What is Net Promoter Score and what wrong you are doing while calculating
“A customer talking about their experience with you is worth ten times that which you write or say about yourself.”
– David J. Greer
For this topic of Net Promoter Score, I would like to discuss the usability first before actual and practical definition of NPS.
NPS (Net Promoter Score) tells you that:
Is your product ready to start the referral program or campaign or not? It also tells you that:
Is your Product Market Fit or not?
Now, let’s start the discussion with the definition. NPS (Net Promoter Score) is the metric which is using globally, to measure the customer satisfaction and loyalty.
It is different from the general user feedback, because user feedback is only gives the data, how happy or angry any customer with the service. But NPS determines the intention of the users to recommend it to others.
Now, there is one question may arise in your curios mind that:
How Net Promoter Score is different from normal Feedback?
Ok, so the main difference between these 2 is in ‘Intention’. While feedback is only about how good or bad was your service or product, but NPS tells, how strongly users recommend it to their family or friends.
These 2 are different things and help in a lot of decisions. Feedback is kind of data, which help directly in a lot of actionable steps and decisions. But net promoter score data give you data to change something strategically and in long terms in a lot of cases.
All about Net Promoter Score Scale
This NPS score can be calculate as per the user rating, in the answer of the recommendation question. Which could be something like this:
“How likely you would recommend our services to your family or friends?”
Scale will be from 0 – 10, and there is 3 different score in this scale. You can customize the scoring as per your industry or business, but as per the market standard, these are three NPS rating:
If you’re in business in a very competitive industry and working in a very thin margin, then you can consider 0-5 as detractors or something like this. If the industry is already much evolved and you’re new in the industry.
How to calculate NPS as per consumers response (NPS Calculators)
Ok, so you want to see how NPS calculators works in real?
Here is the NPS calculator by surveymonkey, which will give you the calculated result of NPS from your consumer’s response.
I have all my responses on NPS score, how to calculate NPS score?
Is that your question as well? There are a lot of way to have the response for your company on NPS score.
You can use NPS score scale on the feedback form, you can run a survey or many more. But what you’ll do with all the responses to calculate your organisation’s NPS score?
It’s very easy just as other basic mathematical calculations.
What you need to do to calculate NPS score?
- Make an excel sheet or google sheet or whatever you like to use
- Make different columns for each number in score scale
- Now enter the number or responds for that particular number in score scale
- Categorise the scale in 3 groups (Detractors, Passive, Promoters)
- Ideal categorisation as per score is [Detractors (0-6), Passive (7-8), Promoters (9-10)]
- Calculate the group percentage by adding up the no. of responses and divide it by total no. of response
- Now you need to subtract the percentage of detectors by percentage of promotors
That’s your NPS (Net Promotor Score).
If you’re still in confusion or concept is not clear then I’ll suggest you to read one more time. And no worry, we’ll provide you an example here as well to make the concept crystal in your mind.
Calculate your Net Promoter Score with us
Let’s consider you got total 100 response in the NPS scale.
10 responses were in the 0–6 range (Detractors)
20 responses were in the 7–8 range (Passives)
70 responses were in the 9–10 range (Promoters)
Now you need to calculate the percentage of each group. Then you’ll found the result like this.
Now, please complete the final step which is: (% of Promoters- % of Detractors). Result in this case will be 60%. Because NPS always use to show as integer number, not in the percentage. So NPS is simply 60 in this example situation.
Now you know following about Net Promoter Score:
- What is Net Promotor Score (NPS)?
- How NPS (Net Promotor Score) is different from feedback?
- How to calculate the net promotor score?
- How to write and denote the NPS?
Now let’s dive deep into the concept. Till now we were discussing only the very frequently searched things. But, if you’re a Growth hacker and wanna learn the real concept about NPS, then I’ll recommend you to keep reading. You’ll love to know more about net promoter score.
