All the businesses in the world rely on their customers. A business is nothing without its buyers. Customers make a business successful and they’re also the ones who lead to bankruptcy. Having satisfied, happy, and loyal customers should be your business’s top priority because it ensures business growth.
According to a Forrester study, experience-driven businesses (businesses that invest heavily in customer experience) have 1.6x higher brand awareness, 1.9x higher order value, 1.6x higher customer satisfaction, 1.7x higher customer retention, and 1.9x return on spend than their counterparts. An experience-led business is one that is focused on improving customer experience throughout the customer lifecycle journey by investing in all possible customer touchpoints (people, processes, and technology).
Customer experience plays a significant role in your business performance. Most businesses should constantly measure customer satisfaction and how loyal the customers are to your brand – merely investing in customer experience, without measuring it won’t work. Net Promoter Score (NPS) is the most popular system to measure customer loyalty to reduce retention and accelerate business growth.
This comprehensive NPS guide will try to cover everything that you need to know about customer loyalty, satisfaction, and experience. Let’s get rolling.
Net Promoter Score (NPS), also known as Net Promoter System, is a customer loyalty metric that measures how likely your customers are to recommend your product or business to a friend. The Net Promoter Score was first introduced by Fred Reichheld in 1993. Later in 2003, Fred partnered with the Bain & Company and the NPS was adopted by the Bain & Company to predict customer purchasing behavior.
NPS gives you an insight into several key metrics such as:
The NPS survey consists of a single question:
How likely are you to recommend us to a friend?
The customers respond by selecting an appropriate number between 0 and 10 to show their likelihood. Here is an example of NPS survey in action:
The Net Promoter Score is calculated subtracting the percentage of detractors from the percentage of promoters. The number of promoters and detractors can be calculated easily from survey analysis.
NPS = (% of Promoters) – (% of Detractors)
The value of NPS ranged between -100 and 100. A positive score indicates that you have more promoters than detractors while a negative score means the percentage of detractors is higher than promoters. Higher NPS is desirable and ensures your business is moving in the right direction.
Net Promoter Score and Net Promoter System are pretty much the same thing. The Net Promoter System is just an upgraded and advanced version of the Net Promoter Score.
The company that developed NPS back in 2003, Bain & Company, calls it a complete system of doing business. Over the years, they have transformed Net Promoter Score from a simple score to a system that ensures sustainable business growth.
The Bain conducted an in-depth study to measure the relationship between NPS and business growth. They found that NPS explained between 20-60% organic growth among competitors. Businesses that follow the NPS approach grow 2x than their competitors.
This shows that NPS is an indicator of business growth but simply measuring NPS doesn’t ensure growth. Businesses that have high scores and lead the industry with 2x more growth. This translates into a high number of promoters (loyal customers) that are crucial for any business. Based on the study, Bain introduced the Net Promoter System that focuses on customer and employee relationships. It asks for a customer and employee-centric culture that leads to long-term business growth.
When your employees are satisfied, they’ll provide superior services to customers and will perform their duties effectively – this leads to business growth. The Net Promoter System does exactly this by letting you measure your current standing in the industry and what actions you can take to increase the number of promoters.
Here is the system that defines and relates to every aspect of your business:
Measuring your score is just the base for decision making. What action you take to improve your score and what system you follow to get to the top, are what really make the difference.
Consider Southwest Airlines which has used a customer-focused approach to gain customer loyalty and trust. Low price is their biggest competitive advantage that makes their customers fall in love with them.
Here is what they do to keep fares low:
This is how they has been able to offer low fares and still remain profitable. It doesn’t end here though, when it comes to customer loyalty, Southwest Airlines goes a step further. It offers several incentives to its loyal customers including free checked bags, companion passes, and premium service. This approach has worked for them for years.
The customers aren’t just satisfied but they’re extremely loyal. Southwest Airlines customers will never fly from another company even if they have to pay a high fare to stick with Southwest. Southwest Airlines has the most satisfied customers:
It has an NPS of 62 which is highest in the industry.
This is all due to a customer-focused approach that it has worked on for years. This is exactly the purpose of the Net Promoter Score – convert customers into loyal customers by moving your business towards a customer-driven company.
