NPS stands for Net Promoter Score (or Net Promoter System) which is a proven way of measuring customer loyalty. (It's also called eNPS when used for employee engagement.)
NPS measures the loyalty of customers to a company or product. The score is reported on a scale of -100 to +100 (with a higher score showing more loyal customers).
It's often referred to as the gold-standard metric for customer experience and has become a popular worldwide standard used by millions of organisations because it is simple, effective and based on actual customer feedback.
It has also been clearly shown to correlate to the success of a business and its revenue growth.
The teams that use NPS are often marketing, product management, sales, and customer service. Most companies who use Net Promoter Score include it as a metric at board-level (along with other performance and financial metrics).
The Net Promoter System was developed in 2002 by Fred Reichheld who was working at Bain & Company and needed a way of measuring customer experience that could help predict customer loyalty and therefore business growth.
Fred Reichheld's research showed that it was possible to correlate customer behaviour with survey questions and he narrowed this to a conclusion that by asking one simple but carefully worded question, he could evaluate customer loyalty.
The question asks a customer:
"How likely are you to recommend [company-x] to a friend or colleague?"
This one simple question has since been used as the basis of NPS surveys by millions of companies around the world.
The theory is that if a customer is willing to recommend your company to a friend or colleague, they are loyal to your company (or product) and will both act as an ambassador for your business to help promote you company and stay as a loyal customer. However, if a customer is not happy to recommend your company, then they are having a poor customer experience and are likely to leave you as a customer.
NPS helps you clearly identify both types of customer and with more sophisticated tools can show you what is driving this behaviour so you can fix problems, increase customer satisfaction, and improve your business.h3>How does it work?
There are many different flavours of NPS, but the original methodology works like this:
Here's an example of how a survey conversation with a customer would work:
This customer scored 9 so is a promoter and is likely to remain loyal to SightMill and is very likely to recommend the software to their colleagues.
They specifically called out the support during onboarding, which was obviously important to this customer.
The two NPS questions can be delivered to your customers via an email, via a form on your website, at an event, even whilst on a telephone call.
Specialist NPS software is useful to help manage the delivery of the surveys, collect the responses, calculate the score and, most importantly, help analyse the trends and show any correlation between the score and the themes in the free text comments or particular groups of customers.
For example, if you have three products (bronze, silver, gold) and you can segment your NPS trends so you see that customers who have the gold product are mostly promoters, those who buy silver are improving their score but those who buy bronze are mostly detractors, then it's clear where to focus your attention.
Alternatively, you might see the theme of pricing come through as a reason behind many of your detractors, whereas your promoters might mention customer service as a reason they would recommend your product.
Using the Net Promoter Score methodology, you group respondents according to their score. It's also clear what each group thinks about your company or product and what the implications are for your business.
This group has had problems and a poor customer experience. They are often very vocal in complaining and will try and dissuade others from using your company or product. This is often the loudest group.
This group has a few issues, but overall like the company or product and it does the job. They might recommend it in passing if asked, but are unlikely to be particularly vocal either to dissuade or persuade any potential customers.
This group really loves your company or product and it has helped them. They'll proactively recommend it and back it.
You should react quickly to any problems and criticism from Detractors, and feed back to them that you have listened and acted on their comments. If this works well, you can often turn a detractor into a promoter who has been wowed by your customer service.
You should look how to improve the experience of those in the Passive group and move them up to being promoters.
And it's a great gesture to thank the Promoters for their support.
Although originally used to track the NPS for your organisation, you can use the NPS scoring system to measure almost anything including individual products, price points, different customer segments, different elements in a product (for example, different web pages or designs), the performance of people in your team (for example, to track the satisfaction of the customers of your sales team or customer service team members).
Measuring and tracking your organisation's Net Promoter Score is a great start, but on its own it doesn't give you the detail to understand or act on anything.
For example, if you score has moved from +35 to +20, you now know that your customers are having a decreasing customer experience but you don't know why or what to do to reverse this.
It's important to understand what is driving the score and the different themes that are mentioned by your customers in their answers to the follow-up free text question.
In addition to these themes that come straight from your customers, you should also look at how the scores relate to different groups or segments of your customers, the individual products they use, features they might buy, team members who manage the relationship, pricing they pay, or region.
By combining these, you will see a clearer picture of why the score is changing and be able to pin-point what to work on to improve customer satisfaction and the overall experience.
For example, if you know your score has moved from +35 to +20 and you can also see that many of the themes from the detractors who provide free text feedback negatively mentions support, this will help you identify what to look at. If you can also then see that the main detractor group who mention support are located in a particular region and buy one particular product, then you have a really clear picture of what to change without impacting other parts of the organisation that are working well.
If you use NPS software that allows you to analyse and tag the themes behind customer free text comments, and view trends by segment, by product, region, manager, or price point, then you will be find it easier to clearly identify and act to improve the right part of your organisation.
The original correlation behind the development of Net Promoter Score was between customer loyalty and business growth. If you can improve your customer loyalty, you will improve your overall performance and, often, your business growth.
The most obvious outcome is that you can reduce customer loss (attrition) by improving the customer experience and loyalty. And it's always better business to retain a customer than to acquire a new customer.
There are millions of organisations around the world that use NPS, ranging from small startups, global multinational companies, to universities, schools, and government departments.
Many of the best-known, and best-loved businesses have got this high level of customer loyalty by focussing on customer satisfaction through tracking NPS. These include two-thirds of the Fortune 1000 companies, and businesses such as Charles Schwab, TEDx, Slack, Zappos, Rackspace, Tuft&Needle, Amazon.