NPS: What is Net Promoter Score and how it works

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Net Promoter Score (NPS), developed by Fred Reichheld, is a powerful and versatile metric for gauging customer loyalty. NPS is a customer experience and feedback management method that helps businesses evaluate customer satisfaction and loyalty. It works by asking a single question to customers: How likely is it that you would recommend our product or service to a friend or colleague? Customers then rate the likelihood of their recommendation on a scale of 0 to 10, with 10 being the most likely.

When NPS question is paired with customers’ demographic data, organizations can gain a broader understanding of customer feedback. Based on their responses, customers are grouped into three categories:

1.Promoters: These are customers who rate the product or service 9 or 10 on the NPS scale. Promoters are highly satisfied customers and are likely to repeat purchases as well as recommend the product or service to others.

2.Passives: These are customers who rate the product or service 7 or 8 on the NPS scale. Passives have a generally positive experience but may be more susceptible to competitive offers.

3.Detractors: These are customers who rate the product or service 0 to 6 on the NPS scale. Detractors are unhappy and dissatisfied customers who are unlikely to remain loyal or recommend the product or service to others.

NPS can provide organizations with valuable insights into what their customers think of their products and services. By understanding how the different customer segments view their brand, organizations can identify areas for improvement and focus marketing efforts on the most enthusiastic customers for maximum engagement and loyalty.

NPS should be part of every business’ customer feedback strategy. It can be used to measure customer loyalty, identify weaknesses in customer experience, set improvement goals, track progress over time, and focus marketing efforts on more enthusiastic customers. With NPS, organizations can better understand their customers and focus on improving their engagement and loyalty. Developing an efficient marketing strategy is a task that requires analysis of a company’s audience or its segment.

Today, there are several tools and software that offer complex ways to gather data for these analyzes to be done. But sometimes, the information that must be prioritized can be obtained through methods considered simple. This is the case of the relationship between customer satisfaction and the Net Promoter Score. Therefore, let’s go deeper into this subject, understanding what NPS is and how to use it.

What is the NPS?

The Net Promoter Score is a method created to measure a company’s customer satisfaction level and how good its relationship with them is. The research methodology emerged after the publication of the article “The number you need to grow” in the Harvard Business Review, written by Fred Reichheld, Consultant at Bain & Company. The data generated by the NPS survey is valuable and can build your key performance indicators (KPI) chart. Aiming at medium and long-term results, it is possible to measure the effectiveness of strategies aimed at customer satisfaction. The survey undertaken should contain both quantitative and qualitative questions, with those relating to quality having the most importance. This greater relevance exists because through qualitative responses it becomes possible to identify problems related to the company, in addition to serving as insights to solve them.

How to calculate NPS?

Understanding well how the methodology works is essential for it to be successfully applied in your business. To take the NPS survey, use objective questions first. Check out an example: “On a scale of 0 to 10, how much would you recommend (a brand or product) to a friend or colleague?” After this item, it is important to insert a question that encourages an open comment from the respondent, such as: “Why did you give this grade?”. It is the answers to this type of question that will provide the most valuable information for your business. With the results of the objective questions, respondents will be classified into 3 categories:

  • Promoters: are customers who already like your company, tend to cultivate a relationship with it and can probably recommend it to family, friends and colleagues.
  • Neutral: are customers who are not dissatisfied, however, are not loyal to your company.
  • Detractors: People dissatisfied with your brand, product or service. There is a great chance that they will stop buying or using your services and that can damage your business image. At the end of the test, the results are calculated using the following formula: % of Promoters – % of Detractors. Neutral respondents are not used in the account. So that you understand better, let’s simulate the simple use of this formula. Assuming that 100 people had answered a questionnaire, and the result was 60 promoters, 20 neutrals and 20 detractors, the calculation would happen as follows: 60% – 20%=40 NPS.

    Understanding and evaluating the results

    After applying the methodology and with the data in hand, it is time to measure the results. The score classification follows the parameters listed below.

    Excellent – ​​between 75 and 100

    In this scoring zone are classified the brands that offer excellent experiences for their audience. The perception is completely positive from the products offered to the service. Companies with this score should keep their work to cultivate their relationship with customers. Very good – between 50 and 74 Brands that are in this scoring zone have customers who see several qualities in what is offered, but point out which factors are lacking. Identifying the problems encountered by customers is essential for their correction to be carried out.