There are several aspects of the NPS that make it an ideal approach to improving customer loyalty. Fred’s article in Harvard clearly showed the importance of the NPS for businesses. Here are the major features and characteristics of NPS that make it a must-have system for your business:
The NPS is simple and straightforward. No learning curve. It is easy to administer and cost-effective.
It is a single-item survey that your customers can fill in less than 30-seconds. This is what makes it ideal for customers. The issue with customers is that they don’t like filling those long and lengthy surveys. Nobody does. Even if you compensate respondents for participating in the survey, the response rate will be low.
NPS solves this issue. It has a high response rate and it measures customer loyalty effectively. The question is self-explanatory that makes NPS a perfect self-administered survey. You don’t have to compensate respondents to boost the response rate. They’ll participate willingly due to its simplicity.
Creating and running an NPS survey is the least complicated.
You can use any customer feedback tool, NPS software, a survey tool, Google Forms, or any app to measure NPS. A simple survey app will do it for you.
It isn’t just simple and straightforward for your customers, but it is also simplistic for your business. You can run an NPS campaign even if you are on a shoestring budget.
Measuring customer loyalty isn’t easy. It is a multidimensional construct that has multiple definitions that make it extremely hard to quantify and measure it.
For instance, customer loyalty can be measured by average order value, repeat purchase, engagement, word of mouth, or other variables. It could take any form, and this makes it challenging for marketers to track and measure customer loyalty.
The Net Promoter Score solves this issue of quantifying and measuring loyalty (both customer and employee), as it has been shown to correlate strongly with customer loyalty. By asking a simple question, you can identify loyal customers who are most likely to recommend your product or company to a friend.
NPS doesn’t just focus on loyal customers but it identifies unhappy customers too. You can find the exact number of respondents who are most likely to switch to competitor. You can get in touch with all the unhappy customers and figure out what problems they’re facing.
The idea is to contact detractors (who are the unhappy customers), value them, make them feel heard, and solve their problems. Maybe, you can conduct interviews with some of the detractors to find out their core issues.
Solve their problems to ensure they stick with your company, don’t switch, and become loyal customers.
For most businesses it is challenging to have a centralized objective for the entire business. Your marketing teams have a different annual objective, the sales department has different goals, customer services use a totally different approach to track business success.
The alignment of goals is a serious concern for businesses.
Here is good news: NPS solves this issue by providing your business with a single metric that they have to focus on. You can tell your teams that their goal is to increase your NPS. Do anything if that just improves NPS.
If you want to become a customer-driven company, you have to make NPS your business’s key metric. This will solve the issue of lack of goal alignment across your business. Your teams can focus on other objectives like increasing CTR of the Facebook ad campaign, but its big objective should be to make customers recommend your business.
If the ad doesn’t improve NPS or get new happy customers, it isn’t helping you achieve your business’s big goal. Train your employees to look for ways to improve NPS in whatever they do on a daily basis.
The relationship between customer loyalty and business growth is evident. When your entire business has one metric to improve (that is NPS), it will lead to business growth.
According to Motista, loyal customers have a 306% higher lifetime value and spend $699 with a company per annum on average. Loyal customers engage in the word of mouth marketing which generates leads and sales resulting in an increase in revenue.
Research shows that customer retention is the most significant driver of revenue for the retail sector. This means retaining customers increases revenue because the simply buy from your business again.
Measuring NPS and taking action based on the measurement helps you reduce customer churn by identifying underlying issues so that you can fix them. If you aren’t sure how to take your business towards sustainable growth, one easy step is to start measuring NPS.
So how you can calculate NPS for your business?
Calculating the Net Promoter Score is quite easy. The survey needs to have a rating from 0-10. All responses are categorized into three categories:
Promoters are customers who respond with either 9 or 10. Passives are the customers who select 7 or 8. Detractors are your customers who choose between 0 and 6.
NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. Here is its formula:
NPS = %Promoters – %Detractors
The NPS ranges between -100 and 100. A high score means that you have more promoters than detractors. So, you need to aim for a score of 100.
Let’s assume the total number of customers who participated in the survey is 100. Here is the distribution of the responses:
The percentage of promoters = 40/100 = 40%
The percentage of detractors = 30/100 = 30%
NPS = %Promoters – %Detractors
= 40 – 30
How do you know if NPS 10 is good or bad? Generally, a positive score means that you have more promoters than detractors and, therefore, positive NPS is desirable. If your NPS is above 30, it is considered good and if it above 60 it is excellent.