History of Net Promoter Score
NPS scoring method and term ‘Net Promotor Score’ was coined very first in 2003 in an article of Harvard Business Review, written by Fred Reichheld. He is a very well-known influential consultant in consumer loyalty industry.
He wanted to know the answer of a questions, which was
“How to measure the customer loyalty?”
He interviewed tens of thousands of individuals to understand the real consumer behaviour in terms of loyalty.
During the experiment he asked many different questions to the consumer, performed many different tasks and at the end he discover the NPS (Net Promotor Scoring) as the best solution according to him.
Why use Net Promotor Score
Whichever company or organisation is using this scoring method, they have some solid reason, that’s why they are willing to invest some resource and budget to roll out the NPS system.
According to us, the very first reason is:
It is related with the Revenue of the Company in Future
We think this is the major reason, which is the most convincing part for any CEO or founders. If your NPS is growing, then your revenue will grow for sure.
Chart below from Bain Consulting will help you to understand this.
A number which is simple to understand and calculate
Net Promoter score is very easy to calculate and easy to understand for anyone. Not only executive, even staffs and non-marketing, product or growth employees can understand in a minute.
For any organisation it is very beneficial, if there is any number which is easy to calculate and directly related to the growth and revenue.
Genroe.com interviewed many CEO and top of the companies on this and here are the top 6 reasons, they enlist “Why organisations use NPS?”
- To drive better result in business
- To drive employee engagement
- To become more customer-centric
- To drive evidence based decision making
- To drive continuous improvement
- Because a number which can be measure can managed
After these all, you should know that what good number in this scale is.
What is a Good Net Promotor Scores
Because this number is directly related with the consumer’s experience, mindset and market. So, there are thousands of variable which can affect the score.
It also can depend heavily on the type of survey, type of sample audience, geographic and demographic condition of the same audience and many more.
Generally any number can be measure or compared on 2 different basis. Externally with competitor and internally with the previous number.
Don’t compare your NPS number with your competitor
Although, many organisations release their NPS score, but they didn’t reveal it that how they select the sample audience, why there is any specific demographic they choose to perform the practice.
So, they are showing the real number but it could be far different from what your study and survey.
Compete with yourself
Best way to measure NPS score is to compare the NPS from your past score. What opportunity and improvements you have been find out last time. Did you work on that? If yes, then what happened, are results according to you?
What was the NPS last time, and compare to that, is the current one satisfactory?
These kind of questions are really helpful, if you’re asking this to yourself. Consider NPS as your self-assessment number and react according to that.
NPS is only number to measure customer loyalty?
Of course No.
There are many alternative measure parameters for net promotor score. Very commonly these two alternative of NPS are using in industry.
Customer Effort Score
This concept also was coined very first in Harvard Business Review in the article titled “Stop trying to delight your customer.” As like NPS, customer effort score is very famous again but like other concepts, these also have many critics.
Like the question of NPS, here the question was:
“How much effort did you personally have to put forth to handle your request?”
Responses: 1 (very low effort) to 5 (very high effort)
In research it is found that, this number is also co-related with the future revenue.
There is some recent changes in scaling and question for CES.
“To what extent to you agree or disagree with the following statement: The company made it easy to handle my issue.”
Responses: 1: (Strongly Disagree) to 7 (Strongly Agree)
We’ll discuss more in detail about customer effort score in a separate article. Another alternative of net promoter score is:
Customer Satisfaction or CSAT
I think it is the most ancient method to measure the customer loyalty. In this method there is a question, which is:
“How satisfied were you with the company’s performance, on a scale of 1 to 5? 1 is not satisfied at all and 5 is very satisfied.”
This seems the easiest method to measure the customer satisfaction and loyalty, but in actual very satisfied customers did not behave or answer differently in comparison of the dis-satisfied customer.
So, now you have an idea about customer loyalty number, program and measuring scale. In next article, we’ll discuss about other measuring method “Customer Effort Score” and their implementation.
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