Word-of-mouth advertising can be a tremendous benefit for any company.
Having your customers recommend your product or service to their friends and family can boost sales without increasing marketing costs.
But how do you know if your customers will recommend, or criticize, your product or service? Determining a good net promoter score, or NPS, will provide you with valuable information to help answer this question.
What is a Net Promoter Score?
Ok, but first, what exactly is a net promoter score? The NPS measures how likely someone is to recommend a company, product, or service to a friend, family member, or colleague based on previous experience.
NPS can be determined by asking survey respondents to select a rating on a 1 to 10 scale. “1” representing “not at all likely to recommend” and “10” representing “extremely likely to recommend.”
Based on the results, you can determine how many previous customers will promote your company, product, or service.
NPS is divided into three categories:
These are established by the score that is given by respondents. Our market research company walks through each category and sees what each score means.
Detractors are customers that won’t recommend your company, product, or service because they had a negative experience. In fact, they may speak ill of it.
Detractors are anyone who responded with a score between “1” and “6”.
While there could be a considerable difference in negative consumer attitudes from detractors, all of them are not likely to recommend your company, product, or service.
Passives are viewed as neutral customers. They selected scores of “7” or “8”. Passives are satisfied with what was offered but aren’t committed to being promoters.
They may seek competing companies, products, or services to completely fulfill their needs.
However, they are not likely to disparage you like detractors. Passives are considered the “movable middle” so understanding what will make them promoters can be very useful.
Promoters are what every company hopes for. By giving a rating of “9 or 10”, they are likely to give an enthusiastic recommendation of your company, product, or service.
The next time they talk to a friend or colleague, they will be sure to mention the positive experience they had with you.
What is a Good Net Promoter Score?
After collecting all of the survey responses, you can calculate the NPS using the formula below.
NPS = % of Promoters - % of Detractors
Now that you have calculated your NPS, you can decide what actions, if any, are needed.
A "good" NPS is different for each business type and sector.
For example, in business-to-business markets, the average NPS is between 25 and 33.
Whereas, the average net promoter score for business-to-consumer brands ranges from 24 to 57.
While these scores are open to interpretation, here are some quick analyses of what each score range could indicate.
- (-) < 0: A negative NPS is a troubling sign for your company, product, or service. You currently have more detractors than promoters, meaning more customers are not going to recommend you versus those who are. Major changes are needed to reverse this dynamic.
- 0 < +40: A NPS above 0 but below 40 is an indicator that improvements are needed to increase the number of promoters. In other words, what are the changes that are going to make the biggest difference? Achieving this would elevate your product or service.
- +40 < +60: Scores between 40 and 60 are encouraging. Maybe some small improvements could be made to the product to add a few more promoters.
- +60 < +100: Net promoter scores above 60 are outstanding. Your company is hitting all the right buttons and customers are relishing its greatness.
Let’s walk through an example of how a company might use an NPS study!
Example Company: “Pizza Shop A”
Pizza Shop A conducts an NPS study with Drive Research. They want the study to help them better understand how customers feel about their business.
One of the questions in the study asks how likely would customers recommend Pizza Shop A to someone they know.
Respondents were asked to select a rating from “1” to “10”. As we discussed earlier, 1 means not at all likely, and 10 means extremely likely.
The study found that 60% of respondents gave a rating above a “9” and only 10% gave below a “6”.
Applying the terms mentioned above, 60% of Pizza Shop A’s customers are promoters and only 10% are detractors.
Using the NPS formula, Pizza Shop A’s NPS is +50. Pizza Shop A is encouraged but asks what it can do to increase its number of promoters.
Fortunately, the study included several other questions that will provide them with reliable data to make better decisions to achieve this.
For example, the study found that 90% of respondents would enjoy Pizza Shop A more if it increased its number of pizza toppings.
Pizza Shop A decides to increase its variety of toppings and will run another NPS study in the future to determine if it increased its number of promoters.
Several different studies can help you determine your NPS. Here at Drive Research, we offer a variety of services that can help your company chart its future.
Other services are also available if you feel they may suit your business better. Reach out to us and we’ll develop a personalized strategy together.
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