While math isn’t something normally associated with customer success, data collection and analysis can help inform your strategy and make improvements to your brand's customer experience.
In customer service, a great way to collect and analyze data is by figuring out your Net Promoter Score® (NPS) data.
In this post, we'll review how you can calculate Net Promoter Score to benchmark customer satisfaction and identify opportunities for customer delight.
What is Net Promoter Score (NPS)?
Net Promoter Score is a customer success metric that measures customer satisfaction and loyalty. Developed in 2003 by Bain & Company, NPS has become the go-to customer success framework used by two-thirds of the Fortune 1000.
By learning more about your customers and collecting their feedback, you can identify customer behaviors and challenges proactively — and reach out to empower them to succeed, instead of waiting for them to call you with a problem.
How to Calculate NPS
To calculate NPS, survey customers and see how likely they are to recommend your business on a scale of 0-10. Organize responses into Detractors (0-6), Passives (7-8), and Promoters (9-10). Then, subtract the percentage of Detractors from the percentage of Promoters to determine your overall Net Promoter Score.
If you're like me and need a little help with the math, let's walk through this calculation using the formula and steps below.
Net Promoter Score Formula
The formula for NPS looks like this: Net Promoter Score = (Number of Promoter Scores/Total Number of Respondents) - (Number of Detractor Scores/Total Number of Respondents)
Or, for a more visual representation, we can use this handy graphic.
Let's see this in practice with hypothetical numbers. If you survey 100 customers, and the result is made up of 70 promoters, 10 passives, and 20 detractors, your NPS would be 50.
As the above calculation illustrates, 70% - 20% = 50%
Now that we know the information that we need to gather, let's review how you can calculate this metric using a four-step process.
How to Measure NPS
While calculating NPS may sound a little complicated, you can actually measure your brand’s score in a few simple steps.
1. Survey your customers.
NPS is determined by asking customers, "On a scale of 0-10, how likely are you to recommend to a friend?", and asking them why they gave the answer they did.
This question can be deployed in a variety of ways: in the form of a survey, an email follow-up to customer interaction, a pop-up notification, or a social media poll.
In order to get an accurate NPS, you must ask the above question and provide a 0-10 numerical scale customers can choose from. It's customary and helpful to provide a blank field where customers can elaborate on why they gave the answer they did, and although this qualitative feedback doesn't impact the overall NPS, it gives you an idea of areas of improvement you can focus on to raise your overall score.
For example, here's how Casper surveyed me via email after I purchased a product. After this screen, I had the option to write an open response about why I chose the answer that I did.
2. Categorize their responses.
Once you've collected responses to the question, tally how many answers you have in each of the following categories:
- Promoters: People who respond with a score of 9 or 10
- Passives: People who respond with a score of 7 or 8
- Detractors: People who respond with a score between 0 and 6
As you may have already guessed, promoters are happy customers who will sing your praises to friends and family, while detractors are unsatisfied and not only might churn, but they could dissuade potential new customers from learning more about you. Passives aren't highly satisfied, so they're at risk of switching to a competitor.
3. Find the Percentage of Promoters and Detractors.
Next, you'll need to find what percentage of your respondents are promoters and detractors. To do this, divide the number of people who rated you positively by the total number of respondents. Then, repeat those steps for people who rated you negatively.
Using the same example we did above, if you surveyed 100 people and 70 gave a promoter score, you would have 70% of promoters. If 20 people gave negative scores, you'd have 20% of detractors. Be sure to convert your decimals into percentages as you'll need values for the next step, below.
4. Calculate the score.
After that, subtract the detractor percentage from the promoter percentage to figure out your NPS. So, if you survey 100 customers, and the result is made up of 70 promoters, 10 passives, and 20 detractors, your NPS would be 50 (70% - 20% = 50%).
Featured Resource: Free NPS Calculator
Download the free NPS Calculator to easily determine your customers' eagerness to promote your business to friends and colleagues.
Anything over 50 is considered a good NPS, with 70 or higher being excellent. However, NPS varies by industry so you’ll want to take that into consideration when measuring success.
