Whenever a person has to make an important decision, that person consults with their family members and friends. People also search or do surveys for the feedback of other people if they are making decisions on buying a house or car, searching for a job, booking hotels, etc. In the digital market now the owner of a company or a businessman has to understand the value of customer feedback. If you are running a company then it is important to know the experience of customers with your company or brand. In today’s time companies are concentrating more on customer feedback than products.
To know the customer’s experience and their feedback, companies need to communicate with them. For this, the best method is to do surveys and ask the customers about their experience, their need, and problems they faced during their market journey. To calculate or evaluate that Net Promoter Score comes as a solution. Net Promoter Score (NPS) measures the customer’s loyalty towards the brand or company. The NPS Statistics show the customer’s loyalty and gives an insightful view of how the customer will like the brand for a recommendation.
What is Net Promoter Score?
The Net Promoter Score is a method to calculate customer’s experience based on surveys. Technically Net Promoter Score is a metric to compute customer loyalty. In 2003, Fred Reichheld introduced it for the first time. To understand it simply it is
Net – the difference between views whether good or bad.
Promoter – to give a view about something whether good or bad
Score – the value of something in numbers.
By combining these three words, you will know the NPS (Net Promoter Score) of your company or brand with customers’ views. NPS will show you whether the customer promotes or refers to your brand to others or not. It shows the customer’s loyalty to how likely they would refer to your brand to get you a new customer. It measures customer loyalty by identifying them as detractors, passives, and promoters of your brand. Calculating Net Promoter Score is easy, you calculate your customer NPS easily with a simple survey with a simple question: –
How likely are you to recommend our products or services to people? rate on a scale from 0-10.
Now you have to divide the responses of customers into three segments:-
- Promoters: – who responded from 9-10 are promoters and loyal customers.
- Passives: – who responded 7-8 are passives as they like your brand or company but not that much satisfied to recommend or refer it to others.
- Detractors: – who responded between 0-6 are detractors as they were not satisfied with the brand or company.
To know the NPS you simply need to subtract the promoters’ percentage from detractors’ percentage. Net Promoter Score is a good method for companies to measure their performance.
With time, now companies have understood the value of customer experience and start focusing on customer feedback. By doing research with companies on Net Promoter Score or as shown in this NPS Statistics they know the importance of NPS.
Click for an elaborative guide to Net Promoter Score Calculation
Net Promoter Score Statistics and Facts
Firstly, we will discuss NPS statistics
- After 2 years of NPS, in 2005 the London School of Economics found that NPS increase and revenue growth are interrelated. They find that an increase in NPS by 7 points is related to 1% of revenue growth.
- According to Temkin research in 2017, research promoters are 4.2 times more likely to purchase again, 5.6 times more likely to buy even after a mistake, and 7.2 times more likely to try new offers.
- Adobe confirms that customer-centric companies grew faster with revenue of 1.4 faster and also increased customer loyalty 1.6x than others.
- According to research by PwC, 60% of CX leaders get more returns from CX initiatives than other companies.
- Oracle found that 89% of customers start a business with their competitor followed by a bad customer experience.
- 6. In 2015, Nielsen discovered that approx 83% of customers trust recommended products that are referred to them by their colleagues, family, friends, etc.
- 7. According to another research, 66% of customers trust other’s opinions.
Some of the facts about Net Promoter Score
1. Net promoter score is the simplest method to measure customer experience:
There are other metrics to measure customer experience still NPS is an easy and simple metric to calculate customer experience metric. In today’s world, no company or brand wants to disappoint its customers.
Companies want to measure customer loyalty. The whole concept of NPS is depending on one question “how likely are you to recommend the product/brand/service?” You can use all the mediums to connect your customer and get their views through email, website, message, etc.