But this isn’t enough, you need to find the numbers of promoters, passives, and detractors to see where you stand. Looking at the overall NPS score isn’t just enough. You need to critically analyze responses. You should have a clear understanding of three categories.
You don’t have to calculate NPS manually unless you just want to do it. There are tons of NPS software and survey tools that let you create and manage NPS campaigns. The software will record responses, calculate NPS automatically, send reminders, and will help you run NPS with ease.
For example our NPS software that you can use to create, run and manage NPS surveys easily.. You can send the survey to customers via email or SMS and when the responses start coming in, you can view numbers of promoters, passives, and detractors from the dashboard.
An NPS tool can do a lot of the heavy lifting but it doesn’t tell you what decisions to make or how to deal with your customers and to convert detractors and passives into promoters. You’ll need to have a clear understanding of your customers and the categories they fall into, only trough that you will be able to improve your NPS and make clear decisions.
Here is an overview of the three categories of customers:
These are the loyal customers who respond to the NPS survey with either 9 or 10. They’re most likely to recommend your business to a friend or relative. Not only that, promoters will usually also actively engage in word of mouth marketing, and stick with your company and repurchase.
Ideally, all customers should be promoters. This is what you should aim for. Every single customer that you have should be loyal and should be your company’s ambassador. Though this does not mean that you should only focus on turning your passives and detractors to promoters but to also focus your customer acquisition to segments that really deliver high NPS.
This will also lead to higher customer lifetime value through second-order effects.
These are your customers who rate you 7 or 8. Passives are on the edge. They could either become detractors or promoters after some time. Passives are prone to competitor offers and if they find a decent alternative, they’ll switch.
Or, if you offer a better product or solve their problem that’s stopping them from becoming a promoter, they’ll stick to your business and become a promoter.
Passives aren’t included in NPS calculation because they’re on the fence. But this doesn’t mean you have to exclude them from all types of analysis. The way you treat passives is essential for business growth. Trustmary’s customer success manages Anu Varila says that passives are actually rather easy to convert into happy customers.
What most businesses do is that they don’t do anything about passives as they’re more concerned about detractors. And this is usually a mistake.
Passives are easier to retain than detractors. Instead of letting them move to a competitor, you should engage them, solve their issues, and convert them to promoters. This is probably the easiest way to increase NPS.
These are unhappy customers who need special attention. Any customer who responds to the NPS survey with a number between 0 and 6 is categorized as a detractor. This means they’re not satisfied with your product and will churn eventually.
The number of detractors is included in the NPS calculation. A high number of detractors will result in a low or negative NPS score. Reducing the number of detractors will increase NPS.
You have to deal with detractors smartly and quickly because they might also damage your brand. They might engage in negative word of mouth and this will ruin your brand image and reputation. Dealing with detractors is essential not only to improve NPS but to safeguard your brand reputation.
Now that you know pretty much all essentials about the Net Promoter Score, customer categories, and how to calculate it, it is time to create your first NPS campaign.
A Net Promoter Score campaign is a systematic approach to creating and distributing the NPS survey, calculating NPS, and analyzing and comparing your score. The following 5-step approach to NPS campaign development and management can help your business create an NPS survey without any hassle:
It’s a no-brainer step. You need to create an NPS survey to get started. There are multiple variables that need your attention at this stage.
First, decide the survey type. It could be on-site or a standalone NPS survey.
An on-site NPS survey is distributed through your website. The survey is triggered when pre-defined conditions are met. For instance, you can choose to send a survey to customers from a specific location or to customers who have purchased or ordered a specific product.
Here is an example of how to create an on-site survey and the right time to send it:
You need to ensure that the survey is sent to customers – and not website visitors. Sending the NPS survey to website visitors will yield a poor score, that is not really actionable because a first-time visitor doesn’t really know your company and won’t recommend you or give any actionable feedback.
A standalone NPS survey, on the other hand, is more flexible. You can send it via email, SMS, or any other channel.
When creating your NPS survey, make sure to ask feedback from the customers with an open-ended question. Here is an example of how to get additional feedback:
Second, choose an appropriate NPS software. Here is a list we have made about the best NPS tools that you can choose from. You can use any survey tool or even Google Forms to create an NPS survey, but a good idea is to use specialized NPS software.
