What is a Net Promoter Score (NPS), and Why is it Important to Your Business?

You already know it’s important for your business to earn a high star rating on review platforms like Yelp, Google, and Facebook. In fact, data shows that roughly 40% of consumers won’t even consider businesses that have an overall star rating below 4. 

However, your star rating isn’t the only score you need to be concerned about. The health of your business is also impacted and reflected by a rating called the Net Promoter Score, or NPS, which provides customer satisfaction insights, helps you identify and address pain points, and makes it possible to predict growth more accurately.  

In this week’s article, we’ll cover all the basics you need to know about Net Promoter Scores and how they work, including answers to FAQs like: 

  1. What are the benefits or impacts of the Net Promoter Score? 
  2. What are some examples of companies with high Net Promoter Scores? 
  3. How can you determine your Net Promoter Score?

Read on to learn what an NPS is, why it matters, and what you can do about yours.

What is Net Promoter Score (NPS)? 

The Net Promoter Score, or NPS, is a numeric scale ranging from -100 at its low end to 100 at the high end. Your NPS is a critical metric that, put simply, measures your customers’ overall level of satisfaction. 

More specifically, NPS is used to gauge how willing or how likely your customers are to recommend your company’s products or services. This provides your business with invaluable insights, like whether consumers are loyal to your brand — and if not, how their loyalty and trust could be earned in the future.  

How Does NPS Work? 

So far, we’ve explained that NPS gauges key performance indicators like customer satisfaction. But how is customer satisfaction actually rated and measured to determine your NPS?  

The short process begins with asking your customers a single question: On a scale of 0 to 10, how likely are you to recommend our products or services to a friend or family member? 

Depending on how the customer answers, they are sorted into one of three categories: 

  1. Detractors — Detractors are customers who give your company a rating from 0 to 6. We’ll talk more about NPS scores and how they’re calculated later on in this article. Learn about dealing productively with detractors who leave negative reviews of your business. 
  2. Promoters — Promoters are customers who give your company a rating of 9 or 10, meaning they’re extremely likely to recommend your products or services. Promoters have the greatest potential to become brand evangelists, writing positive reviews about your business on platforms like Yelp or Google. 
  3. Passives — Passives are customers who feel relatively neutral toward your brand, giving you a rating of 7 or 8. Passives are unlikely to either promote or detract from your business. 

This system might sound simple, but the consequences for your brand — and your bottom line — can be profound. Read on to learn about the impacts of your Net Promoter Score, and how to calculate and improve your company’s NPS. 

What Are the Benefits of Net Promoter Score, and How Does NPS Affect a Company? 

Unlike a low star rating, which can easily scare away potential customers, a low Net Promoter Score is unlikely to drive away business. In fact, many consumers have never heard of this term and are more likely to evaluate your brand based on other factors

Instead, a low NPS is more like a warning sign showing you that your customers are having negative or disappointing experiences — and that, unless you make changes, your business is unlikely to benefit from brand evangelism or word-of-mouth. 

So how do you know what changes to implement, or determine what’s causing the low satisfaction? Monitoring your online reviews is an efficient and effective strategy, providing you with feedback you can act upon to provide an improved product or service. Along with monitoring your reviews, it’s equally important to follow up with personalized review responses, a topic our response scribes cover in more depth here

At a glance, here are three meaningful ways your Net Promoter Score benefits and impacts your business: 

  1. It allows you to accurately measure and quantify customer satisfaction so that it can be improved. 
  2. It lets you identify Detractors more easily, empowering you to boost retention and reduce your losses from customer churn. 
  3. It provides you with actionable insights into the overall quality of your products or services — and whether it needs to be improved. 

What is a Good Net Promoter Score? 

According to Bain & Company — the original creators of the NPS — any Net Promoter Score above 0 is considered positive, because it indicates that your customers are more loyal than not. But what if you’re trying to aim a little higher? 

A score above 20 is considered great or very good, while a score above 50 is considered exceptional. To be in the top tier of performers, you’ll need an NPS over 80; but to reiterate, any score over 0 is considered “good.” 

It’s also important to keep your industry in mind, since average Net Promoter Scores can vary widely from one to another. For example, the average NPS for department store brands is a robust 58 — but meanwhile, the average for internet service providers is a mere 2. Most other industries fall somewhere between those two points on the spectrum, according to data from HubSpot, such as brokerage and investment firms (45), credit card companies (37), drug stores and pharmacies (28), health insurance companies (18), and cable/satellite TV service providers (7). 

What Company Has the Highest NPS Score? 

It’s not a coincidence that some of the world’s leading brands also boast top Net Promoter Scores. Here are a few examples, according to HubSpot’s blog: 

  1. Zappos — 58 
  2. H-E-B — 64 
  3. Apple and Ritz Carlton (tied) — 68 
  4. Southwest Airlines — 71 
  5. Costco — 74 

Where Can I Find My Net Promoter Score? 

As you might remember from earlier, customers who rate their likelihood of recommending your business from 0 to 6 are Detractors, customers who rate 7 or 8 are Passives, and customers who rate that likelihood as a 9 or solid 10 are Promoters. However, don’t let these 0-10 ratings distract or confuse you: what you ultimately need to be focusing on are your overall percentages of Promoters vs. Detractors. 

By determining the difference between these two groups, you can calculate your brand’s Net Promoter Score. For example, if 65% of your customers were Promoters, 25% were Detractors, and 10% were Passives, you would subtract 25% (your Detractors) from 65% (your Promoters), giving you a Net Promoter Score of 40 — above average, in many industries. 

Improve Your NPS by Leveraging Our Review Generation and Review Monitoring Services 

Manually calculating your Net Promoter Score might sound simple at first — but it can get complicated quickly for multi-brand locations or franchises that receive hundreds or thousands of reviews and customer survey responses. Fortunately, there’s a faster and easier way to determine your NPS with confidence and accuracy. 

Try out the new NPS Calculator Tool from Shout About Us, which is launching in February 2022. We’ll be sure to keep all of our readers and followers updated on this exciting new release, which is designed to help your business more readily meet the challenges of retaining customers and building buzz. 

In the meantime, book a demo of our review response service, review generation service, review removal service, or business listings management service. Whether you need full-service, top-to-bottom reputation management support, or you’re looking for a lightweight solution to target specific pain points, Shout About Us provides the tools to help you accelerate your growth and increase your revenue. Contact us online to get started, or learn about partnering with Shout About Us

 

Share This Article :

Related Posts

Leave A Reply