The Net Promoter Score (NPS) is a simple yet effective way to measure customer satisfaction. It is used extensively by businesses of all sizes to see if their customers will recommend their business to someone else.
A study by Lumoa revealed that CX influencers prefer and recommend NPS to their colleagues. It is the first choice of the majority of the CX experts.
Because it is easy-to-administer, easy-to-compute, and respondents can quickly respond to the question as it only contains a single question.
The NPS ranges between -100 and 100 and the biggest challenge that businesses face is that it gets tough for them to make sense of their NPS. What is a good Net Promoter Score is the most common question that experts ask. How to make sense of the Net Promoter Score and how to figure out what is a decent NPS?
This article explores everything about Net Promoter Score, how to compare it, and what is a good NPS.
How to Find Net Promoter Score
The NPS is measured by asking a simple question:
“How likely are you to recommend us to a friend/colleague?”
Customers respond to the question by selecting an appropriate number between 0 and 10. A high rating means that the customer is extremely likely to recommend your business while low numbers indicate that the customer won’t recommend your brand.
The responses are distributed into three categories:
- Detractors (Rating from 0 – 6)
- Passives (Rating from 7 – 8)
- Promoters (Rating from 9 – 10)
Detractors are not satisfied with your product or company and are least likely to recommend your business to a friend. Passives are likely to be influenced by competitor offers and are likely to switch if they find a better alternative. Promoters are the customers that are loyal and will recommend your business to their friends.
Here is the formula that you need to use to calculate NPS:
NPS = (Percentage of promoters) – (Percentage of detractors)
The NPS could range between -100 and 100. You need to compare the NPS with industry benchmark to make sense of how good or bad it is. Generally, higher NPS means your customers are satisfied with your company and they’re loyal customers.
But you don’t always get a high score. There are industries where a low score means you’re doing an awesome job. The Net Promoter Score varies from industry to industry.
What is a Good Net Promoter Score?
So what exactly a good Net Promoter Score is?
The Net Promoter Score is not much helpful in isolation. It only makes sense when it is compared with the industry benchmark report because then you can see how good your NPS is.
A good Net Promoter Score for one industry might be poor for another industry. Consider department stores where a decent NPS is 52. On the other hand, a good NPS for the internet service industry is -7.
It is essential to compare your score with competitors to see where you stand. Click here to check Net Promoter Score by benchmarks by industry.
When comparing your score with NPS benchmarks, make sure you don’t ignore location. There is a difference between the NPS benchmark for the travel industry in the US (18) and the NPS benchmark for the travel industry in Australia (12).
There are several reasons for these differences such as cultural and societal, local competition, behavioral changes, economic situation, etc. These changes impact good NPS in different countries and states. When comparing your NPS with benchmarks, you need to make sure that you have selected the right geographical region. Comparing the NPS of a business in the US with the European NPS benchmark won’t give you a clear picture of how well your company is doing in terms of customer satisfaction and loyalty.
What is a Good Net Promoter Score?
Comparing your NPS with industry benchmark can be done manually or you can use a tool. An easy way to figure out what is a good Net Promoter Score for your industry is checking Deligted’s NPS benchmark tool.
Here is how to use this tool to see if your NPS is good:
- Find the NPS using the formula mentioned above. We suggest to use our NPS calculator online for free, it will calculate NPS automatically based on the responses you receive.
- Enter NPS in the Delighted tool here.
- Select your industry.
- Click Compare your NPS.
- You’ll see the low, average, and high NPS in your industry on the next page. You’ll see your percentile in the industry which will help you compare your score.
- You’ll also see companies in your selected industry. This is to help you see if you have selected the right industry. If not, repeat the steps and select the next best suitable industry.
You need to make sure that the industry you select for the NPS comparison is accurate. The NPS varies from industry to industry so if you end up selecting an inaccurate industry, your NPS will be misleading. This is something that you don’t want to do, right?
If you want to know what is a good Net Promoter Score, you must select the correct industry for comparison. There isn’t any other better way to identify good or bad NPS.
Generally, NPS above 70 is considered good irrespective of your industry. If your NPS is above 30, it is still good irrespective of your industry as it means your business has more happy customers than unhappy ones. Even if your NPS is between 0 and 30, it is still considered acceptable and isn’t really bad. However, if it is below 0, that’s the time when you should worry.
Let’s make it simple: If your NPS is positive, it means you have more promoters than detractors which means you’re doing a good job. In this case, you’ll have customers who will recommend your business to friends.
When your NPS is negative, it means you have more detractors which could be disastrous. This is the situation where you need to look for ways to improve customer experience and customer satisfaction to convert Detractors to Promoters.
So here is how you should figure out what is a good Net Promoter Score:
- Find NPS.
- If it’s positive, the NPS is good.
- Compare it with industry benchmark of the right region and see how well you’re doing in your industry. You should be average or above average.
Now that you know what is a good Net Promoter Score and how you can find the average score in your industry, you need to focus on improving it.
What you’re supposed to do if your NPS isn’t good or is negative? Even if the NPS is good, you still have to work on customer experience improvement. There are several techniques that you can use to improve your Net Promoter Score. This article by Thales Teixeira and Renato Mendes on HBR provides you with an actionable way to improve your NPS.
Customer experience improvement should be consistent and you need to make sure that no matter how good your company’s Net Promoter Score is, you don’t stop taking appropriate actions to improve customer experience and retention.