Knowing how loyal your customers are to your business is powerful information. Are they out singing your praises to their friends, family, and community? Or are they telling everyone they know how disappointing your business was to them? These insights can help you build a better customer experience if you gather and analyze them the right way.
That’s why the Net Promoter Score® (NPS®) system is so popular with businesses, from small startups to big international enterprises. In fact, it’s become one of the most-used forms of measuring customer loyalty and satisfaction. But it’s not the only way to gauge how much your customers like your business, and it has some limitations that you should be aware of in order to make the most use of the metric.
This guide will walk you through everything you need to know about the benefits of using the NPS survey, as well as the downsides. Having a well-rounded view of the pros and cons of this very popular customer feedback metric will allow you to create a complete view of your customer satisfaction stats and create a better experience for your customers.
What is NPS?
Let’s start with the basics. What is the Net Promoter Score survey? At the simplest level, you can define NPS by what it measures - customer loyalty and customer satisfaction. It gathers this data by asking just one question: how likely are you to recommend your product, service, or company to others on a scale from 0-10.
The NPS question was introduced by Frederick Reichheld in his 2003 article “The One Number You Need to Grow,” and it’s been shown in research by Bain & Company, Satmetrix, and more to correlate strongly to increased business growth.
There are also several types of Net Promoter Score surveys, you can send eNPS surveys to employees to measure employee loyalty and satisfaction, for example. And you can send transactional NPS (tNPS) surveys after a specific customer transaction, like a customer service interaction, to ask about that exact experience and how it affected the customer’s likelihood to recommend your company.
How to calculate NPS
Calculating your NPS takes just a few steps. First, you gather the numerical responses you received from your NPS survey where your respondents rated their likelihood to recommend your business on a scale from 0 (very unlikely) to 10 (very likely).
Next, group your respondents into three categories.
Your Promoters are those who have responded with a 9 or 10.
Your Passives replied with a 7 or 8.
And anyone who rated you a 6 or below is a Detractor.
To calculate your NPS, subtract your % of Detractors from your % of Promoters.
For example, say you had an NPS survey with 100 respondents and 40 of them were Promoters, 35 were Passives, and 25 were Detractors. To calculate your score, you’d subtract 25 from 40 and get an NPS of 15.
Your NPS will tell you how many more loyal advocates you have compared to vocally dissatisfied customers or vice versa.
What exactly do the three categories of customers mean? Let’s go into a little more detail.
Detractors are respondents who rated their likeliness to recommend your products, services, or business as a 6 or below. These customers might be giving you their money right now, but they’re quite unhappy and likely to switch to a competitor at any moment. They also might be describing their disappointing experiences with your business to their network of friends, family, and colleagues.
Passives are right there in the middle of customer satisfaction—they’re not unhappy like Detractors, but they’re not particularly loyal or satisfied either. They’re just making purchases and not thinking about your business too much—that’s why they rated their likelihood to recommend as a 7 or 8. Passives aren’t saying much of anything to their networks about you, whether good or bad, but they’re also not likely to stay loyal if something new comes along.
Your Promoters are your most loyal customers—they rated their likelihood to recommend you as a 9 or 10, and they love your company. Not only are they highly loyal buyers, going out of their way if needed to make purchases from you, but they also enthusiastically recommend you to their networks. Those word-of-mouth recommendations are marketing gold and can bring in many more new customers at no cost to you.
What is a good NPS score?
Now that you’ve calculated your score, how do you know how it stacks up?
NPS is just a number unless you know whether that’s a good result or a really poor one.
Typical NPS benchmarks are:
Anything over 50 is pretty great.
If you’re over 70, your customer loyalty is world-class.
It probably won’t surprise you to learn that NPS varies widely by industry. Satmetrix offers yearly NPS industry benchmarks—see where you land.
Of course, external benchmarks are great, but they’ll only take you so far. You’re truly competing against yourself to do better all the time—so use your score internally as well to push your customer experience to the next level. That’s how you build a successful business with highly loyal, satisfied customers.
Why you should measure NPS
Measuring your NPS data can give you valuable insights into loyalty metrics that are pretty hard to calculate any other way. NPS is especially powerful when combined with other customer feedback surveys, which we’ll talk more about below.
You’ll get even more insights out of your NPS data by segmenting your respondents by various metrics. You can segment them by how long they have been a customer, their age or other demographic data, or their purchasing habits.
For example, you could drill down into your data to find that most of your Detractors are new customers over age 60—and that could help you spot some areas for improvement you might have missed otherwise. Perhaps there is something in their particular customer journey that is a big pain point for this group, and now you can run some additional targeted surveys and perform market research to find the reasons you’re performing poorly with this group.
This goes for your Promoters as well—measuring your data and segmenting it to find out who the most passionate advocates for your business are can help you discover new potential customer bases to target with your marketing. If urban dwellers under age 30 absolutely love your company and your products, you can begin a campaign to reach more of them and gain more customers who are likely to be highly loyal and satisfied.
What are the pros of NPS?
As you can see, NPS is a powerful tool as well as a popular one. It has many benefits for businesses that use it. Here are just a few of the biggest pros of NPS.
Pro: NPS is intuitive and easy to use
The NPS survey tool is easy to use for businesses of all sizes—no statistician required. With just one standard question based around one simple idea—likelihood to recommend—it’s a very intuitive system to understand.
And it’s easy to set up and send out using a variety of survey tools, including GetFeedback’s NPS tool. Once you’ve sent out your survey and gathered your data, calculating your score is a matter of very simple math. And you get a clean score that’s just one number, easy to measure against others in your industry. You can even integrate NPS into your CRM systems such as Salesforce. The simplicity and ease make NPS very appealing to businesses.
