Leveraging Net Promoter Score^SM in Your Business

In the prior posts covering our latest whitepaper, "Leveraging Net Promoter Score in Your Business", we have covered the history of customer loyalty surveys, how the industry came to use NPS, and what NPS is. Now it is time to calculate it!

To start, we need some data. The data we need is collected through surveys, usually via email using the question (slightly updated from Reichheld's original version) "How likely is it that you would recommend Your Company/Brand to a friend or family member?"

The people who fill out the survey are called respondents. When asked this question, respondents are presented with a scale of options from which to choose. Scales can vary, but the traditional one is a numeric scale ranging from 0 to 10 with 0 being "Very Unlikely to Recommend" and 10 being "Very Likely to Recommend." Pictured below are three example scales: 11 numbers, 5 phrases, 3 emojis.

Now for some more definitions:

Detractors

On the traditional 0 to 10 scale, people who choose a number from 0 to 6 are called "detractors." Reichheld calls this group detractors, because he found they typically represent over 80% of the negative word-of-mouth comments that push potential new customers away and demoralize employees. Detractors are customers who likely had a bad experience with your business. They generally have negative feelings and would not put their reputation on the line to recommend you.

Passives

Those who indicate they are only likely to recommend you by selecting a 7 or 8 are considered "passives." They have fairly neutral feelings toward your business and might be repeat customers, but no guarantees. These customers are more likely to drift toward competitors when presented with better offers.

Promoters

Here is the fun part – people who select a number 9 or 10 are your "promoters." These are your super fans who love your brand and are likely to be your repeat buyers. They will give you glowing reviews and testimonials. According to Reichheld's research, these customers have the highest rate of repeat purchases and represent over 80% of referrals. Keep them happy and they will remain loyal, and will tell others about your business, creating a cycle of growing, loyal, repeat customers!

Formula to Calculate Net Promoter Score

Net Promoter Score is calculated using the below formula:

NPS = %Promoters - %Detractors x 100

The results will be a whole number from -100 to +100.

Let's look at an example and calculate NPS. Here we can see the promoters, passives, and detractors.

Notice that Passives are included in the NPS calculation only as part of the total number of respondents. These customers are on the fence relative to how they feel about your business, and you should take them into account because they could be turned into promoters (or detractors)!

Interpreting NPS

NPS ranges from -100 to +100. Your objective is to improve your NPS over time. The key to achieving improvements to your NPS is to measure it regularly and compare how your business is performing over time. Customer needs and wants are always changing, so you need to change with them to maintain their loyalty.

It is important to recognize that your goal is not a perfect 100, but rather continuous improvement. Japanese culture has a word for this, which is Kaizen. Kaizen is the philosophy and practice of making small incremental improvements, in both life and business, that result in major changes over time.

When applied to business, your goal is to collect feedback that affords you the opportunity to make small changes that improve your business, and hence improve your NPS. When these small improvements are made continually, your business and brand are boosted in a significant way.

Other considerations to calculating NPS

Collection method – NPS surveys are typically sent via email to past customers. You can also include it as a pop-up on your website, or via a dashboard notification if that applies to your business. You can use a survey service to send out email and text (SMS) surveys automatically based on set parameters.

Scale selection – We covered the 0 to 10 scale, but there are many options. Other common scales include a 5-phrase scale which does not use numbers but phrases ranging from "Very Unlikely" to "Very Likely." The fewer options are convenient for the respondent, but there is only one Promoter choice - which means those few respondents who never give a "top box" score will appear as Passive. There is also a 3 emoji, which displays three emoji style options representing Unhappy/Detractors, Neutral/Passives, and Happy/Promoters. This scale is easy on the customer but does not provide a depth of information. The general rule of thumb about scale selection is to pick one and stick with it. This ensures historical comparisons of your NPS are valid.

How often to measure – Best practices say to survey the customer regularly throughout their journey with your business, at the appropriate customer interactions (aka "touch points") and using a method that prevents the same person from receiving the survey too often. How often is only a question you can answer for your business. For some businesses, it might be right to ask the same customer every single time they make a purchase, whereas others might feel it appropriate to ask the same customer for feedback every 90 days when ordering regularly.

Collecting written feedback after "the question" – Regardless of how the respondent answered the NPS question, it is critical to ask why they answered the way they did. Allowing respondents to share their comments openly and freely, is crucial to your understanding. Comments from Passives and Detractors help you understand what went wrong so that you can remedy the situation. For Promoters, gathering positive comments which can serve as testimonials can be used to help attract potential customers in the future.

Tune in next month for the next section from our latest whitepaper "Leveraging Net Promoter Score in Your Business".