Know what NPS is all about and What is a good NPS

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Know what NPS is all about and What is a good NPS
  • 30
  • July
  • 2022

We all know how valued customers are to every business. The key concern for every business is to stay relevant in the marketplace in which it operates. It can only be achieved through positive word of mouth, and this is where the Net Promoter Score plays an important role. NPS is a metric created by Fred Reichheld, a partner at Bain & Company, in 2003 and is used to understand customer satisfaction, and in turn customer loyalty. It measures how well an organization generates relationships worthy of loyalty.

Therefore, NPS determines how likely are your customers to recommend your product or service to others. The score is calculated on a 0-10 scale where 0-6 scores are known to detractors or those who are unsatisfied with your brand. Scores 7 and 8 determine the passive scores or those who are neither satisfied nor dissatisfied with your brand while scores 9 and 10 are promoter scores identifying those who are highly satisfied with your brand and surely would recommend the same to others. NPS Score is calculated by subtracting detractors' percentage from promoters' percentage.

NPS is widely used as a benchmarking tool to understand where your organization stands in the market. However, it is also seen how apart from allowing your organization to be benchmarked in the industry, NPS allows you to shape your organization’s culture, enhance customer experiences and build long-lasting relationships. Using NPS, organizations can rectify and correct their weak services and address the various customer pain points. Contrarily, if the feedback from customers is positive, organizations feel encouraged to work more passionately. NPS also helps in benchmarking if your organization is meeting the expectations of your customers. It elucidates the fact that you are fulfilling the promises that they made to the customers for products

The usual NPS question seen on most surveys asks "how likely are you to recommend this brand to friends and family?” Benefits of using the NPS survey for your business

1. NPS maintains Customer Satisfaction and Reduces Customer Churn Rate

A higher NPS reflects more satisfied customers. This means that existing customers are more likely to go and recommend the organization’s products or services to others thereby increasing the number of customers. Thus, customer satisfaction leading to customer retention can be made possible using the NPS metric. Identifying the problem statement with the help of NPS and resolving the same, sends out positive feedback about your organization. Satisfied customers are more likely to continue trusting your organization and hence help in reducing the churn rate.

2. Analyse your customer's opinion on revising sales policy

By using the feedback received from your customers, your organization can remediate the problems in its services and can devise new policies that could benefit all. A declining NPS score is an indicator of improving service efficiency. This helps in creating strong confidence amongst employees. Improved services, therefore, help in reduced complaints, increased customer retention, and decreased customer churn rate. NPS score renders an opportunity to identify the problem where improvisations are necessary to implement and change the theme of a product or service to make your customers at ease.

3. NPS fixes problems faced by customers and helps to benchmark against competitors

NPS helps in resolving customer issues. Organizations, at times, fail to effectively serve their customers and live up to their expectations. It could be because of a technological error or managerial shortcoming. However, with NPS these issues can be identified and can duly be taken care of. Thus, we can say that NPS helps in identifying the problem statement. The NPS roadmap is reflective of customer satisfaction. It is very crucial to maintain a healthy and strong image of your organization in the market, which in turn, provides more opportunities to grasp more customers. This makes your organization a strong contender in the market space. A strong position in the market helps is gaining more stability and success in the longer run.

4. Significance of a “good” NPS score

NPS is a score ranging from -100 to 100. A perfect NPS score of 100 is tough to achieve.

Creators of NPS at Bain & Company also suggest what each score signifies:

• A score above 0 is good
• A score above 20 is favourable
• A score above 50 is excellent
• A score above 80 is world-class

Therefore, a positive NPS renders rocket fuel to the fame of any organization, and resultantly it creates a brand desired by all customers.

Therefore, to summarise, a big picture of your reputation in the market can be analyzed using the NPS score which is a quantifying scale to get an estimation of your customer's satisfaction and loyalty to your business. Its importance is non-negotiable, especially after the arousal of digital marketing. Owing to that shift of markets from shops to online sites requires a scale to monitor customers' tilts towards your product.

*Net Promoter, Net Promoter Score and NPS are trademarks of Satmetrix Systems, Inc., Bain & Company, Inc., and Fred Reichheld.

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