When you use a survey tool that is not specifically built for NPS, you’ll have to do a lot of work manually such as calculating NPS, finding the number of promoters and detractors, and managing feedback. A specialized NPS tool will handle all this for you. The score will be calculated, responses will be categorized, and everything will make much more sense.
Here is an example of our NPS tool. It shows you all the details via its intuitive dashboard.
When choosing an NPS software, you need to make sure that it can be integrated with your CRM and email marketing tools. As it is usually the easiest way to send targeted NPS surveys to your customers and analyze responses at an individual level.
Using an NPS app has another benefit as it can also make survey distribution easier. This obviously depends on the tool, but usually, the tools take a lot of the workload away with automation.
Ask yourself: What distribution channel you’ll use and why?
Why you are sending surveys via email, and why not via SMS?
Here is a list of the most popular NPS distribution channels:
Email: Works well in almost all types of situations but has a relatively low response rate. The best thing about email is that it is non-intrusive, integrates with CRM, trackable, and has a wide outreach.
SMS: SMS NPS survey is ideal when high response rate is a priority. However, SMS-based NPS survey distribution is expensive and has limited scope because not all customers share their phone numbers.
In-app: An in-app NPS survey works best for SaaS and businesses having an app. The scope is, therefore, limited. In-app surveys have a high response rate and you get immediate feedback. The biggest issue with in-app surveys is that they’re intrusive and might end up ruining your CX.
Phone: NPS survey via phone is more of an interview that’s intended to get in-depth insights. The response rate is very high. The best thing about phone-based NPS surveys is that you get a chance to get in-depth customer feedback that helps you reduce churn. However, it is expensive, intrusive, and can make the NPS not so reliable as a single metric, if done incorrectly.
Website: Your website is a good place to distribute NPS survey in some specific cases. It requires advanced targeting to show the survey to customers only, but it can be worth it.
Chatbots: Messenger and chatbots provide you with another amazing survey distribution channel. It works automatically, provides you with in-depth feedback, and yields a high response rate. On the downside, a lot of the time it is hard to link it to your CRM and it is expensive.
Offline: It works best for businesses that have physical stores and offices.
And remember, you don’t have to necessarily stick with a single distribution channel. You can use multiple channels. For instance, you can send the survey via email and send a follow up through text message. Here is an example of how to use email and text message to boost response rate:
Using multiple channels is ideal and works better than using just one channel but there is usually one channel that will bring most of the responses – find it. In most cases, email works best. It is simple, cost-effective, has a wide reach, and can be easily integrated with the leading CRM tools.
Integration with CRM tool is essential because it lets you analyze responses at the individual level. It lets you see what category a customer belongs to and what technique to use to engage with him. This is one of the most important points of NPS to offer an individualized experience to customers that will persuade them to stick with your company.
And don’t forget to add follow up in the loop. It increases the response rate to a great extent.
When you have distributed the NPS survey, responses start rolling in. Your NPS tool will calculate the score automatically in real-time. You’ll get to know the exact number of promoters, passives, and detractors.
If you have distributed the NPS survey offline, you have to calculate the score manually. You need to enter data into an Excel sheet. Create macros for the surveys and start adding data into the sheet. Or, you can just upload the file to your NPS software for further processing (provided your tool has this feature).
Analyzing the scores and categorizing responses into promoters, passives, and detractors. If you are using an NPS tool, data analysis gets easier. Everything is calculated automatically for you and you get to see it in the analytics dashboard.
Depending on the tool you are using, the dashboard and reporting style will vary. You need to look at the following data for in-depth insights.
NPS: The first thing that you need to calculate is the Net Promoter Score. If your tool doesn’t do it automatically, use the formula to calculate it yourself.
Response frequency: Find responses by rating. How many customers responded with 0, 1, 2, and so on. This will reveal frequency distribution that helps in identifying patterns and where most of the customers fall.
The number of promoters, passives, and detractors: This is another critical report that you should generate to find the number of promoters, passives, and detractors in your sample. Find their percentage for comparison.
Demographics: Demographic analysis can be done if you have integrated your NPS tool with CRM or other software that has the necessary data available. You can analyze responses on the basis of gender, age, location, purchase history, and other variables. For instance, segregate responses on the basis of gender and see if women are more loyal than men or vice versa? Some NPS tools also have this feature, so you dont have to necessarily do any integrations.
