Much has been written about NPS (Net Promoter Score) calculation. It is rather hard to bring something new in these stories but I will still try. While reading loads of materials on NPS I understood that the key points we need to know to apply NPS in practice are still difficult to find.
So what is NPS?
NPS definitions which can be found on Internet are generic and obscure, so let me put it this way: if you want to know how much your customers love you, calculate NPS! This is the main thing, you hardly need memorized definitions like “the method to define customer loyalty…” and so on.
How to measure NPS?
It seems as easy as ABC. Following this method you ask your customers a question:”How ready are you to recommend our company to your friends?” Depending on the answer you divide the audience into three groups:
- “critics” – people who will never, not for the world, recommend you to their friends. They may reduce your NPS, but they play an important role in measuring it, later I will explain why;
- “neutrals” – the customers who are either “occasional” for you or just neutral about your brand;
- “promoters” – the customers who will gladly recommend you to their friends, which means they will provide you with a steady flow of new customers.
So, let us assume that you’ve obtained these indicators. What is next? Next we calculate NPS according to the formula: (number of promoters – number of critics) x100%=NPS.
Measuring NPS: pitfalls and nuances
While making a survey you should take into consideration some nuances. You should not forget that the survey must last long enough to receive representative results. As practice shows, as long as the number of interviewed customers is under 20%, the results may be deceptive.
If you run a survey via e-mail newsletters, the level of answers should be not less than 30-40%. Besides, the fact that makes me doubt is that, as a matter of principle, your letters are opened by more or less loyal customers, which means that you risk underestimating the number of “critics”. What can be done about this? Perhaps, I would advice you to add other channels than e-mail newsletters.
It is best to fix the respondents’ answers on the paper or electronically so that you could study each of them thoroughly. Even better would be if respondents gave you their contact details so that you could obtain more detailed answers if you are interested.
How you can collect the answers:
- if you are a café, for example, you most probably have a wi-fi page, make a survey there;
- you can use your subscriber base and address to them by e-mail;
- you can place a survey form on your website;
- you can collect the answers offline if offline contacts with customers is a frequent phenomenon at your company.
Anyway, use all the possibilities to get the most precise picture.
We have calculated NPS. What does it mean and what to do with it?
This is where problems arise. You can find the information how to calculate NPS anywhere, but you will never (meaning almost never and nowhere) find out how to interpret the results and what to pay attention to. But this is what the blog is for – to give you such important information.
So, when interpreting the information, the obtained figure is not the most essential indicator. Feedback from your “critics” is what means a lot. Thanks to their opinion you can improve your service and increase your customer loyalty, on its base you can make necessary changes, find weaknesses of your company. In a nutshell, they give you directions and you understand where to move to become really customer-oriented. Don’t neglect analyzing your critics’ questionnaires, and if you have their contact details, contact them to obtain as much information as you can! If you manage to turn “critics” into “promoters”, they will become real defenders of your brand and the most loyal customers.
What level of NPS should you strive for?
It would seem that nothing can be more precise than figures, but considering NPS you understand that figures are ve-e-ery relative. Let’s assume that you found the NPS of your company to be 53%, but whether it is good or bad you don’t know. Let’s try some examples. The companies with the highest NPS in America* have the level of 70-85%. For example, NPS of amazon.com and Apple equals 70% and 72% respectively; and a bank branch of financial company USAA has NPS of as much as 87%. I found an interesting statistics on the average NPS across the niche and the NPS level of a leader.
Of course, 70-85% is a very high NPS, but as we see everything still depends on the niche. However, this doesn’t mean that you shouldn’t strive for catching up with the companies which have gained the highest possible level of customer loyalty.
Regularity is also very important in NPS measuring. By tracking this indicator trend you can estimate the quality of your work on loyalty and whether your efforts are justified or not. It is still hard to say what periodicity should be, it depends on the field you work in, on frequency of your interaction with your buyers, as people tend to visit cafes more often that buy sofas, don’t they?