Net Promoter Score gives merchants the ability to track the health of their customer relationships – but what about NPS relative to others? Let's take a look.
It's one thing to look in the mirror – another to grasp how you look compared to others. Though Net Promoter Score ("NPS") provides a crystal clear mirror, it takes a few smart marketing decisions to understand what is a good NPS and what scores could benefit from improvement.
The Logic Behind NPS
Quickly, for those looking at NPS for the first time: the logic behind NPS is that businesses only have to ask customers one question to understand the health of overall customer satisfaction (and thus, long-term monetary success):
- From 0-10, how likely are you to recommend this business to a friend?
Scores of 9 and 10 represent "Promoters," 7 and 8, "Passives," and <=6, "Detractors." As we saw previously, the way to calculate NPS score is subtracting the percentage of "Detractors" from "Promoters;" research from the father of NPS, Fred Reicheld, showed that most businsses register between 10 and 15.
So, there you have it! 15 – a "good" Net Promoter Score. Are we done?
Peeling Back the NPS Onion
Darn. Business is more complicated than that – especially for small-medium sized businesses ("SMBs"). Among other factors, polling zillions of customers at large brands is iminently doable, but SMBs cannot draw on the same audience. On a smaller scale, industry-specific factors affect customers' perception, making cross-industry comparisons challenging. Most important: though my business might have an impressive NPS score of 20, what if my competitor is racking up 21s?
To find out the answers to these types of questions, SMB's need strategies for tracking and understanding NPS. Here's how to do just that.
Understanding What is a Good Net Promoter Score
At a high level, think about how we designate stuff "good" and "bad" – let's use a random example like, "How good does this smoothie taste?" Sure, we can differentiate between "good" and "bad," but for "how good" we need two things: (1) context and (2) time. More smoothies and more time between trying our smoothie and making a definitive judgement (I tried avocado, banana, blueberry, and spinach this morning – wasn't the best going down, but right now I feel great!).
To contextualize NPS, the best starting point is location. For multi-location business owners, track NPS at the brand level and NPS at individual locations. Once you start, you'll immediately see outliers, with some locations far outperforming others (recent data show that the average check between a business's best and worst performing locations differs by 156%). Ask top-performing managers which best practices to disseminate throughout the entire organization and implement them immediately at the lower performers. Once each location's NPS score stands equal to the brand average, you'll know you have a "good" score (1 location businesses can try using months instead of locations to approximate the same logic – requires time though).
From there, A/B test new customer service innovations at various locations to see which will continue pushing individual NPS upward. Because the whole (NPS at the brand level) truly represents the sum of its parts (NPS at the location level) – by incrementally improving the parts, you can have a tremendous impact on the whole. Repeat this process, and continue pushing NPS upwards through the phases of "Good" (from good, to better, and best).
To develop a time perspective, businesses need to focus on accumulating data histories. Remember, customer satisfaction is a dynamic metric. Knowing NPS on one day has zero relevance for what that NPS will be 30 days later. So, rather than asking "what's a good Net Promoter Score," ask "how has my NPS changed?" Use NPS to track the success of new customer service initaitives. Incentivize managers to demonstrate improved NPS every month over the course of the year. Analyze how NPS changes with seasonality or morning vs. night. There's always a new way to look at / cut NPS to see what's working and what's not. The quality of "Good" only comes from continuing to be good every single customer visit – not on one day.
Want a specific example? Here's a case study showing exactly how this approach works in practice. Read it to find out how NPS helped a business succeed in getting customers to spend 19% more and come back 44% faster.