2. Measuring employee experience with NPS:
In 2003 Fred Reichheld developed Net Promoter Score to measure customer loyalty. It is designed to get customers’ feedback. But with NPS you can also measure employee loyalty. ENPS means Employee Net Promoter Score that measures the employee loyalty for their workplace or company. It is as easy and simple as NPS and companies need not take any special surveys to understand their employee views.
The question for ENPS is just the same: “how likely are you to recommend your work to others (friend, family, etc.) it is the best method to involve employees to measure their loyalty. ENPS assists your company with the views of employees and changes the thing of a workplace which gives a negative impact on employees. With ENPS and other surveys like yes/no question, like/dislike, etc. Other methods will give you the best result.
3. It is an effective way for managers
With NPS you can measure customer loyalty and also employee loyalty that assist managers of companies to know the working of their companies. Managers of companies measure employee loyalty through ENPS and can understand the views of employees of the department. Managers will be able to identify which department of a company is doing well and which department needs to make some changes to improve as a whole.
4. NPS is related to positive and negative views:
Net Promoter Score for customers ranges from -100 to +100. Positive or negative scores depend on different companies. Generally, NPS below 0 is reviewed as an unsettling score for the company, an NPS score of 30+ means that customers are likely to stay connected with the company or brand. And if NPS is above 60 then it is the view as customers will likely refer your brand/company to others. These customers will spread positive views to others. NPS ranking and NPS score are not basically relative. What makes an impact is your brand value to other competitor’s brands.
5. The actual value of NPS is in Follow up:
Follow-up is the main part of the NPS score as it comes after the main question of NPS. Follow-up tells you the actual value of NPS. It plays a great role in knowing you about the detractors and passives, follow-up tells you what you have to do with detractors and passives to improve your products/services. Few questions that you can ask your customer as follow up to analyze the NPS score:
- How can we improve your experience?
- Why do you like our product more than others?
- How can we meet your expectations?
- What is the main reason for your score?
While getting replies of your follow-up from your customer, send them to thank you to increase good customer experience. It is the best way to show your gratitude to the customers.
6. Benchmarking is easy with an NPS score:
Net Promoter Score is a benchmarking tool. With NPS you can benchmark your company with other competitors easily. It is not easy to do benchmarking with other tools like CES or CSAT matric as it only measures customer expectations and their interaction with the company/brand. But with NPS you can calculate and compare the progress of your company.
7. NPS scores can be affected by global events and timing:
With time customers’ needs and wants get affected and change. That’s why NPS gets affected by the timing and global events. For instance, during the COVID pandemic many companies, businesses, or brands get affected very badly. Recently Qualtrics researched 10,000 US customers in 20 different companies (May 2020) to measure the effect of this global event (COVID pandemic). The NPS statistics or research shows that:
- The total NPS score decreases from 29.8 to 14.6 points.
- NPS score decreases by 30 points among the young customers than the old customers with 3.2points. The reason for this is age differences. The youngsters are more used to and more known to digital media and products.
- The tourism sector gets affected very badly. The NPS score of companies related to tourism declined by 24-28% as there were restrictions on traveling worldwide.
8. Depending on NPS only is not enough:
NPS is the best metric to know how likely a customer is to recommend your product to others. Still, you can’t confirm that the customer is going to purchase the product from you again. To know the customer experience you will have to use other metrics like CES, CSAT, and NPS.
9. NPS changes with time:
Except for global events, NPS can change over time. The reason behind it is competition. Customer expectations are high now and it changes. For example, Atlanta, Georgia-based Company increased its survey response rate and store insightful data to know its customers’ preferences, and improved its overall customer experience by conducting regular surveys all around the year.
10. Net Promoter Score shows a larger picture:
The NPS score looks at the larger picture. It assists you to measure customer views based on product, service, social image, brand credibility, etc.
11. Net Promoter Score is influenced by customer tolerance:
Customer’s expectations are higher now, they want their journey to go well, they expect the right product on time and in good condition. They want good products and services. For instance, Netflix and Uber being part of a low-tolerance industry have gained high tolerance.