When it comes to what your customers or clients say about your business, talk is anything but cheap. In fact, the opinions they express to friends, colleagues, and the thousands of people who read their online reviews can tell you more about your company’s present performance and outlook for the future than almost any other metric.
If your customers say positive things about their experience with your company, they in effect become walking (and unpaid) promoters of your brand; expanding its reach and improving its reputation among consumers. Conversely, even a single bad review by a passionate detractor can metastasize and turn one person’s negative perception into scores of prospects who won’t give your company the time of day. Knowing how many of your customers say good things about your business versus those who badmouth it is the essence of your “net promoter score” (NPS).
What is Net Promoter Score and Why Does It Matter?
Introduced in 2003 by business strategist and loyalty marketing specialist Frederick F. Reichheld, the net promoter score is a measurement of overall customer loyalty and satisfaction based on one simple question:
“On a scale of 0 to 10, how likely are you to recommend this company’s product or service to a friend or a colleague?”
Reichheld found that the collective answers to this question directly correlated to a company’s likelihood of retaining existing customers and attracting new ones. For businesses that rely on recurring revenue, in particular, knowing whether its customer base will remain in the fold can provide invaluable insights into future earnings.
How is NPS Calculated?
Customers who respond to the survey question are grouped into three categories:
- Promoters are those who answer with a score of 9 or 10, making them enthusiastic brand ambassadors
- Passives give a score of 7 or 8 and are unlikely to either recommend a company or give it negative reviews, but are close to promoters than they are to
- Detractors rate a company between 0 and 6, meaning they won’t buy from the company again, won’t recommend it to others, and may actively and publicly espouse negative opinions about the brand.
To calculate NPS, disregard the passives altogether and then subtract the percentage of detractors (0-6) from the percentage of promoters. If, for example, 50% of respondents were promoters and 25% were detractors, the NPS would be 25. If the percentage of detractors swamps that of promoters, the NPS can fall far below zero.
What Does It Mean?
Generally, if your NPS is at or just above zero, that is considered good, as more people have a positive (or indifferent) opinion about your company than negative. If you’re above 50, you are crushing it, and if your NPS is 70 or above, you are in the top echelon of companies in terms of customer satisfaction. If, on the other hand, you find yourself significantly underwater with a score of -25 or more, you need to spend some time figuring out why so many folks are dissatisfied with what you do.
How to Obtain Your NPS
Though the NPS question is a short and simple one, you still need to go out and get the answer from hundreds or thousands of customers. Plenty of companies provide NPS -specific services and software that can make it easy to request, receive, compile, and analyze customer responses, including SurveyMonkey, Zendesk, and SightMill.
With your company’s NPS in hand, you’ll find out whether you have a volunteer army of happy customers staying with and referring others to you, or whether you have a hostile and destructive squad of former customers determined to keep future customers away.