The Ultimate Guide to
Net Promoter Score
“The ultimate survey question.”
“The only question you need.”
A ton of marketing dollars and hype surrounds the Net Promoter Score question. It’s a question that’s been heralded as the gold standard for customer experience for more than a decade — and for good reason. It’s a simple way to check the pulse of your business’ growth and customer loyalty.
Maybe you’re asking: what exactly is an NPS score, why is it the gold standard, and how do I find mine?
All will be explained shortly — young customer loyalty Padawan.
Net Promoter Score was first introduced by Fredrick Reichheld in the Harvard Business Review in 2002. You can read his entire article here, but the gist is he got the idea from a presentation done by Enterprise, the car rental company.
They explained how they received exponential market growth by sending out and
This was back in the day when surveys were dozens of questions, intimidating to participants and frequently incomplete. Enterprise's approach was
The other major difference is how they analyzed the data. Enterprise only paid attention to customers who gave the highest possible rating. The reasoning behind this was to concentrate all efforts on key customers: those who not only make repeat purchases but those who are most likely to recommend Enterprise to others.
Reichheld wanted to know if other industries could benefit from finding loyal customers and if they also correlated with business growth. He also wanted to know if he could further simplify this survey down to a single question.
He worked with a research firm, Satmetrix Systems, for over two years to conduct surveys about major brands and compare the results against the respondent's actual spending habits. They compared multiple
Reichheld would subtract the percentage of detractors from the promoters to find how many people were promoting the company and how that related to known growth data. The results were accurate across most industries.
His report sent shockwaves through the industry. Suddenly, having a great product and great customer service wasn't the focus for these companies, instead, it became about fostering customer loyalty.
He noted this doesn't work for all industries. Loyalty doesn't always mean growth for the computer software industry, banking institutions and companies who can be considered monopolies. People can hate these companies and, due to outside circumstances, they can still be profitable. (Like the loathed Comcast)
To make an NPS survey just ask the question, "How likely are you to recommend [our company] to a friend or colleague?" Ask customers to rate their likeliness from 0 to 10. 0 being not likely at all and 10 being extremely likely.
Let the responses roll in.
Customers who rate between 1-6 are detractors, 7-8 are passive and 9-10 are promotors.
When creating the Net Promotor Score, Reichheld wanted the mathematical formula to be easily understandable.
All you have to do is subtract the percentage of detractors from the number of promoters. This means if you end up with a negative score and you did the calculations right — your business might be in trouble.
Detractors are categorized by anyone who rated their "likeliness to recommend" in the 0-6 range. Promoters rated 9-10 and neutrals rated 7-8.
Let’s say for example you have 4,300 responses to an NPS survey. You’ve figured out 1,100 are detractors and 2,450 are promoters. Find the percentage of detractors (25.58%) and promoters (56.97%).
Then subtract 56.97 - 25.58 and you have 31.39.
So hey, if your score is 31.39, congratulations! You have a good promoter score and your business is growing!
Net Promotor Score changed the surveying landscape. Before NPS, customer surveys were long, boring and hard to gather valuable data from (although some businesses still insist, or simply don't care, about having long, boring surveys).
NPS gives busy businesses and teams an easily obtainable goal to shoot for. When the customer loyalty goes up, the company will also grow. Sure there is a lot more nuance to the health and profitability of a business than a simple number meaning good or bad, but distilling down the essence of a successful business takes times and work. For a lot of companies, these resources can be better spent elsewhere.
While NPS isn’t a direct measurement of growth, it’s a great way to see how many of your customers are loyal. You may be able to see how often customers make purchases by using smart POS systems or other forms of tracking, but these frequent buyers could be repeat customers and not loyal customers.
Repeat customers may frequent your business out of necessity or value. Say you’re the only pizza place within five minutes of an un-loyal customer’s house. If competition opens up closer to the customer, that customer will probably leave. However, if the customer had wonderful experiences at your pizza shop – great enough to tell their friends and colleagues — they presumably wouldn’t leave.
Loyal customers will spend over 10 times more over their lifetime than regular customers and they account for 84% of total visits. It’s not only steady business, it’s more business.
More importantly, these are customers who say they will promote your business to other people. Even if they don’t find a need for your services anymore, they will still continue referring people to you.
For example, a customer may have a loyalty to Toyota, but moves to a higher income bracket and starts buying more luxury cars. They won't buy from Toyota anymore, but they'll recommend them to a niece or nephew.
As with anything massive enough to shake up an industry, there is a lot of criticism against Net Promotor Score. Here are a few common complaints about the survey industry’s leading question.
It fails to predict customer behavior.
Just because someone says they will tell their friends and family about your service or product, doesn't mean they actually will.
Someone who leaves a rating of 10 may not actually evangelize to anyone else. The same goes for your detractors.
Personally, I've bought a few products off of Amazon that I found "life changing." I would give some of them a great review, but I just have so many other things I want to do in life and not enough time.
It fails to provide actionable data.
NPS is a great thermometer for finding out the health of a business but, just like a real thermometer, it doesn't do much more than that. For example, the conference room at SurveyMe’s office is 82 degrees, but is it because someone (Amber most likely) turned off the air conditioner or because the sun is poking through the windows?
This is easy to discover if you're in the room where the problem is occurring. However, if you're judging your business’ health off of a number from a survey, you need to obtain more information to get the whole picture and make your survey results actionable.
Luckily there's an easy way to solve this. The best way to follow up an NPS survey question is with an open-ended question asking the participant why they rated the way they did. Try using the question, “What’s one thing we can do to improve our business?”
Despite these criticisms, it's hard to deny the power and the simplicity of the Net Promotor Score question.
Try as marketing research teams might, there still isn’t a single question as powerful as NPS quite yet. Anytime one of your clients doesn’t know what questions to ask on their survey we direct them to the NPS survey question as a start.
There's no better way to get a quick read on your business' health than an NPS question.
A Net Promoter Score question is a great first step in creating an effective survey, for more tips download our ebook, "How to Create an Effective Survey."