Contents
What is NPS?
The net promoter score, or NPS for short, is considered to be one of the oldest customer experience management metrics used in business. It is also one of the most important metrics since NPS is used to measure customer loyalty. It is based on one simple question of how likely a person is to recommend a company, product, or touchpoint to their colleagues or friends based on their customer experience. It doesn’t matter whether it was a recent or a long-term experience. The 11-point scale ranging from 0 to 10 is a bit out of the ordinary because it’s a bit more skewed towards the detractors who take up points 0-6, meanwhile, 7-8 is reserved for neutrals and 9-10 is for promoters.
How is it measured?
The Net Promoter Score (NPS) is measured by taking the number of promoters and subtracting the number of detractors, it is an absolute number that can move up or down. However, it is very relative depending on how the promoter, neutral, and detractor boxes are assembled.
Here’s how it looks in numbers. A typical example would be having two companies with an NPS of 50. One company has 80% promoters versus 20% detractors, and no neutrals, meanwhile the other company would have 0% detractors but 50% promoters. This means that both companies in this example have the same NPS but different promoter boxes.
Fundamentally, the companies will have to take a different view of how they are going to approach things and make customers more loyal. On the one hand, the company that has zero detractors doesn’t really have to deal with significant issues, it doesn’t have any churn and it only has to focus on the neutral customers to make them happier. This means it’ll focus more on satisfaction drivers, increasing customer loyalty.
Meanwhile, on the other hand, a company that has the 80/20 ratio will have to take a bit of a different approach. From its point of view, the majority of its customers are happy with their services, and they have an efficient setup, but 20% of people still have a problem because they don’t seem to like a part of the process, or the pricing or the branding. In that case, the company has to deal with the root causes of the customer’s dissatisfaction.
The dos and don’ts of NPS
NPS cannot be simplified into being just one simple number, that is the biggest mistake that has historically occurred. Most managers understood NPS as some kind of simple value and they kept asking the question: “What should l do or not do to increase our NPS by one point or more?” However, that’s not the right question to ask.
A normal manager that wants to be effective from the NPS point of view, needs to look at how many promoters they have, how many detractors they have, and how many neutrals they have. Based on that data they then need to tailor their various activities specifically to target each part of their customer base. In general, you need to keep the promoters loyal, with neutrals you need to know what small changes you need to make to turn them into promoters and when it comes to detractors you need to know how to retain them and turn them into neutrals or, even better, promoters.
Neutrals are rarely targeted because usually, those do not make a significant chunk of the pie. However, if there is a significant number of neutrals then that is usually accompanied by a significant number of detractors. In those cases, you analyze the root cause of the detractors and then you try to get rid of these root causes if it is within your means – this may include changing the style of communication, pricing, branding, etc.
Once you do that and the detractors become neutral, automatically, in correlation to that, the neutrals become promoters. That’s because the root causes that are important to the detractors can marginally be of some importance to neutrals, therefore by improving the environment you are improving the overall loyalty.
How to investigate the root causes?
To find out these root causes, the NPS question has to be accompanied by another simple question, such as:
• What would we have to do so you would rate us with 9 points or higher?
• What is the most important driver for your decision?
If you want you can even list out the drivers for the customers, however, that should be preceded with an open question so that you get a more honest and valuable answer.
That’s the best approach because you can correlate the data and the output gives you a better overall picture of the supposed problems.
Even across verticals, NPS can vary
The problem with NPS is that there isn’t a worldwide benchmark. It’s also necessary to be careful when comparing NPS across verticals as well. It also depends on what brand we’re focusing on and if it’s being compared with similar companies or brands.
Let’s take automobile manufacturing companies as an example.
Luxury car customers have totally different expectations compared to let’s say large family car customers. At the end of the day, while their loyalty may remain the same, the support they come to expect from these brands will differ. Luxury car customers will probably expect premium services for the prices they pay, while the family car customers are aware that there is probably a limit to the bang for the buck services the company offers on its models.
In summary
To sum it up, NPS is a valuable tool that can take you a long way in improving your customer experience. However, in order for you to use it correctly, you have to ask the right questions and address the root causes of decreasing NPS rather than just wondering how to increase it by one or more points. The way how to get there is to understand expectations of your customers.
