What is NPS score and why is it important? (+examples)

If you have ever wondered what the NPS Score is, you have found the right article.

In this article we will briefly describe what the NPS is, how to calculate it and then provide some examples of why this is important to your business.

What is NPS score and why is it important?
NPS is an acronym for net promotor score. NPS is important because it is a measurement of how happy your customers are, and how willing they are to refer someone to you. Your net promoter score (NPS) is a formula and is the percentage of the promoters (really happy) minus the percentage of the detractors (unhappy).

Let's now go deeper into describing what the NPS score is and then we will provide some real world examples.

Net Promoter Score (NPS): This important number will reveal what your customers really think about you

Now that you are serving a growing base of customers, it's time to kick things into next gear.

So, what’s next?

Marketing and Innovation, of course.

But to market, innovate and produce more products and services (value), you need a strong pulse on what your customers really think. And what they really want.

Because you probably don’t have the whole story. Don't feel bad because this is tough for most companies.

The first step is to get some customer feedback.

After all, customer feedback is market research at its best.

As we get into the NPS score and its importance, here is a very helpful article on creating a simple survey using Google Forms:

How to Create an Online Survey Using Google Forms (+example)

There are many strategies for customer feedback.

I have a few preferred methods to find out exactly how your customers really feel about your brand. While NPS is a solid customer feedback tool used by huge companies, it is one important tool that you can use in addition to others.

For example, NPS is a form of quantitative market research. That is, it is narrowly measuring the answers of one pre-defined question in order to gain a metric that we can use as a benchmark for future decisions.

Alternatively, having your sales team ask your customers open-ended questions can be an extremely helpful information-gathering customer survey tool, which is a form of qualitative market research.

Used together, these two forms of customer feedback can give you and your organization a competitive advantage.

For a very helpful article on how marketing professionals do market research, go here:

8 Market Research Strategies used by Marketing Professionals

Your Net Promoter Score (NPS) is absolutely a strategy worth knowing.

Let's now learn how you can easily do this now.

Here's what NPS is and why its important for your business

The purpose of the NPS is to categorize a company's customers into 1 of 3 groups:

1. Promoters
2. Passives
3. Detractors

Your net promoter score (NPS) is generated by asking your customers one question:

How likely are you to recommend your business, product or service to a friend or colleague?

-- Ranked on a scale of 0 to 10, 10 being best

Here's what the NPS means:

• Customers giving a response of 9 or 10 are promoters.
• A score of 7 and 8 are passives.
• A score of 6 or below are detractors.

Here's why this score is important:

Your net promoter score is...

The percentage of the promoters minus the percentage of the detractors.

Here's an example of what this looks like, for a local IT services company:

A survey was filled out by 375 customers, via email, direct mail and while “in the shop":

• 84 were in bucket #1: 9’s and 10’s: 22%
• 229 were in bucket #2: 7’s and 8’s: 62%
• 62 were in bucket #3: 0’s thru 6’s: 16%

The NPS formula calculation:

Bucket 1 - Bucket 3 = 22 - 16 = 6

The NPS Score = 6

A score of 6 sounds meaningless, doesn’t it?

It basically is, by itself. That’s why you need to measure your score against the industry.

If you are in the cable TV or ISP business, you may be leading the pack as these industries are known for having a lot of unhappy customers.

But if you are in a specialty services niche, you have your work cut of for you as this industry is al about providing excellent service to the customer.

But regardless of your industry or your score, the higher the score the better.

So, what is a good Net Promoter Score (NPS) and why is it important?

NPS scores vary widely, especially among industries.

• Typically, well-known, popular companies like Amazon, Apple, Costco and Nordstrom may get scores of 50-80, which are absolutely fantastic.
• A score of 20 or better is a great score, while 30-40 is very, very good.
• If you are getting a negative number, it may be time to look for a new business.

Or, time to hunker down and find out what is going on and start making your customers happy.

How to improve your NPS score and more importantly, make your customers happier and more loyal

Here's a real example NPS action plan from a manufacturing company:

Analysts at this German manufacturing company found that for every 10% improvement in their NPS score, they realized a 7% increase in their revenue growth.

Coincidentally, they also found that their NPS scores spiked when their sales reps visited their dealers three times, and began to fall with more frequent visits.

You can do this to improve your customer loyalty right now, even without knowing your NPS.

But regardless, this is more proof that simply asking your customers what they want is a wise starting point.

Helpful Resources

If you have customer survey skills, you can learn how to turn this into an income as a marketing consultant. Go here to learn how with our Nomad Marketing Starter Guide.