Customer health is the foundation of every customer relationship. It can be evaluated using many metric systems, Net Promoter Score (NPS) is one of them.
First developed by Fred Reichheld of Bain & Company in collaboration with the firm Satmetrix in 2003, NPS is now used by millions of businesses to measure and track how they’re perceived by their customers. By understanding customers’ perception, companies can not only identify their strengths but weak points that need improvement. But to do this, one needs to know how Net Promoter Score can be calculated with accuracy. Here is how.
The calculation of this score is on the basis of a single question, “How likely are you to recommend our company to a friend or colleague”. The question is answered by customers on a scale of 0 to 10. Now, the survey conducted to gather the responses can be carried out in two stages:
Relationship Surveys: The objective of this survey is to evaluate customers’ loyalty. In other words, these types of surveys are specially designed to gauge customers’ overall experience and satisfaction across all touchpoints. Relationship surveys are conducted at regular intervals to measure customer behavior such as loyalty, customer spend, and customer advocacy.
Transactional Surveys: Transactional surveys are meant to investigate experience a customer has in a specific interaction or transaction. This particular survey is sketched to measure customer’s outlook about the brand or service at a particular point in time.
Point to note: Make sure to start your NPS program with a relationship survey. It will help you evaluate customer loyalty, brand perception, and unearth the touchpoints affecting it whether good or bad. Transactional surveys are not compulsory, but if you feel they are needed, you can begin transactional surveys once you have identified crucial touchpoints.
Once the survey is completed and respondents give a rating between 0 (not at all likely) and 10 (extremely likely), companies can divide the customers into 3 categories:
Promoters: Promoters are those people who responded with a score of 9 or 10. They are people who are completely satisfied with the brand or service and are typically loyal and enthusiastic customers.
Passives: Passives are the customers who responded with a score of 7 or 8. These are people who are reasonably satisfied with the service but not happy enough to be considered promoters.
Detractors: Detractors are the customers who responded with a score between 0 to 6. These are people who are not happy with the service or brand and are unlikely to buy anything again. In fact, they can even discourage others with negative word-of-mouth recommendations.
After categorizing your respondents, you need to evaluate what percentage of them are promoters and detractors. To calculate this, one must divide the number of promoters by the total number of respondents. Repeat the same steps for people detractors. Suppose you have surveyed 100 people and 60 rated between 9 to 10, you would have 60% of promoters. And if 10 people rated you between 0 to 6, you would have 10% detractors. After calculating the promoter and detractor percentages, NPS score can be calculated by subtracting the two. So, your NPS would be 60% - 10% = 50%.
Once you have calculated the score, you can use it to know whether your customers are satisfied or whether they are at risk of churning. If your score is high, it means that your efforts are paying off and you are on the right path. However, if the score is low, you must pay attention to the specifics and employ methods to improve it. To do so, you can make use of “silver bullet” technological solutions such as data integration platforms. Go through our whitepaper to know-how integration solutions can help businesses improve their Net Promoter Score.