October 7th 2019
5 Minute Read
It’s been around since 2003, and frequently comes up whenever people talk about customer satisfaction and customer loyalty. But if you’ve never used it, you may well wonder, ‘What is NPS?’.
Net Promoter Score® (NPS) is a customer loyalty and satisfaction rating developed by Fred Reichheld, Bain & Company and Satmetrix. NPS was designed to help companies measure general customer satisfaction and predict their fortunes over 3 years.
NPS was created as a relational survey, designed to be sent to a business’ full database over 90 days. Now, it’s more widely mis-used as a transactional survey, sent to customers after interactions and purchases.
How does NPS work?
It all begins with a single question:
“On a scale of 0-10, how likely would you be to recommend our company/product/service to a friend or colleague?”
The customer then answers the question by choosing a score between 0-10, with ten being the best.
In its original design, NPS surveys are sent to 1/90th of a business’ database, every day for 90 days. Then, after 90 days, the business would have their Net Promoter Score®, made up from all the responses.
Anyone who responded with a score from 0-6 is classed as a Detractor, 7-8 is classed as Passive and 9-10 is classed as a Promoter.
But what exactly are these detractors, passives and promoters?
What’s a detractor?
Detractors (0-6) are unhappy customers who are unlikely to return to your business. But it gets worse. Detractors are also your biggest risk of damaging online reviews and negative publicity. They’re the people who discourage others from buying from you.
However, this is a problem. A customer who chooses 0 and a customer that chooses 6 had wildly different experiences. The 0 had a dreadful time and is likely to tell the world about their poor experience. Whereas the 6 might have had an ok time who might end up coming back.
What’s a passive?
Passives (7-8) are satisfied customers who may or may not do business with you again. Their scores aren’t necessarily bad, but they’ll be more easily enticed by competitors. In other words, you may need to give them a reason to buy from you again.
Again, this is another problem. The difference between a 6 and 7, or an 8 or 9 is very subjective, but NPS is segmenting them completely and treating it as gospel.
What’s a promoter?
Promoters are your most loyal customers. The ones who will regularly do business with you and recommend you to friends and family. Therefore, make sure to include these customers in your marketing campaigns and loyalty clubs for best results.
Yet another problem! A 10 is a perfect score and suggests that nothing could be improved, whereas a 9 suggests there is a “but”.
“The service was fantastic BUT parking was tight”.
“The hotel room was great BUT the bathroom was a bit cold”.
Your true customer advocates should be telling the world that you are perfect, and there were no drawbacks at all. Grouping these two customers together can be damaging for modern businesses.
How is NPS calculated?
Begin calculating your Net Promoter Score® by working out the percentage of your customers who are detractors, passives and promoters. Then, subtract the percentage of detractors from the percentage of promoters and voila.
Your score should be anywhere within -100 to 100. The higher the better.
Here’s an example:
11 people visited a business and each person gave a different score. That means there were 7 detractors (64%), 2 passives (18%) and 2 promoters (18%), giving the business an NPS of -46. Kind of confusing, right?
Are there any problems with NPS?
Despite many businesses using NPS, there are four problems that are always present.
1 – Passives are ignored
As Bruce Temkin’s research found: over half of passive customers will buy from a business again. These customers are valuable and provide you with the opportunity to transform them into promoters. However, NPS ideology largely ignores these customers. And very few businesses who use NPS focus on getting more passive customers.
Why? Because the dream is to have as many brand advocates as possible (even though NPS doesn’t show you them). However, having lots of passive customers means you have lots of customers who are more likely to buy from you again than not. In truth, it’s clearly a poor way of segmenting your customers. But as “passives” aren’t disregard, they definitely shouldn’t be disregarded. Instead, they could be a group of customers with potential for more sales. But it’s not to be. Heck… passive customers don’t even get a fair representation in the NPS calculation!
For instance, if 99% of your customers score you 8/10, but 1% score you 6 or less, you’ll have a negative NPS score. That hardly seems fair considering it could be the toss of a coin between a customer scoring you 8 or 9. Which brings us onto the next problem…
2 – Scale interpretation
Interpretation is a problem that affects all types of numerical scores.
Here’s an example. One customer may score a business 8/10 thinking it was great. They will definitely return and recommend others. But not according to NPS. This is because the Net Promoter Score® only treats them as passive customers. This causes you to underestimate your performance and write off the hope of any future referrals. Or worse.
The problems aren’t just at the top of the scale though. By grouping together customers who score you 0/10 and 6/10, you will cause your business huge problems. Sure, all detractors require some customer service intervention to earn another chance. But to do this effectively, you need to first understand the size of the task.
A 6/10 score may indicate that you need to work on one or two things to win a customer back. Whereas, 0/10 emphasises that there are major problems that need an immediate resolution and apology.
Not only will this misinterpretation affect your customer relationships, it will cause lasting damage to your online reputation. Customers who score you 0-2 are the most immediate danger to your business. They need an immediate apology and resolution of their issues to stop them writing a bad review. Then you can contact your remaining detractors. By focusing your immediate attention on every detractor, you leave your business vulnerable.
3 – Answer score distribution
This is a problem faced by businesses who only use the Net Promoter Score® to measure performance. If this business’ score is -25, they will base progress on their score increasing. The distribution is completely ignored.
Don’t make this mistake. The score distribution is hugely important, as you will see in the below three examples:
These distributions show that the business has performed very differently in each season. But how would they know this from their Net Promoter Score®? They wouldn’t.
Spring’s score distribution shows that lots of customers have big problems. Whereas Q2 and Q3 show the need for small improvements for a better NPS and, hopefully, happier customers. We say hopefully because you can’t be certain with NPS. And that brings us onto the last problem…
4 – The question
The biggest problem with NPS is that the question doesn’t actually ask the customer how they feel! Instead, it’s very interpretive.
Some customers might love your business without wanting to recommend you. Your business could be personal to them (such as medical care) or so niche that it wouldn’t be useful for their friends or colleagues.
Meanwhile, some customers might recommend you to someone else, even though it’s not their cup of tea. With the NPS question, you wouldn’t know if they’d do business with you again or not. Nor would you know how they feel. And that’s the main reason we created the Customer Happiness Score®.
Are there other options to NPS?
So what is NPS, and should you be using it?
Overall, NPS is a well-known score for measuring customer satisfaction. But customer satisfaction isn’t good enough anymore. And nor is NPS.