Understanding NPS: A Deep Dive
In the early 2000s, Fred Reichheld, the founder of Bain & Company’s loyalty practice, started research to create a reliable customer loyalty metric. He did so by placing traditional survey questions under scrutiny and asking, "What questions could truly help brands understand customer loyalty?"
By finding correlation between survey responses and purchase data, Reichheld isolated a single question that was predictive of not just customer loyalty, but also brand advocacy, repeat purchases, upgrades, renewals, and positive referrals.
What developed from this research was that “single question”—the NPS question—as well as the Net Promoter Score, NPS Prism, and related methodologies which “quantify the link between loyalty and profits.”
In this section
- The ultimate question
- Scoring and calculating NPS
- Benchmarking: What's a great NPS?
- Transactional vs. Relational NPS
- Three tips to improve your NPS score
- Try an NPS pilot on us!
The ultimate question
In NPS surveys, the carefully worded NPS question is followed by a statistically significant 0-10 scale. The question reads:
“How likely are you to recommend (brand, product, or service) to a friend (or colleague)?”
This single question reshaped Customer Experience (CX) metrics. Reichheld, and his co-author Rob Markey, refer to it as the “Ultimate Question.”
The open-ended response
After providing a score (let’s say 10!), customers are prompted with a simple follow-up:
“Tell us a bit more about why you chose 10”
This open-ended comment is a critical component of NPS. Verbatim feedback helps untangle the complexity and context behind a raw NPS score, helping you calibrate where you are doing well and where you have opportunities to improve.
Scoring and calculating NPS
The power of NPS is in the scoring, which measures loyalty along an 11-point scale.
In the Net Promoter System, customers are segmented into three groups based on the score they select. Each group presents its own opportunities and challenges:
- Promoters (9-10): Promoters will go out of their way to recommend your product or service to others, often unprompted. They are willing to put their personal reputation on the line for you brand. They are incredibly valuable assets for a business and are critical in driving future growth. Promoters “account for more than 80% of referrals in most businesses.” They generally have a good relationship with employees and lift their morale.
- Passives (7-8): Passives may like your product or service, but it isn’t a slam dunk. They may jump ship as competitive options present themselves. They may mention your brand to others, but are unlikely to personally vouch for it. Their referrals are conditional. Shockingly, “their repurchase and referral rates are as much as 50% lower than those of promoters.”
- Detractors (0-6):Detractors are likely to churn or dissuade others from using your product or service. Their voices are often louder than promoters, accounting for “more than 80% of the negative word of mouth.”Think of them as liabilities who can shrink your business, diminish your brand, and even discourage your employees.
The good news is that detractors and passives aren’t doomed to dissatisfaction forever—your actions in closing the loop and making long-term changes to your customer experience can move the needle towards promoter scores!
The Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters, resulting in a score between -100 and 100. Read more in our overview of NPS surveys or test the equation yourself with our NPS calculator!
Benchmarking: What's a great NPS?
NPS ranges from -100 to 100, so a score above 0 can be considered good—mathematically, you have more happy customers than unhappy ones.
But once a company breaks into positive NPS territory, just how good is good?
The short answer: it’s relative. Each industry has different benchmarks. And within industries, NPS can change based on recency of interaction, product pricing, where customers live, demographics, the competition, support levels, marketing, and a multiplicity of additional factors.
As a very broad generalization:
- Scores above 40 are very good
- Scores above 60 are amazing
- Scores above 70 are the holy grail, but are rare—think Apple, Costco, Southwest Airlines, and Zappos on their best days
If you’d like a general sense of how your score stacks up with other companies in common verticals, check out our NPS benchmark tool.
Focus on NPS trends
To uncomplicate things a bit, it’s best practice to focus on the relative change in your NPS score over time, rather than an absolute number. Work to make your NPS higher than it was last week, last month, or last quarter!
Dive deeper into benchmarking
Precision benchmarking of the customer journey may not be in your current plans, but down the road you can grow into it. There are many options. For example, Bain & Company recently partnered with SAP-Qualtrics® to launch NPS Prism®. (Delighted is a sister division of SAP-Qualtrics.) To quote the 2019 press release:
“NPS Prism addresses a crucial problem for business leaders: the lack of reliable, high quality Net Promoter Score® benchmarks for gauging competitive performance and progress against goals. Moreover, NPS Prism adds a new-to-world capability for driving those benchmarks down to each important episode of the customer journey.”
Qualtrics also partners with other benchmarking leaders through our XM Institute (like JD Power, Walker Loyalty Matrix, and Kantar TRIM).
Should you decide to go all in on benchmarking, the NPS data acquired through Delighted can be imported into Qualtrics for analysis in the XM platform. Learn more about benchmarking tools for CX on the Qualtrics XM support site, and reach out to our team if you want to chat through these options!
Transactional vs. Relational NPS
There are two categories of NPS surveys to consider: transactional and relational. While each can be run independently, combining these two survey types can be a powerful way to gather a complete picture of your customer experience and loyalty.
Transactional surveys focus on collecting customer feedback related to a specific experience, and are dispatched following key events (ex. subscribing to a plan, placing an order, receiving a shipment, concluding a support interaction, etc). The completion of a transaction signals that the customer has fully experienced your product or service and will have formed an opinion that can be measured.
