Customer satisfaction is an imperative part of any business’s success. If you have satisfied customers, it is more likely that your products will sell. On the dissatisfied customers are more likely to share their negative experiences with other people.
When it comes to satisfaction, it’s important to know how to quantify it. There are a variety of methods, surveys and tools available today that aim to measure satisfaction. One of the most popular methods is the Net Promoter Score (NPS).
What is NPS?
The NPS is essentially an index that ranges from -100 to 100 and aims to measure the customer experience. This information can be analysed and transformed to help predict business growth. This metric was developed by Fred Reicheld and Bain & Company in order to measure customer satisfaction simply and effectively.
To measure NPS, customers take a short survey that prompts them to rate how likely they are to recommend the specific product, company or service they bought to their friends, family and peers. Customers answer this question on an 11 point scale; 0 is equivalent to not at all likely and 11 represents highly likely.
Customers who provide a rating of 9 or 10 are considered to be promoters. With a score of 7 or 8, they are known as passives. Lastly, detractors are those customers who give a rating of 0 to 6. The NPS is then calculated by looking at the difference between the percentage of promoters and detractors. The final NPS is represented as an absolute number between -100 and +100. It should be noted that NPS is not a percentage and should not be represented that way.
Is This Measure Useful?
One benefit of this metric is that is can be measured over and over again. It provides a clear rating and can be repeated throughout a business or across different industries. No matter if you are a service industry that cleans houses or an online shoe company, you can use the NPS to gauge customer satisfaction.
For example, the online shoe company may pride themselves on fast delivery and free returns. This is a popular business model and customers are often pleased with the experience. However, there is a lot of pressure on the shoe company to have the right inventory stock on hand so they can fulfil orders quickly. If they don’t carry the right models or sizes in their inventory stock and need to order more, it may impact their “fast shipping” reputation.
Let’s say the fast shipping was putting too much pressure on the shoe company’s inventory stock and they wanted to just focus on offering free returns. With an NPS, they could assess if customers were still happy with their shoe buying experience or if there were more detractors now that their service was different.
Regardless of the industry, NPS can be adapted in a variety of settings and help gauge and understand customer satisfaction to help shape business development and growth.