Net Promoter Score (NPS)

Cracking the Code of Customer Loyalty with Net Promoter Score (NPS)

Niladri Mahapatra

Niladri Mahapatra

August 16th, 2023 at 11:57 AM

Agile Measure & Grow

 Understanding and Implementing NPS: The Key to Measuring Customer Loyalty


Understanding and properly maintaining client loyalty is crucial for long-term success in company. The Net Promoter Score (NPS) is a widely used measure that aids businesses in evaluating and enhancing customer loyalty. In this post, we will examine the idea of NPS, its calculations, and give a real-world example of how a business successfully applied NPS to produce outstanding outcomes.

The Net Promoter Score (NPS):
Developed by Fred Reichheld in 2003, the Net Promoter Score is a customer loyalty metric that aids organizations in measuring and assessing the loyalty of their consumers. The idea is straightforward yet effective: it divides clients into three categories based on how they answer the query, "How likely are you to recommend our product/service/company to a friend or colleague?"

1. Promoters (score 9-10): These are the customers who are devoted supporters of your brand and are very satisfied. They are inclined to aggressively promote and suggest your company to others.

2. Passives (score 7-8): Although these clients are content, they lack the enthusiasm of advocates. If a better offer comes along, they are more likely to switch to a competitor..

3. Detractors (score 0-6): Detractors are displeased consumers who might spread unfavourable rumours, which could ultimately result in lost sales and harm to your brand's reputation.

Calculating the Net Promoter Score:
The percentage of critics is subtracted from the percentage of promoters to determine the NPS. The final score ranges from -100 to +100. A favourable score indicates a healthy balance of supporters and critics, whereas a poor score suggests a pressing need to address customer complaints and enhance the customer experience.

Example on NPS: Company XYZ
Let's use the hypothetical Company XYZ, an electronics-focused online retailer, as an example to help us better understand how NPS functions in real life. In order to better understand customer loyalty and enhance the entire customer experience, Company XYZ chose to deploy NPS.

1. Survey Implementation: A random sample of consumers from Company XYZ received a quarterly NPS survey. Following the NPS question, customers have the chance to add additional comments to the survey.

2. NPS Analysis: Based on the results of the survey, Company XYZ divided its clients into promoters, passives, and detractors. Assume that the analysis showed 60% supporters, 30% supporters in a passive role, and 10% opponents.

3. Calculating the NPS: To calculate the NPS, we subtract the percentage of detractors (10%) from the percentage of promoters (60%). Thus, Company XYZ’s NPS is 50 (+60% – 10% = 50).

4. Taking Action: With the use of their NPS score, Company XYZ pinpoints the main causes of customer discontent as well as those that have a positive effect on customer loyalty. Through individualized offers and superior customer support, they work to turn passive customers into promoters by addressing frequent complaints made by critics.

5. Monitoring progress: Company XYZ keeps track of improvements in their NPS and identifies areas that require additional attention. They can gauge the effect of their efforts on client loyalty by comparing scores over time.

Here are a few examples and some information on how to calculate Net Promoter Score (NPS):

Example 1:
Suppose you send out a customer satisfaction survey to 100 customers, asking them to rate how likely they are to recommend your company on a scale of 0-10. The responses are as follows:
– Promoters (rating 9-10): 70 customers
– Passives (rating 7-8): 20 customers
– Detractors (rating 0-6): 10 customers

To calculate NPS, first, we need to classify respondents into three categories based on their ratings. Then, subtract the percentage of Detractors from the percentage of Promoters:
– Percentage of Promoters: (70/100) * 100 = 70%
– Percentage of Detractors: (10/100) * 100 = 10%
– NPS: 70% – 10% = 60

Here, the NPS is 60, indicating a highly positive sentiment among customers.

Example 2:
Let’s say you conduct another survey with 200 respondents, resulting in the following ratings:
– Promoters: 100
– Passives: 70
– Detractors: 30

To calculate NPS:
– Percentage of Promoters: (100/200) * 100 = 50%
– Percentage of Detractors: (30/200) * 100 = 15%
– NPS: 50% – 15% = 35

In this case, the NPS is 35, suggesting a positive sentiment but with some room for improvement.