Transactional surveys are well-suited in a variety of situations such as the hospitality industry, eCommerce stores, customer care teams, and recruitment processes.
Relational NPS surveys seek to measure your customer’s relationship with your brand or product overall. Relational surveys can be dispatched to a cross section of customers on time-based intervals (ex. monthly, quarterly, or yearly).
Use time-based surveying if your business is heavily based on relationships or lacks discrete events to measure. This method is well-suited for web agencies, law firms, and consultancies.
Three tips to improve your NPS
Improvements in your NPS score will come from small and large-scale changes within your organization, stemming from the very feedback you receive from your NPS surveys. To that end, below are three ways to improve NPS:
1. Share your NPS feedback widely
Companies with effective NPS programs make sure that their feedback reaches every corner of their organization. Customer feedback is most effective when it is being read by the teams empowered to act on it. This includes both customer-facing teams, product and marketing teams, and leadership.
When everyone in your organization is reading customer feedback, everyone is working on behalf of the customer—even those in entirely internal roles. NPS provides a common mission for teams spread out across the org chart. It will infuse meaning into their jobs and show that their efforts, regardless of the role they play, improves the lives of real people.
2. Respond to the micro
When someone submits negative feedback, your first response should be resolving any outstanding issues for that customer. Do they have an unresolved support request? Do they have a problem with your product? Can your team do anything to immediately improve their experience, even if it’s just recognizing that they had a negative experience and that you will do your best to improve that experience next time.
Once immediate and outstanding issues have been resolved, you can lean into larger efforts that address the roots of these individual requests. Another positive outcome of closing the loop with passives and detractors is that they will feel heard, and know that if they have problems in the future, they can reach out to your team for help rather than simply posting negative reviews or actively dissuading other customers from working with you.
3. Solve underlying problems with root-cause analysis
The most effective way to improve your NPS is to improve your customer experience! In identifying what aspects of your experience need improvement, root cause analysis is extremely powerful—and there is a simple way to get to the root cause of an issue. Just ask: “Why?”—and continue asking until you’ve arrived at the root.
A detractor leaves feedback that her order is already 3 days late. You apologize for the delay, overnight a replacement, and give her a $50 credit on her next order. You’ve addressed the acute problem and she’s happy.
But as more NPS feedback arrives, you notice a pattern. An issue you thought was a one-time fluke is actually systemic.
Q: Why was her order delayed?
A: It shipped out 3 days later than it should have.
Q: Why did it ship out 3 days later than it should have?
A: It was scheduled to be shipped on a Friday.
Q: Why does shipping on a Friday affect delivery times?
A: The shipping team is understaffed on Fridays.
Q: Why is the shipping team understaffed on Fridays?
A: The shipping team has spent their hiring and overtime budgets.
After peeling away a few layers of the onion, you’ve discovered a much deeper operational issue that can be addressed.
For more advice on becoming a customer-centric organization, read Closing the loop in our Help Center.
Try an NPS pilot on us!
Delighted is focused on providing an exceptional NPS experience for you and your customers. Get started right away with a 7-day trial and send surveys to 250 customers free!
Learn to quickly set up your first NPS survey with our Delighted Quickstart in 8 Steps lesson in the Getting Started section of our Help Center. This lesson was designed with you in mind!
A Delighted pilot is a great way to build momentum and rally the whole team around customer feedback. There are five keys to a successful pilot:
1. Select a panel
The first step is selecting the customers to be surveyed (aka, your panel). A good rule of thumb for a pilot is to start with the customers you expect will have the highest chance of responding.
For your pilot survey:
- Focus on recent customers: If your product or service is fresh on a customer’s mind, they’ll be more likely to respond.
- Find those who’ve experienced the entire product: Focus on people who can provide feedback on the entire customer journey.
- Stick to a single language: Focus on a single language to start with. You can bring in other languages later. For now, keep it simple.
2. Start small
Be conservative to start with. Survey in batches of 200 people or less and gain experience. Then, increase your batch size as you get a feel for the rate at which people are responding and you have discovered your capacity to follow up.
3. Follow up
Prepare yourself for the good, the bad, and the downright ugly. You’ll hear unbiased, unfiltered opinions about what matters most to your customers. This is a good thing, even if it may sting at times. Whatever the case may be, one thing is sure—you’re going to be itching to address the issues as quickly as possible.
At this point you’ll hopefully have a healthy mix of promoters, passives, and detractors. Next, you’ll need to decide on a process for closing the loop. For more, read our Closing the loop article in the Training & Tutorials section of our Help Center.
4. Demonstrate NPS-driven action
Once your pilot is humming along and the feedback is flowing in, you’ll start to notice patterns. Pick an area of improvement and act on it. Your action will serve as a use case to validate what you are doing.
5. Share your improving NPS
Post your NPS publicly within your organization! The results will speak for themselves as you convert more and more of your customers into enthusiastic promoters. Teach every team member what the NPS metric actually means, and demonstrate your progress over time. This will help loop others into a shared, customer-centric mission.