used Magoosh to prep for. When results dipped, they identified a product algorithm issue as the reason. Through creatively gathering NPS results in-app as part of an A/B test, they were able to quickly make product changes without negatively impacting customer happiness.
What are best practices for using NPS?
Some tools and tactics are easy to implement. Pretty much anyone can figure out how to use a hammer correctly, right?
Putting Net Promoter Score to work for your business requires a bit more thought. Although it’s a simple survey, customer journeys can be complicated. Consider these best practices to reap the benefits of using NPS to measure and improve customer loyalty:
- Focus on more than the score. Your NPS score is a high-level indicator of how customers feel about your brand. If you want to move the needle and achieve a higher score this time next year, do the work of analyzing each response segment. Look for trends and seek to understand the “why” behind responses.
- Treat it like one piece of the puzzle. NPS can give you great insights, but it’s stronger when used in combination with other metrics like CSAT and CES. Think of each metric like a different piece of your customer experience puzzle. Which pieces do you need to excel?
- Tailor your surveys. The right software can make it easy to personalize surveys with things like your customers’ names. Don’t skip this, but also don’t stop there. Take it one step further and think about how NPS fits into your broader customer journey. Where are the logical places to gauge how customers feel about you? What are the big moments you need insight into?
- Take action. Measuring NPS won’t help you if you don’t do anything with the feedback you receive. Action is a necessity, but don’t feel like you have to reinvent everything overnight. Instead, try taking an agile approach to your customer experience. Learn, iterate, and repeat. Consistent small improvements snowball into large shifts over time.
Put Net Promoter Score to work for you
NPS is a powerful tool that any organization can use to craft a better customer experience and drive customer retention. If you’re not already using it, you should seriously consider adding it to your metric toolbox.
We’ve covered the basics of Net Promoter Score in this post, but we’ve only scratched the surface. With thousands of the world’s leading companies using NPS, the opportunity to learn from others is endless. If you’d like to learn more about implementing NPS successfully, download The Ultimate Guide to Net Promoter Score today!