Customer satisfaction is an objective that almost every company has an eye on. And to their help comes various customer satisfaction measurement tools that also are globally accepted by leading brands.
One of the most popular customer satisfaction measurement tools that companies use in modern times is Net Promoter Score.
Introduced in 2003 by Bain & Company’s Fred Reichheld, Net Promoter Score has become the go-to customer loyalty and engagement measurement tool for companies as big as Apple, Amazon, Google, Microsoft, G.E., American Express, and others.
Did you know that more than two-thirds of the Fortune 1000 list use Net Promoter Score? Well, it’s in your business interest to learn about Net Promoter Score.
In this post, we’ll help you get acquainted with the Net Promoter Score, its formula, and the different ways for how net promoter score is calculated as well as how to calculate customer satisfaction overall.
So let’s jump right into the content, shall we?
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What is Net Promoter Score?
NPS or Net Promoter Score is essentially a customer experience and satisfaction metric that allows companies of all sizes to measure customer loyalty.
Net Promoter Score is usually measured to determine whether or not customers are willing to promote the brand, products, and services they use.
The score is measured within a range of -100 and 100.
The idea here is to use Net Promoter Score to develop a benchmark that companies can use to gauge current levels of customer loyalty and take initiatives to improve customer satisfaction and predict customer behavior and purchasing trends.
How to calculate NPS using Net Promoter Score formula?
Now that you know precisely why you need Net Promoter Score surveys or NPS surveys, it’s time we learn how to calculate the score! The formula to calculate NPS or NPS calculation is simple. Let’s take a look at the nps calculation formula —
Net Promoter Score or NPS score = (% of Promoters) – (% of Detractors)
To calculate the net promoter score, all you need to consolidate is the percentage of promoters, passives, and detractors in your existing customer base. Who are detractors and promoters?
Promoters are people in your customer base that are happy with your brand and rate you 9-10 in the NPS survey. Passives are survey respondents that will rate you 7-8.
And detractors are the unhappy customers that you should care for the most as they rate you 0-6 in the survey.
The only problem with using NPS calculation to gauge customer satisfaction is that you need a significant number of responses to get precise results.
We highly recommend using Net Promoter Score when you have at least 500 responses from the surveys. But what should you do after collecting the responses?
Calculating NPS using Excel template
There are several ways you can put the Net Promoter Score formula to work. First, you can do an NPS calculation through Excel.
Use the software to categorize the responses into promoters, detractors, and passives. Add the responses to each group and then divide the total number of groups from the total number of responses.
Calculating NPS using online calculator
You can even do an NPS calculation online. NPS calculator is easy to use and delivers quick results. All you have to do is determine the number of promoters, passives, and detractors. Feed the numbers into the NPS calculator and you will have the results.
Calculating NPS with a survey tool or NPS software
So how is net promoter score calculated? Let’s take a deeper looker at that here.
You can create an NPS survey manually and execute them to generate results. But you should prefer using NPS software as it can help you save time, create better NPS surveys, and control the distribution channels and events that trigger the surveys.
NPS software will also allow you to view real-time responses and access in-depth NPS reports. By using survey software you don’t even need to know how NPS is calculated. The software takes care of all of that for you!
Most NPS software will offer NPS question templates and formats you can choose from. The templates can be edited and used accordingly. The results of the surveys are displayed in the dashboard with line and bar graphs.
The best thing about using NPS software is that you don’t have to export or copy-paste data, significantly eliminating human errors. All of this makes NPS software better than using Excel and online calculators.
Why do you need Net Promoter Score?
Indeed, you can calculate customer satisfaction and loyalty through Net Promoter System. But, there are other customer satisfaction measurement tools available too. So why should you go for NPS surveys?
Do you even need NPS survey results in the first place? The simple answer to the questions is: Yes, you need NPS surveys to make the most of recommendations and reviews and push or influence potential customers to make a purchase.
More importantly, to figure out the probability that such customers will return and whether or not you need a new customer experience or marketing strategy.
Here are some of the most important reasons you need a Net Promoter Score —
1. Reduce customer dissatisfaction
Dissatisfied customers, if left unattended, can impact your business revenue and overall market reputation.
The open-ended questions and follow-ups through the NPS survey help collect feedback that allows companies to deal with dissatisfied customers better.
In this way, Net Promoter Score makes it easier for brands to focus on issues critical to business success.
2. Boost customer loyalty
How to boost customer loyalty?
While there are several ways you can do that, the most effective way to achieve customer loyalty is to listen to the customers and implement the feedback.
NPS surveys help measure customer loyalty as is a perfect reflection of the customer experience or customer satisfaction, leading to increased customer lifetime value.
3. Make impactful referral marketing campaigns
Net Promoter Score surveys make it easier for companies to figure out customers that are satisfied with their products and services.
Such customers were subjected to impressive customer experience and in return, they will be more than willing to share testimonials and online reviews.
NPS surveys will help identify the brand promoters and grow your business through a “word-of-mouth” marketing strategy.
4. Increase customer retention
If customers don’t make repeated purchases, move to your competitors, or cancel subscriptions, it shows that your company fails to retain customers.
Calculating Net Promoter Score will help reduce the churn rate as you successfully identify the promoters, passives, and detractors.
As the number of passives and detractors increases, you would know that the customer churn rate is on the rise.
5. Gauge customer expectations
NPS surveys allow customers to share feedback. The feedback, more importantly from passives and detractors, can help build your business with a strong foundation.
Qualitative feedback helps determine customer expectations and improve accordingly, leading to better Net Promoter Scores.
Different types of NPS survey used to calculate net promoter score
Calculate NPS feedback as the NPS survey help companies collect data related to customer loyalty and relationships.
The surveys are pushed at precise moments in the transaction or event to ensure the surveys are attended at the right time, i.e., the time when customers can share the most honest feedback.
Since not all NPS surveys are built the same way, you should know the types of surveys —
Relationship NPS surveys (customer/employee)
You want to know if your business or brand provides a good customer experience as a whole.
If you wish to measure the general customer experience, you want to conduct a relationship NPS survey. These also help gauge employee experience.
However, relationship NPS surveys work when conducted regularly (bi-annually or quarterly).
Transactional or event NPS surveys
Are you looking to figure out the seamlessness of a particular event or transaction in the customer journey? You should use transactional or event NPS surveys.
These surveys help determine CX immediately after a specific transaction or interaction.
We suggest you put transactional NPS surveys at certain points of contact that lead to customer dissatisfaction or the ones you wish to make more efficient.
The Net Promoter Score calculation isn’t complicated. The NPS score equation is easy to implement and works well regardless of the size of your customer base.
However, the challenging part of the process is to implement the insights of the survey. Remember, the idea is to make the entire customer purchase journey seamless, enjoyable, and memorable without jeopardizing the overall customer experience.
The more you focus on that, the easier it will be to improve the NPS. Did you find this post helpful in using the NPS calculator? Also, don’t forget to check out other informative posts on the blog!