A popular measure of customer loyalty is NPS. By classifying customers into Promoters (loyal and enthusiastic), Passives (satisfied but not loyal), and Detractors (unhappy customers), it aids enterprises in measuring client advocacy. Counting the proportions of Promoters and Detractors, then deducting the Detractor percentage from the Promoter percentage, is how the NPS is calculated. A high NPS indicates better levels of customer satisfaction, while a low NPS shows more Detractors than Promoters. The NPS scale is between -100 and +100..

 NPS Data capturing – Net Promoter Score

In order to calculate your NPS (Net Promoter Score), you must solicit input from customers about their degree of happiness and brand loyalty. Here is a step-by-step tutorial on how to efficiently collect NPS data:

1. Determine the appropriate timing: Determine the frequency and timing of your NPS measurements. It may occur after a particular encounter, following a purchase, or on a recurring schedule, such as quarterly or yearly.

2. Choose the data collection method: Select the technique you'll employ to get NPS data. Email surveys, website pop-ups, in-person questionnaires, phone surveys, and incorporating an NPS question into your customer service encounters are just a few of the choices accessible.

3. Craft the NPS question: How likely are you, on a scale of 0 to 10, to suggest our business, product, or service to a friend or colleague? is the typical wording of the NPS question. Make the query unique to your company by doing so.

4. Determine the follow-up question: You can ask a follow-up question that is open-ended, such as "What is the main reason for your score?" to elicit further information. Customers can now give more thorough justifications thanks to this.

5. Implement a scoring system: Create a score system based on the NPS survey replies. Sort the respondents into the following three categories: Promoters (scoring 9–10), Passives (scoring 7-8), and Detractors (scoring 0-6).

6. Calculate the Net Promoter Score: To calculate your NPS, subtract the percentage of critics from the percentage of supporters. The scale for this rating is -100 to +100.

7. Analyze the data: Examine the NPS data to find trends, patterns, and areas that need improvement. To acquire useful information, look for reoccurring topics in consumer feedback.

8. Act upon the feedback: Utilize the comments to enhance your offerings to customers and the entire customer experience. Address the issues brought up by critics and emphasize the advantages mentioned by supporters.

9. Monitor NPS over time: Follow patterns in customer loyalty and satisfaction as you measure your NPS over time to assess the impact of your initiatives. As necessary, modify your strategies.

10. Share results and take action: Share the NPS results and insights with relevant stakeholders across your organization. Use the data to inform decision-making and drive customer-centric initiatives.

Remember, NPS is just one metric, and it should be supplemented with other customer feedback measures to gain a comprehensive understanding of your customers’ experiences.

Involved Stack holder to data capture related to NPS – Net Promoter Score Calculation Data
Various departments and roles within an organization should be involved in data capture related to Net Promoter Score (NPS) calculation. These typically include:

1. Customer Service/Support Team: They have direct contact with clients and are essential in receiving feedback, documenting responses, and resolving any issues that may arise..

2. Sales Team: They can collect NPS data during sales calls, customer visits, or follow-ups.

3. Marketing Team: To gather opinions from a larger consumer base, NPS surveys can be incorporated into marketing campaigns, newsletters, or the company website.

4. Product Development Team: They can gather NPS data to gain insights into product features or functionality to help guide future improvements.

5. IT/Analytics Team: They play a vital role in integrating NPS data-capturing tools, maintaining databases, and analyzing the collected data for insights.

6. Management/Leadership Team: They should be involved in setting goals, monitoring NPS trends, and making strategic decisions based on the gathered data.

7. External Consultants: To ensure an objective and thorough assessment, firms may employ external experts with experience in NPS measurement and analysis.

Remember, involving a cross-functional team ensures that data capture is comprehensive, accurate, and actionable throughout the organization.

Businesses can measure customer loyalty and pinpoint areas for improvement by using the Net Promoter Score. Companies may improve their products and services, strengthen customer connections, and ultimately spur corporate success by using NPS as a critical tool. In today's competitive environment, it's important to keep in mind that the key to success is knowing your consumers' perspectives and meeting their wants.



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