Understanding NPS, How It Works & Whether it’s a Measurement that Makes Sense
1 year ago Hutch Morzaria 0
Improving customer experience is one sure-fire way of expanding your business and establishing a credible brand name for yourself. After all, who doesn’t want their brand to be known for a great customer experience?! Great customer experience is essentially the key to a successful business. So why not use tools to help you improve your customer experience? There’s an abundance of tools available both online and offline that are designed to help you achieve the ideal you’ve envisioned for your clients. However, few can boast the power and usefulness that the NPS can provide you with.
So, What Is This “NPS”?
NPS stands for Net Promoter Score and it was developed by Fred Reichheld. It helps to create a clear and understandable customer satisfaction score which can then be used as a comparison between various businesses over even a single business across an extended period of time. This is done through surveys (we’ll get to that in a bit), and sometimes questionnaires, which are directly given to consumers so that accurate data can be collected. Of course, you’re probably wondering where this happens.
Well, think about any random time you ever got a pop up on your screen while you were visiting a website. Often times you will get questions like “would you recommend this product (or service)
The NPS question given to the customer will generally include an 11 point scale from 0 to 10. Think of it as a rating with 0 meaning that you are not likely to recommend it at all to 10 meaning that you are extremely likely to.
According to the NPS guidelines, consumers can be broken down into three categories:
Category #1: Promoters
These are the people who will be giving your recommendation question a 9 or a 10. We call them promoters because they are very likely to spread the word about your product.
Category #2: Passives
Next up are the “passives”. These are the people who will give a score between 7 and 8. These are the most vulnerable of your clientele. Why?
Category #3: Detractors
In order to calculate your Net Promoter Score, you subtract the percentage of detractors from the promoters. The NPS is not expressed in terms of percentage. It needs to be an absolute number between -100 and +100. Generally, a positive NPS is considered good for businesses. In fact, many businesses aim to make sure that their NPS does not fall to zero or negative as zero shows that your business is stagnant while a negative NPS will show that your business’s customer experience is bad and that there are more detractors than promoters. This will, in turn, lead to a series of losses for you, so it is vital to make sure that your NPS is always positive.
By using this data, you can begin to plan a business strategy that improves your NPS.
Why Is It Important?
The biggest advantage of NPS is that it is able to provide a simple, yet holistic, understanding of your customer experience. This coupled with the fact that your customers are the ones directly answering questions without any filter, provides you with accurate data.
Does It Make Sense?
While it might initially take some time to wrap your head around it, once you get it you’ll realize the NPS is actually really easy to use and understand. While other tools can be very complicated, the NPS is simple, and its effectiveness lies in its simplicity.