Everything You Need to Know About NPS

Over 65% of Fortune 1000 companies have accepted this index, and they are constantly trying to improve it. Yes! we‘re talking about Net Promoter Score a.k.a. NPS. Now, if you’re not using this score or you’re thinking about it, then you’re in the right direction. Because a majority of firms are using it, and they clearly have multiple good reasons.

What is a Net Promoter Score?

Basically, Net Promoter Score (NPS) is an index to rate a business from 0 to 10, to recommend it to one’s friend or a colleague. There are more than one ways of ranking a business through NPS. Scale from -100 to 100 is also used for a wider range. Let’s understand this scale one step deeper:

If customers score your business 9 or 10 out of 10, it simply means they are Promoters. Promoters are the customers who are your regular buyers. Who admire your products or services. They repeatedly enjoy your products, and they would recommend your products to others.

If customers give your business 7 or 8 out of 10, they are Passives. It simply means they are satisfied with your products or service, but that doesn’t mean they are loyal to your company. The same behavior we see in ecommerce market where customers who purchase from a particular platform can be easily diverted to another platform with a great offer or a discount. These customers may not say any ill about your company but they can be easily diverted.

If customers give your business 6 or less than 6, they are Detractors. Detractors are the ones who can harm your company’s reputation word by word. They do not appreciate your product or service, they most likely would not purchase from you again as well. Now, these are the customers you really need to think about, as they certainly had a bad experience with your company. There are higher chances they would spread a negative word of mouth.

How is NPS calculated?

NPS is calculated based on one simple question:

“On a scale 0 to 10, how likely would you rate a company’s product or service or both to recommend it to a friend or a colleague?”

All the responses from customers are collected and below formula is applied to figure out the NPS of a particular company:

NPS = %age of Promoters – %age of Detractor

Why should you implement NPS for your company?

There’s a reason why more than 65% of Fortune 1000 companies have implemented NPS in their company. This reason will motivate you as well to implement this index.

More customer base!

The companies who have adopted this number and getting NPS 6 or below, are constantly working to improve their product and customer service. This index is a mark sheet of your company’s performance, just like a kid performing in an exam. Fewer marks in the exam is a sign to improve performance, and excellent marks is a sign to keep up the good work.

We all know how strong the impact of verbal communication is. Customers who are happy will bring more customers. Hence, more customer base. A good NPS is a proof that you’re doing well for your customers, and the next logical step is to keep up the good work.

How NPS is helping companies in various ways:

  1. NPS is not just for your customer satisfaction. It can be used for your employee improvement as well. It can be a good base for employee appreciation or promotion. Companies these days are motivating their employees to work harder to achieve the NPS number by number. If employees get succeeded in achieving the desired number, they get promoted. NPS is not just a number to know how well you’re performing in the market, it is a sign that you have chosen the right team or employees.
  2. 6 or Lower than 6 NPS is a strong sign that you need multiple improvements in your product. This is a clear sign that your customer base is not entirely happy with your product, and they might not want to use it for the second time. It’s a solid sign that you need to find out the loopholes in your product or service. For example: Lenovo, a well known mobile brand broke records by manufacturing smartphones at economical prices, but they failed miserably when it came to providing customer services. Lenovo holds 23 NPS out of 100, and it’s obvious that they need improvements when it comes to hardware and services.
  3. Each department of your company can be ranked in terms of NPS. You can find out which departments are performing well and which are not.
  4. A lower Net Promoter Score can be a sign that you might want to change your business pattern. Phillips is a great example of that. Phillips decided to open their customer care centers in weekends based on the results of NPS, and the response they received after that was outstanding.

Tools to calculate NPS:

There are multiple tools available in the market which will help you to figure out your NPS. There are hosted NPS software available, as well as online tools to carry out multiple surveys. Software for NPS has various plans like $25/month for 100 surveys or $250/month for 1000 surveys.

There are online NPS calculators for you to find out your score. But you have to manually feed the respondent data for each number.

NPS

Bottom Line:

A Majority of companies are adopting Net Promoter Score for their improvement. But, as every coin has two sides, many companies are not in the favor of this number. But, as we have seen there are multiple genius reasons to follow this number.

Let us know what you think about this article, and also type down your views on Net Promoter Score.

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