    Reasonable – between 0 and 49

    Brands that are in this scoring zone need to review their relationship with their customers. Inefficiency, lack of quality in products and lack of attention in service are errors that affect the perception of your business by customers. Identify the points most criticized by respondents and seek practical solutions as soon as possible.

    Poor – between -100 and -1

    Only brands in a critical situation are in this scoring zone. Consumers are frustrated and may complain, damaging the company’s image. Being in this critical range means that the company must urgently rethink its strategies, as attrition poses the risk of generating brand enemies and decreasing sales.

    How to act on feedback

    Feedback is one of the main reasons for implementing NPS. Cultivating a culture that encourages you and understanding what your audience really thinks is part of the process of evolving your business. To do this, inform your customer about the importance of their response to the company and thank them after completing the questionnaires. It is important to emphasize that for customers to believe that the improvement intentions are true, actions need to be taken according to the responses and also disclosed, so that they know that their suggestion helped to improve their business.

    Learn about the benefits of NPS for your business

    Understanding what your audience thinks of your brand is essential for the next steps of marketing strategies that seek customer loyalty. Using the evaluation method allows you to understand which positive aspects should be maintained and which aspects should be improved. Check out the main advantages of using the Net Promoter Score. Quick to apply, easy to useFrom questionnaire templates, you can easily create options that fit your business context and send them on the same day they are prepared.After finalizing your application, the results will be simple to interpret information that can indicate the best path to follow with your company. Take action quickly

      The simplicity of the method allows to identify failures in a quantitative and qualitative way. Even while the stipulated deadline for application is occurring. Identifying customers with specific problems and helping them to solve them can be a great relationship strategy that offers the possibility of delivering solutions at the same moment that a problem was found.

      Assessment and comparison of the competition

      Using your resources well, you can also acquire data about your competition and understand what your customers are thinking about them. Contrary to what some people think, comparison metrics are not vanity metrics. From them it is possible to identify weaknesses, strengths and opportunities that your business has the potential to take advantage of.

      Does the Net Promoter Score help you sell more?

      The insights collected through the NPS may contain strategic information for your sales sector. Through the data collected, it is possible to know the true perception that your customers have about your brand. This could be the missing touch to develop more efficient campaigns and sell more. With the public profile traced, your team will have arguments and resources to close negotiations much more efficiently.

      Frequently asked questions about NPS

      This methodology is new to many entrepreneurs. Therefore, doubts arise when considering its use and in its implementation stage. Check out answers to some of the most common questions related to Net Promoter Score. Does my company profile allow the test to be carried out? For sure. All types of companies can implement the methodology to measure satisfaction. Companies can even carry out internal tests to identify dissatisfaction among their employees and make their organizational environment better.

      When is the best time to implement?

      The best time to start is now, but don’t be in a hurry. Your first few surveys don’t have to be big or done directly with your customers. Test the NPS internally, understand how the process works and improve your questions, so you will feel safe when you arrive now to conduct the survey with your customers and they will realize the preparation behind your work. How many people should I interview?Multinationals and small companies use this process, this means that there is no recommended total number, but a portion of their customer base. For the statistical number to bring relevant and accurate results, try to get responses from at least one fifth of your contact base. How often should I apply the NPS? Avoid sending questions too often, as your customers may view the practice in a negative light. The minimum break period recommended by the creator of the methodology is at least 3 months. The time between questions will be longer according to your strategy. Some companies opt for the 6-month interval so that their customers can better understand their service and provide more detailed information. A very important detail is to take actions that make respondents realize that their feedback is being used and put into practice to improve the company, strengthening their relationship with customers and contributing to NPS improvements. Do I only need to take action on detractors? Don’t just get hung up on criticism that exposes the points that need improvement in your business. Taking actions to strengthen the relationship with neutral respondents rewarding promoters customers can positively affect the way your company is perceived, preserving your best customers and creating new fans of the brand.

      Use an online chat in your website for best NPS results

      We hope this content is useful for you who are looking for strategic improvements and are looking for new performance indicators. After conducting your surveys and analyzing your satisfaction data, consider installing JivoChat’s online chat on your website and improve your company’s communication with your customers.

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