How do customers feel about your business and what is NPS?
Posted: Sun Jan 19, 2025 10:41 am
NPS or Net Promoter Score was created by Fred Reichheld with the assistance of Bain & Company in the early 2000s. The main goal of this method is to measure the level of customer loyalty to the company. The NPS concentration method consists of one simple but effective question: "How likely are you to recommend our company/product/service to friends and acquaintances?" The answer to this question is given on a scale from 0 to 10, where 0 means "absolutely do not recommend", and 10 means "definitely recommend".
Respondent categories
NPS breaks down all respondents into three main categories based on their answers:
- Promoters (from 9 to 10 points):
These customers are extremely satisfied using the moj database with your product or service and are actively willing to recommend the company to their friends and acquaintances. Promoters play an important role in promoting a business, as they not only bring in new customers through word of mouth, but also make repeat purchases themselves.
- Neutrals (from 7 to 8 points):
This group of customers is generally satisfied with your product, but is not a loyal fan of the company. They can easily switch to competitors if they find a better offer. Neutrals do not harm your image, but they do nothing to support it.
- Detractors (from 0 to 6 points):
These customers are clearly dissatisfied with their experience with your company and may speak negatively about it. Detractors can cause significant damage to your reputation by scaring away potential customers.
How to calculate NPS?
The formula for calculating NPS is very simple, but effective:
\[ \text{NPS} = \% \text{Promoters} - \% \text{Detractors} \]
For example, if 100 customers completed the survey, of which 50 were Promoters, 30 were Neutrals, and 20 were Detractors, the calculation would be as follows:
\[ \text{NPS} = (50\% - 20\%) = 30\]
This means that the company has a positive NPS, which is a good indicator for business. The higher the NPS, the more satisfied and loyal customers you have.
Why do you need NPS?
NPS has several important benefits for business:
1. Simple and convenient: One question is enough to quickly and efficiently collect customer loyalty data. This makes the survey process quick and easy for both customers and the company.
2. Informative: NPS provides a clear picture of overall customer satisfaction and helps you identify areas where your company is strong and weak.
3. Predictive Value: A high NPS often correlates with a company’s future growth and stability in the market. Loyal customers not only come back again and again, but also bring in new customers through recommendations.
4. Fast feedback: NPS allows you to quickly respond to negative reviews and fix problems in a timely manner, which helps improve customer experience and increase loyalty.
How to use NPS data?
1. Analyze Feedback: It’s important to look beyond just the numbers. Collecting qualitative feedback from customers, especially detractors and neutrals, can help you understand what exactly is causing your customers to be unhappy or indifferent. This data can be invaluable in identifying specific issues and ways to address them.
2. Improving Products and Services: Feedback should be used to directly improve your offerings. This may include improving existing products and services as well as developing new, more competitive solutions.
3. Customer Segmentation: Identify which customer groups are the most loyal and which need additional attention. Segmentation allows you to develop targeted strategies for different customer categories, which helps you meet their needs more effectively and increase satisfaction.
4. Develop loyalty strategies: Based on NPS data, strategies can be developed to increase customer loyalty. These can include loyalty programs, personalized offers, and other marketing initiatives aimed at strengthening customer relationships.
In conclusion, NPS is a powerful tool that helps businesses gain a deeper understanding of their customers’ opinions and sentiments. Careful and consistent use of this metric not only helps retain current customers, but also attracts new ones through positive reviews and recommendations. Regularly measuring NPS allows a company to be one step ahead of its competitors, offering customers the best experience and service quality.
Respondent categories
NPS breaks down all respondents into three main categories based on their answers:
- Promoters (from 9 to 10 points):
These customers are extremely satisfied using the moj database with your product or service and are actively willing to recommend the company to their friends and acquaintances. Promoters play an important role in promoting a business, as they not only bring in new customers through word of mouth, but also make repeat purchases themselves.
- Neutrals (from 7 to 8 points):
This group of customers is generally satisfied with your product, but is not a loyal fan of the company. They can easily switch to competitors if they find a better offer. Neutrals do not harm your image, but they do nothing to support it.
- Detractors (from 0 to 6 points):
These customers are clearly dissatisfied with their experience with your company and may speak negatively about it. Detractors can cause significant damage to your reputation by scaring away potential customers.
How to calculate NPS?
The formula for calculating NPS is very simple, but effective:
\[ \text{NPS} = \% \text{Promoters} - \% \text{Detractors} \]
For example, if 100 customers completed the survey, of which 50 were Promoters, 30 were Neutrals, and 20 were Detractors, the calculation would be as follows:
\[ \text{NPS} = (50\% - 20\%) = 30\]
This means that the company has a positive NPS, which is a good indicator for business. The higher the NPS, the more satisfied and loyal customers you have.
Why do you need NPS?
NPS has several important benefits for business:
1. Simple and convenient: One question is enough to quickly and efficiently collect customer loyalty data. This makes the survey process quick and easy for both customers and the company.
2. Informative: NPS provides a clear picture of overall customer satisfaction and helps you identify areas where your company is strong and weak.
3. Predictive Value: A high NPS often correlates with a company’s future growth and stability in the market. Loyal customers not only come back again and again, but also bring in new customers through recommendations.
4. Fast feedback: NPS allows you to quickly respond to negative reviews and fix problems in a timely manner, which helps improve customer experience and increase loyalty.
How to use NPS data?
1. Analyze Feedback: It’s important to look beyond just the numbers. Collecting qualitative feedback from customers, especially detractors and neutrals, can help you understand what exactly is causing your customers to be unhappy or indifferent. This data can be invaluable in identifying specific issues and ways to address them.
2. Improving Products and Services: Feedback should be used to directly improve your offerings. This may include improving existing products and services as well as developing new, more competitive solutions.
3. Customer Segmentation: Identify which customer groups are the most loyal and which need additional attention. Segmentation allows you to develop targeted strategies for different customer categories, which helps you meet their needs more effectively and increase satisfaction.
4. Develop loyalty strategies: Based on NPS data, strategies can be developed to increase customer loyalty. These can include loyalty programs, personalized offers, and other marketing initiatives aimed at strengthening customer relationships.
In conclusion, NPS is a powerful tool that helps businesses gain a deeper understanding of their customers’ opinions and sentiments. Careful and consistent use of this metric not only helps retain current customers, but also attracts new ones through positive reviews and recommendations. Regularly measuring NPS allows a company to be one step ahead of its competitors, offering customers the best experience and service quality.