Have you noticed lately that every time you make a purchase from a clothing store or stay at a hotel, you get a follow-up email from the company asking you about your experience? If you have, you’re not alone.
These companies were probably inquiring about your interaction so they could calculate their Net Promoter Score. Net Promoter Scores are an easy and actionable way for businesses to measure customer experience and then react accordingly.
Your score is incredibly important to your revenue. Companies with the highest scores in their category grow at over twice the rate of the category average. Double! In monetary terms, your happiest customers have the capacity to generate as much as $9,500 more in profits over their lifetime than your unhappiest ones.
So, how do you calculate your score, and what can you do to improve it if the result is low? Read on to find out how you, too, can boost your score and double your company’s growth.
What Is the Net Promoter Score?
Developed by Fred Reichheld of Bain and Company, the Net Promoter Score (or NPS) is a number that measures the loyalty of your customers and their willingness to promote your business to others.
The Net Promoter Score simply asks customers, “How likely is it that you would recommend [your product/brand] to a friend or colleague,” then provides a scale from 1 (“Not likely at all”) to 10 (“extremely likely”).
Based on their answers, people who respond are divided into three categories:
- Promoter: Anyone who scores your business a 9 or 10 is someone who will likely become your brand advocate, offering you solid word of mouth referrals to others. They’ll be your most loyal customers—they have the highest retention rate and cost efficiency.
- Passive: The name speaks for itself. Those who score your business at a 7 or 8 probably had a positive experience, they won’t cause you much trouble, but you can’t rely on them to be your business’s biggest fans either.
- Detractor: Anyone who scores your company lower than a 7 isn’t happy with your business. Unsurprisingly, they have low retention rates, are costly customers—and you’re at risk of them spreading negative reviews to their friends about your interactions.
How to Calculate Your NPS
Your company’s Net Promoter Score is equal to the percentage of people who are Promoters minus the percentage of people who are Detractors. You can use the following calculation to receive your final score:
[(Promoters/Total Responses) x 100] – [(Detractors/Total Responses) x 100] = NPS
Average businesses have a score of 10-20. Truly best-in-class companies (think Apple or Amazon) often have scores as high as 80.
How to Improve Your NPS
To improve your company’s NPS, you need to first analyze the data and then act accordingly.
First, ask the right questions. In addition to the ranking of their experience, follow up with a free form question that will provide qualitative data on top of the quantitative score. Something along the lines of, “What improvements could our company make to provide you with a better experience in the future?” will do.
Then, review answers by customer segment (e.g., by buyer personas, demographic, or new vs. repeat). When you examine different groups rather than the aggregate, you’ll have an easier time diagnosing your problems and obstacles.
Rob Ristagno is the CEO and Founder of The Sterling Woods Group, a firm that builds new revenue streams for media companies and publishers. He is an expert in direct monetization of content. Prior to creating The Sterling Woods Group, Rob served as a senior executive for several niche media and e-commerce companies. He most recently was the Chief Operating Officer of America’s Test Kitchen, considered to be the gold standard in the niche media world for building diversified – and often digital – revenue streams.
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