Customer tenure: Does customer tenure relate to NPS? Are customers who are new any less loyal than long-term customers?
Customer feedback: Analyze customer feedback. Not all customers share their feedback so it’s essential to carefully analyze the feedback that you have received. Look for trends and common issues that customers have raised. Use qualitative data analysis techniques like thematic analysis or content analysis.
In the end, if there is one thing to focus on it is your NPS-score. NPS is relative, so compare it to your industry standards. There are different NPS benchmark reports available out there that can help you with the comparison. These include: Satmetrix, Forrester, Retently, Qualtrics, Trustmary, and several others.
When you compare your score with an industry benchmark, you get to know where you stand and how well you are doing in terms of other businesses in your industry. Let’s assume you are in the airlines industry and your NPS turns out to be 32. Compare this to a benchmark report to see how good or bad 32 is.
According to the Satmetrix NPS benchmark, the average score of the airlines industry is 39. Your score of 32 is below average. This shows you have lot of room for improvement. Remember 39 is just the average, you should aim for above average.
Usually you should compare your score against multiple benchmarks. One tool you can use is Delighted they have an easy-to-use dashboard to compare your NPS. Enter your score, select industry, and click Compare your NPS.
You’ll see where you stand in the industry on the next page.
You’ll see low, average, and high NPS in your industry along with your percentile. It also shows you leading companies in the industry that help you figure out if you have selected the right industry. The 40th percentile means that 40% of businesses have NPS less than your score. This means you have a lot of scope for improvement. Ideally, you should aim for a high score to reach the top of your industry.
Closing the loop means following up with your customers who have shared their feedback. When you get back to the customers immediately it shows them that you are committed, you care for your customers, and you can solve individual customer problems.
Consequently, it usually increases NPS right away. The faster you follow up, the better. Why? Because it shows your commitment and that’s one way of converting detractors into promoters.
You can follow up via email or a phone call. However, a phone call is ideal because it lets you get additional feedback from the customer and you to better understand and solve the issues.
Feedback comes from all types of customers and you have to close the loop for all the customers including promoters, passives, and detractors. Here is how to do it:
Promoters: These are happy customers who share their feedback. You can send them ‘Thank You’ emails, reward them, ask for referrals, offer an exclusive reward, etc. Don’t ignore promoters when they share feedback because not getting back to them might make them switch. If you can’t do anything else, send a simple thank you email.
Passives: Only 37% of passives share their feedback so it’s important to act fast with the follow up for passives. Else they are likely to churn. Passives are usually price-sensitive customers so the easiest but not necessarily the best way to retain them is by offering discounts. In general, solving the problems the customer has is probably the right way to go about it.
Detractors: Most detractors won’t share feedback, so the ones that do are actually quite valuable. That is why you need to act on the feedback that you receive quickly. It is hard to please all the detractors as every case is unique. Focus on treating everyone individually. Usually, a good percentage of detractors will complain about similar or related issues so it is all about categorizing feedback so you can follow up with all the detractors who had a similar complaint more cost-effectively.
Closing the loop is an essential step in your NPS campaign. The whole point of the NPS survey is to get actionable information through which you can make changes to increase your NPS. Simply measuring NPS isn’t enough.
This is the final step in the NPS campaign process that is often ignored. The whole idea of creating a systematic approach to measuring NPS is to simplify the process and make it repeatable.
Identify issues in the process as you manage the campaign. If there aren’t any issues, that’s OK. In that case, no tweaks are needed. However, it is common to find issues related to the NPS software, functionality, third-party integrations, distribution and administration of the survey, and other things.
You need to identify all such processing-related issues and fix them before initiating a new NPS campaign. Continuously tweak and update the process and the steps of the campaign. Having a process for the Net Promoter Score campaign helps you run campaigns without any issues.
How often you should run the NPS campaign?
There isn’t an ideal time, but most businesses run a campaign every quarter. You can do it every month too. It depends on your industry, distribution channels, business growth, budget, etc.
For instance, if you tweaked your e-commerce store’s design, it will be a good idea to run a campaign after implementing the design to get feedback from the customers and to check their response.
