Happy Customers: Net Promoter Score

This is part 2 of our series on Happy Customers, previous segments are available in our archives.

Are your customers happy?

Such a simple question is remarkably difficult to answer. You could ask them, but rarely will someone tell you their honest opinion of you. You could wait and see if they remain customers (unhappy customers will leave) but by then it’s too late to change their mind.

Ideally, you would have a way to measure customer satisfaction that:

  • Is a simple metric (a single number).
  • Fast enough that you can measure it on a regular basis.
  • Does not require a lot of analysis.

The great news is that this simple measurement exists and it is called the Net Promoter Score. It allows you to ask your customers a single question to tell you everything you need to know. That question is:

How likely are you to recommend our company/product/service to your friends and colleagues?

The answer takes the form of a score, from 0 to 10, with 0 being not at all and 10 being extremely likely. You then group your customers into three groups based on their response:

  • Promoters (9-10): Customers who love your product and will recommend it to others.
  • Passives (7-8): Customers who are ambivalent.
  • Detractors (0-6): Customers who are unhappy and may advise against working with you.

NPS

At first, this seems rather aggressive since you need to score a nine or higher to be considered a promoter. However, most people have an inherent ratings bias where they avoid giving very low ratings. This scale is designed to better capture the customer intent with that bias in mind.

To calculate your Net Promoter Score (NPS) you simply subtract the percentage of customers who are Detractors from the percentage of customers who are Promoters:

Net Promoter Score = (% who are Promoters) – (% who are Detractors)

Your NPS can be anywhere in the range of -100 (very bad) to 100 (very good). In most cases it will be in between, with a positive value better than a negative value. For example, in 2013 the Apple iPhone had an NPS of 70, Costco had an NPS of 78 and Southwest Airlines had 66 (source). There are many sites which provide NPS benchmarks for different industries, so it should be easy to find one for yours.

The NPS is not a perfect measure of customer happiness, but it gives you a quick way to classify customer satisfaction. Tomorrow we’ll talk about how to apply the NPS to segmentation to help improve overall happiness!

 

Quote of the Day:Happiness in this world, when it comes, comes incidentally. Make it the object of pursuit, and it leads us a wild-goose chase, and is never attained. Follow some other object, and very possibly we may find that we have caught happiness without dreaming of it.” Nathaniel Hawthorne