Net Promoter Score (NPS): Things You Need to Know

What is an NPS?

Businesses are facing severe competition today and the prize up for grabs is the customer’s attention. To promote the products and services of your business, you have to vie for the consumer’s attention at all times. If you are not efficient enough to do so, someone else will just swoop in and get the consumer’s attention and in turn, their business from you. Naturally, the question that begs itself here is how will you know if the customer is attracted to your offerings? How will you know what you are doing is enough?

Many indicators are being currently used by businesses across the globe to get the answers to these questions. These marketing indicators constantly monitor the performance of your various marketing plans and how effective these plans are to attract consumers and help grow your business. Various complex marketing analytics tools can capture the various intricacies of customer engagement and provide you critical insights into how customers are engaging with the various touchpoints you have established for your business.

In this article, we will focus our discussions on an analytical parameter - Net Promoter Score or NPS. It is one of the simplest parameters used in finding out how engaged your customers are.

To begin with, let us understand what is NPS and what is NPS score meaning. Your customers or even your target consumers can be broadly classified into mainly 3 types:

  • Those who are loyal to your brand. These customers will not only buy your products but will actively recommend you to other people they know. Your business obtains valuable word of mouth marketing from these consumers. These customers are known as Promoters.
  • Those who have a neutral outlook on your brand. These customers buy your products but may not willingly promote your products to other people. Your business will neither derive any marketing benefit nor any negativity from these consumers. These customers are known as Passives.
  • Those who bear a negative feeling towards your brand. These customers are not only unhappy with your products or services, but they will also actively dissuade other people from buying your products. These customers are harmful to your business since they will have a damaging effect on your brand through negative word of mouth marketing. These customers are known as Detractors.

Net Promoter Score, as the name suggests, is a parameter that is derived by finding the numerical difference between the promoters and detractors that your brand possesses at a given point in time.

Importance of the Net Promoter Scorecard

How do you Calculate Net Promoter Score?

To calculate the NPS for your brand, you need to first conduct customer satisfaction surveys. The survey should be around the idea of finding out whether a customer will recommend your products and services to others. Categorize the customers based on their responses, and find out the percentages:

  • Customers assigning a score of 9 or 10 must be categorized as Promoters
  • Customers assigning a score of 7 or 8 must be categorized as Passives
  • Customers assigning a score of 6 or below must be categorized as Detractors

For example, suppose after conducting the survey, you find that your business has 15% Passives, 33% Detractors, and 52% Promoters. This would mean that your NPS score is (52 - 33) = 19.

Your brand’s NPS could be anywhere between -100 and 100 if the survey results are found to have extremely polarized customer feedback. Importance of the Net Promoter Scorecard

NPS is a key metric in understanding how your brand is viewed by the customers. If your brand has a negative or low NPS, then it is time for you to think about revamping your marketing strategies. The major advantage of the NPS metric is that it is very easy to understand. Anyone in your organization will be able to understand what the NPS metric means for the business and they can use this as a reference point to improve the customer experiences at all the possible customer touch-points.

It is important to understand that NPS will only indicate customer perceptivity and will not be able to provide the reason behind it. The NPS needs to be combined with other performance metrics to have a holistic view of the interactions and experiences a customer is facing at the multiple touchpoints in their journey with your brand.

If you are using advanced marketing analytics tools to assess the business performance, NPS can be treated as one of the key input parameters for these tools to get to the outcome.

Analyzing the Potential Drawbacks of Using a Net Promoter Scorecard

Drawbacks of the Net Promoter Scorecard

The NPS figure when used on its own, is only able to offer an indication and not enough analysis on the areas that are required to be improved. Even the scoring process does not take into consideration the finer aspects of customer engagement.

For instance, the score doesn’t shed any light on the percentage of Passive customers. This is important because these Passives can be targeted to enhance their experience with the brand and convert them into promoters. Similarly, broadly classifying all customers scoring your brand between 0 and 6 as Detractors, does not shed enough light on the severeness of the Detractor. So, with the NPS score, you will not be able to distinguish how severely a customer is acting as a detractor. You will not be able to know what activities are required to be performed to say, convince someone with a score of 6 to become a Promoter or someone with a feedback of 0 to a Promoter.

Further, this scoring method does not also take into consideration non-customers who can also act as Promoters or Detractors. However, this issue can be resolved by expanding the engagement survey to a wider target population.

Even though NPS is a key parameter to indicate whether customers are happy with your services and whether they will recommend you to someone else, still there is no sure-way method to find out if these customers have recommended your brand to anyone else.

Hence, you should focus on collecting as much data as possible through the customer engagement surveys and continue to interact with your customers even after the sales are over. This way, keeping the NPS as an overall indicator, you will have sufficient additional and meaningful insights into how the customer engagement programs are working.