If you conduct NPS survey too often, your customers can get irritated and the response rates can drop. So, what you should do is keep test and find the best NPS interval for your business.
Running an NPS campaign and measuring your score is the beginning, what you do next after getting heaps of data defines the future of your business. Unless your score reaches 100, you have room for improvement in your NPS.
How to improve your score?
Here are some best techniques to improve NPS:
After running an NPS campaign, you get feedback from customers and your NPS tool has heaps of data.
Identify patterns, most repeated issues in the feedback form, customer journey, and any other linkages.
HotelTonight uses NPS to collect customer feedback to improve CX and fix issues that result in unhappy customers. It used customer feedback to increase its NPS to 75 which is more than 2x the industry average. This was made possible by constantly collecting customer feedback and acting on it.
In most cases, the data will tell the story, just analyze everything critically.
As an another example a wealth management company used customer journey analytics to find the common drivers that make its customers promoters or detractors.
The company looked at the customer journey to identify what journey leads to becoming promoter and what journey leads to becoming detractor. It found out that the happiest customers that become promoters create their accounts via the web portal. The least happy customers that become detractors have their accounts set up by an employee.
The company encouraged customers to create accounts via the web portal, guided its employees accordingly and focused on acquiring customers that will create account via web portal. This simple analysis helped the company improve their NPS.
Look for patterns. If you don’t have a clue, interview your customers. Interviewing 10-15 detractors will help you figure out the biggest issues your customers are facing and find commonalities among detractors.
Develop a culture of improving your customer experience and NPS in your organization. When your teams, employees, and everyone in the company have one goal to serve your customers better, improvements on NPS will happen on their own.
Changing your business to more customer-centric model can be difficult, but it is usually worth it.
Because focus on customer experience will become a necessity in the upcoming years. Actually Gartner predicted that 80% of businesses are expected to compete solely on the basis of customer experience.
A lot of the time onboarding and employee training have too few resources to begin with. In some cases the onboarding can even be ignored completely. This usually leads to subpar NPS scores over time and it should not be a surprise.
Imagine your employees reaching out to your customers for closing the feedback loop without training on how to actually do it. A lot of the times employees don’t even necessarily know what are the priorities in the process, even though they are doing it.
Training your employees is probably the driving factor of cultural change to more customer oriented company. Train them on the importance of customer experience, improving NPS, making as many customers as possible a promoter, and what role they play in the whole. Your employees priority should be making your customers happy.
If you are new to NPS, you might end up making a lot of mistakes. You can avoid making NPS mistakes by following the best practices that work most of the time. When you use best practice, you save yourself from guesswork. It is better to follow a proven process instead of reinventing the wheel. Here is three most important best practices you should usually stick to:
Data and tool integration are more important than you think. Have you integrated your NPS software into the CRM you have? If you are sending an NPS survey via email, have you integrated it into your email marketing?
Of course, you can run a standalone NPS campaign without integration. You’ll get the score, and you can compare it and move on, but it won’t help you with business growth long term. It will be difficult to track historical NPS, you won’t be able to see how customer changes his response to NPS over time, what type of customers are more satisfied, what type of product purchases result in a high score, and so on.
Are you more worried about detractors? Well, it is good to connect and engage with detractors but don’t ignore promoters in doing so.
Not leveraging promoters is a big mistake that a lot of businesses make. You need to engage promoters and make them feel special.
There are tons of ways to use promoters to grow your business and bring in new loyal customers. Don’t ignore promoters for the sake of detractors.
Do you know how customers NPS evolve overtime?
Customer satisfaction and loyalty change over time depending on several factors. Some customers might be happier at the early stages while others towards the end of the journey. Find the customer journey changes and see what results in the highest and lowest NPS. You can then identify issues in your customer journey and fix them to boost NPS.
The Net Promoter Score provides you with a surprisingly good overall picture of your business and on how to keep it growing. By turning your business to become more customer-driven you will most likely speed up your growth as the customer experience improves and bigger part of the customer base will start to recommend your business to their network.
Hopefully you feel like you now know enough about the Net Promoter Score and can move all this to practice.
Create your first NPS campaign, follow the steps mentioned in this guide, and adopt a customer-first strategy that focuses on improving your customer experience and NPS. And you’ll soon find yourself heading in the right direction towards the top of your industry.
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