Pro: NPS is great for leadership
NPS makes it easy for leaders and executives to quickly understand where the company currently stands in customer loyalty and satisfaction. It also allows managers to swiftly compare departments against each other—looking at customer service rep ratings versus the IT help desk, for example, so they can identify potential pain points in the customer journey.
Pro: NPS helps quantify and measure customer loyalty
Customer loyalty is a notoriously tricky metric to measure. Loyalty is a very abstract concept, and measuring how likely customers are to stay with your business for the long-term has historically been difficult. Customers can be frequent purchasers, satisfied buyers, big spenders—and still not actually loyal to your business.
NPS solves this problem elegantly and has been shown in repeated studies to be a very effective measure of customer loyalty, and can even be a powerful engine for growth.
Pro: NPS allows for detailed feedback
Getting your NPS score is great—but there’s so much more your NPS questionnaire can do than just provide you with one number. Adding in one of the potential open-ended NPS survey questions allows respondents to offer you much more detailed feedback on why they feel the way they do towards your business.
You can ask the standard question: “What is the primary reason for your score?” Or you can create your own customer question. Either way, you get detailed feedback on what’s behind the customer rating—and that’s highly valuable at identifying issues and surfacing wins.
Pro: NPS identifies your most loyal advocates
Knowing who are your most loyal customers has many benefits for your business. You can reach out to those customers to get testimonials for your marketing, to join your referral program, encourage them to share their positive experiences on social media or online review sites, and more.
NPS is a fast, simple way to identify those advocates—your Promoters—so you can reach out and cultivate them further. You can also use this knowledge to dig deeper into what makes your customers become Promoters and advocates so you can replicate that with other, less-satisfied customers as well.
What are the cons of NPS?
NPS has many benefits, but like all metrics, it has its limitations. The key is being aware of them so you can make the best use of the metric.
Con: NPS is not a silver bullet for measuring customer satisfaction
While NPS is powerful and popular it’s not the be-all, end-all of customer satisfaction surveys. Too many businesses, however, treat NPS like it is the one and only solution to measuring customer sentiment.
And that’s a mistake—this one survey is not a silver bullet to solving all of your customer experience problems and pain points. It’s one metric in the larger picture of overall customer satisfaction, sentiment, and loyalty.
Con: NPS requires deeper analysis from results
On the surface, NPS can seem like a very simple survey system to analyze—you send out the NPS question, get ratings from 0-10 back, and do a little basic math to get your score. And it’s true—getting just your NPS score is simple.
But analyzing your open-ended results from that follow-up question asking customers why they gave the rating they did gets complex fast. Open-ended results are complicated to analyze in any survey, and this is definitely true for NPS.
And it’s not a step you can skip, because that verbatim feedback provides the reason why customers rated your business the way they did. Without that additional information, you’re left with just a number and no actionable information to make improvements or changes.
Con: NPS has a lack of context around scores
While NPS is very useful as an overall measure of customer loyalty, it also comes with a lack of context in most cases. You won’t know exactly what factors may have affected a customer’s rating—was it a recent campaign, a product change, or something else?
Open-ended survey feedback can help clarify the picture, but you’ll still be missing some important context around the rating unless every single customer leaves you very detailed feedback each time—and we know that will never happen. You’re sometimes left guessing as to the cause of a very low rating, or even a very high one. And that makes meaningful improvement harder.
See the complete Voice of Customer by supplementing NPS with other surveys
The pros and cons of NPS should make it clear that this metric is too powerful to ignore—but it’s also not a magical number all on its own. NPS should be just one of the CX metrics in your Voice of the Customer program.
In addition to NPS, you should also be measuring and acting on these two other important metrics to get a more complete picture of where your customer experience currently stands, and where you have room to grow.
Customer Satisfaction Score
The Customer Satisfaction Score (CSAT) metric is used, quite simply, to measure customer satisfaction. It asks your customers: “How would you rate your overall satisfaction?” and typically uses a five-point scale, with the options as very unsatisfied, unsatisfied, neutral, satisfied, and very satisfied.
You can ask customers to rate their satisfaction with your products, services, interactions, and your company as a whole, but it’s most effectively used to measure satisfaction with a specific interaction or event. CSAT is a good measure of short-term customer satisfaction—how customers are feeling about your business right now.
We recommend calculating your CSAT using this formula: (Number of 4 and 5 responses) / (Number of total responses) x 100 = % of satisfied customers.
Customer Effort Score
Customer Effort Score (CES), on the other hand, is used to measure how easy it is to do business with your company. This kind of survey asks customers how much they agree with this statement: “The company made it easy to handle my issue,” using a seven-point scale from 1 = strongly disagree to 7 = strongly agree.
CES measures how much effort a customer needs to put in when they have an interaction with your business, whether it’s making a purchase, paying a bill, or resolving an issue with your customer service team. Measuring customer effort is a surprisingly good measure of satisfaction—people don’t like doing business with companies that make it difficult. CES is another good short-term customer satisfaction measure.
Your CES can be calculated in several ways, but we like this one: divide the sum of all individual customer effort scores by the number of respondents. It looks like this: (Total sum of responses)/(Number of responses) = CES score.
Your Voice of Customer program
Building a complete VoC program using all three types of surveys helps balance out the cons of just using the NPS system alone, while still allowing you to take full advantage of the powerful pros. You get the best of all worlds and a holistic view of multiple facets of the customer experience and customer satisfaction.
Exploring the pros and cons of NPS doesn’t mean you should shy away from using this helpful survey—it just means you have a more complete picture of what NPS can and cannot do for your business. But it’s still one of the most valuable survey methods out there.