So, now you know how to measure NPS. But what do you do with it next? How do you use this data to improve outcomes for your customers? Below are some questions you should ask to contextualize the score.
What does NPS mean?
1. Are your customers satisfied, or are they at risk of churning?
First and foremost, your customer NPS gives you an idea of the level of customer satisfaction you've achieved thus far. The higher your NPS, the greater number of promoters, or happy customers, you have relative to detractors, or unhappy customers.
Customer NPS gives you a good benchmark to judge your customers' perception and depending on how high -- or low -- the number is, you can take action. If your NPS is low, why is it low? And if your NPS is high, great job -- now, how are you going to capitalize on that?
2. How are your customers' opinions trending over time?
Measuring customer NPS over time informs companies how customer perception is changing -- and if it's trending positive or negative. If NPS is steadily increasing, your company is making customers happy. But if NPS takes a dip -- or if you start getting more passives than promoters -- that's a sign that you need to dig into customers' qualitative feedback.
NPS surveys are usually accompanied by a space for respondents to answer why they gave the score they did, and this information can be just as valuable as the score itself. Customers could be calling for simple fixes or huge overhauls, and you don't have to take all of their feedback into account. But if multiple customers consistently bring up similar requests and complaints, it could be a great indication of a change you could make that would have a lot of impact.
One of my favorite examples of tracking NPS over time comes from Taylor & Hart — a London-based jeweler specializing in bespoke engagement rings, uniquely designed and set with ethically sourced diamonds.
In fact, after making NPS its most important metric to track, the ecommerce company grew 2x.
After analyzing its NPS data, the company learned that the product consistently received lower scores than the customer service NPS. This means that customers were satisfied with their service, but not the product. After realizing this trend over time, Taylor & Hart revamped their manufacturing process, including logistics and delivery.
Additionally, the company tracked NPS over time and saw patterns of popular ring designs, top customer types, and specific geographical areas. Then, the company optimized its advertising campaigns and saw a 70% increase in revenue.
3. What changes do you need to make?
The answer to that question will request a lot of analysis and introspection. It's likely you won't be able to make those changes overnight. But the qualitative NPS feedback you receive can start a conversation about new products and services, company policies, or promotions you could offer to improve customer perception -- thus making them more likely to recommend you to a friend.
That way, you'll earn more promoters who will, in turn, earn you more business -- by way of referral marketing.
This is important because growing companies prioritize customer success, and use NPS to focus on increasing retention rates. Why you may ask? Because increasing retention by 5% actually increases profits anywhere from 25% to 95%.
NPS Survey Types
There are usually two different types of NPS surveys that determine when and how they're sent to customers:
If you work with customers over the course of years-long business relationships, you might consider automatically deploying NPS surveys on a monthly or quarterly basis to make sure customers are satisfied, and to implement feedback that might keep them from canceling in favor of a competitor's solution.
The key difference between the two types of NPS surveys (transactional vs. relationship) is that the relationship survey is meant to gather feedback from long-term customers on a regular basis.
An example of how to use a relationship NPS survey comes from Baremetrics. The company not only regularly reaches out to customers but also touches base with long-term promoters to see if they would be willing to provide a customer referral.
In the example above, a Baremetrics customer service rep sends a thank you email to a promoter for leaving an NPS and then kindly asks the customer to spread the word about the company. They even provide a pre-written Tweet that the customer can simply copy and paste to their account. This is a great way to build stronger relationships with your loyal customers as well as leverage their experiences for customer advocacy.
Transactional surveys are deployed after key events in the customer lifecycle. Transactional NPS surveys might be sent to customers after they make a purchase, speak to customer service, or if they've gone a certain number of days without logging into software or purchasing a product replacement or refill. You can determine based on your CRM database and marketing automation tools which criterion make the most sense for sending out a survey.
Use NPS to Bolster Customer Relationships
Net Promoter Score is a key metric that can help you increase customer retention and build stronger relationships with your customers. Use data collected from this score to prevent problems before they arise and ensure your customers remain satisfied with your brand.
Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.
Editor's note: This post was originally published in July 2017 and has been updated for comprehensiveness.