Net Promoter Score (NPS)
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Net Promoter Score =
Proportion of Detractor Scores - Proportion of Promoter Scores
What is a Net Promoter Score?
Net Promoter Score or NPS® is a measure of a customer base’s willingness to promote a product or service to colleagues and friends. It is based on the results of a current customer survey, which asks respondents to answer the following question: (on a scale of 1-10) “how likely is it that you would recommend (brand or product X) to a friend or colleague?” (10 being ‘extremely likely’ and 1 being ‘not likely at all’)? Responses are grouped as follows: 10s and 9s are brand ‘Promoters,’ 8s and 7s are ‘Neutrals’, and any responses below 7 are brand ‘Detractors.’
NPS has grown to be an incredibly popular metric among marketing and customer support departments, valued for its simplicity and for its focus on customer satisfaction and loyalty as the prime measures of organizational performance. NPS can be an especially important metric to organizations focused on growth through account expansion or referrals - the “Viral Engine of Growth” in Eric Ries’ terms.
Net Promoter Score Example
- Detractors: 6 (4.8%)
- Neutrals: 64 (51.2%)
- Promoters: 55 (44%)
- Total: 125 (100%)
Net Promoter Score = 44% - 4.8% = 39.2
Here are two samples of NPS Klips we’re experimenting with at Klipfolio (A ‘Klip’ is our term for a visualization that places data in context and delivers business insights):
Net Promoter Score Benchmarks
There are many online resources to provide your company with an NPS benchmark. Net Promoter Network provides the following list of Average NPS by Industry:
- Department & Specialty Stores: 58
- Brokerage & Investments: 45
- Table Computers: 44
- Smartphones: 40
- Software & Apps: 19
- Health Insurance: 12
- Cable/ Satellite TV Service: 3
- Internet Service: -3
When it comes to NPS, clearly, the higher the number, the better, but there are no definitive benchmarks for SaaS companies. Here’s some expert advice and rules of thumb:
- According to surveys completed in 2015, the average NPS for software companies of all sizes is 23.
- Surveys completed by software companies range from 91 to 1, with a lot of companies reporting net promoter scores between 20 and 40.
- The average NPS of all Survey Monkey clients who use NPS is 31, according to their NPS Benchmark Report.
Not listed? Not a problem! Search the Net Promoter Score benchmark for your company, tag, or industry on NPS Benchmarks.
Net Promoter Score Challenges
Absent a plan to monitor and act on information obtained through net promoter scoring, NPS is useless, and you’ve disrupted your customer base for no good reason.
Developing, executing, and extracting value from NPS surveys is not without its challenges. These can include:
- Distributing the survey to a large customer base without annoying them;
- Getting a high enough response rate to make the results matter;
- Getting an NPS reading in real-time so you can act to improve your business in real-time.
These challenges are heightened by the fact that most NPS reporting is periodic and ad hoc, with little foresight to what will be done with the results. Therefore, the “result” is a vanity metric of little use. For more on the NPS vanity trap, see Beyond Vanity Metrics: NPS and Customer Referral Rate.
Net Promoter Score Best Practices
Net promoter scoring should start by answering two related questions: (1) why are we asking? and (2) what will we do with this information? Most organizations will use an initial NPS survey as a benchmark and track subsequent NPS surveys to measure ebbs and flows in customer sentiment over time. Having clear visibility into changes in NPS over time enables action when customer satisfaction/loyalty drops significantly. A climbing NPS score is an indication that customer experiences are improving, so you should keep doing what you’re doing.
Perhaps the best insights and the most powerful benefits of net promoter scoring come when you combine NPS with related KPIs such as Customer Retention Rate and Customer Referral Rate. If NPS has been falling for the past two quarters, you should expect to see a climb in customer churn and a reduction in account expansions and referrals. On the other hand, as NPS climbs, you would expect to see rising customer referral, retention, and expansion rates. Measuring the relationships between these metrics can help optimize performance over time.
How to Monitor Net Promoter Score in Real-time
Once you have established benchmarks and targets for measuring Net Promoter Score, you’ll want to establish processes for monitoring this and other marketing KPIs. Dashboards can be critical in this regard.
Learn more about how to track your Net Promoter Score on a Digital Marketing Dashboard.
Net Promoter Score: Top Resources
The Smart Marketer’s Guide to Net Promoter Score (NPS), Iona Lupec
Net Promoter Score(NPS)-a balanced view, Customer Champions
Why NPS is a growth-focused KPI, Christian Reni
To gain deeper insights into your overall marketing performance, be sure to explore our comprehensive guide on vital digital marketing metrics that complement your Net Promoter Score (NPS) analysis and drive informed decision-making.
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