A Net Promoter Score (NPS) is a tool used to determine and measure if your customers will refer you to new people. In fact, NPS is one of the most important social media metrics you need to track. NPS is an ideal way to see whether your recommendation efforts are working or not.
Why are referrals so important? People trust their friends, family members, and other loved ones a lot more than advertisers. In fact, only 14% of consumers actually trust advertisers. Because that number is so high, referrals are detrimental in the modern business landscape.
NPS definitely counts as a customer satisfaction benchmark. But it’s not the same thing as a customer effort score or customer satisfaction score. The NPS measures the overall sentiment that a new customer feels towards your brand.
Why is Net Promoter Score important?
NPS measures customer loyalty by categorizing them into three groups - promoters, passives and detractors. But NPS has many other benefits that can help your business measure and justify success and customer growth:
- NPS measures customer loyalty. Many businesses measure customer loyalty and control by looking over a customer’s repeat purchases, their churn rate, and their average order value. Measuring NPS on a daily basis will show you the likelihood of your current customers to refer other customers. In short, it gives you a tab on your loyalty performance -- are customers fans, or even better, advocates for your brand?
- NPS identifies areas for product improvement. When you track NPS, you can see the negative side effects of updates, and you can troubleshoot changes with your product in real time. NPS consists of a numerical ranking, but there's also a qualitative question that follows, asking the respondent to assess why they answered the first question.
- It’s user-friendly and easy to adopt. This quick-and-easy process makes NPS an efficient medium for data collection. It has higher completion rates than traditional surveys and it's more cost-effective than conducting focus groups or customer reviews. NPS also makes it easy to personalize your marketing efforts.
- It quantifies word-of-mouth traffic. Further, word-of-mouth marketing is important at several parts of the buyer's journey -- from consideration to evaluation to purchase -- and it's becoming more important in developing markets.
How to measure Net Promoter Score
Examining your Net Promoter Score is a crucial way to track the feelings and thoughts customers have about your brand. It thoughtfully contributes to your word-of-mouth and referral marketing efforts by helping you determine if what you are creating and putting out there to your target audience is working or not.
<<< Looking to boost your Net Promoter Score? Here are the top referral marketing software tools to look into. >>>
The NPS system gives you a percentage, based on the classification that respondents fall into—from Detractors to Promoters.
So to calculate the percentage, follow these steps:
- Enter all of the survey responses into an Excel spreadsheet
- Now, break down the responses by Detractors, Passives, and Promoters
- Add up the total responses from each group
- To get the percentage, take the group total and divide it by the total number of survey responses
- Now, subtract the percentage total of Detractors from the percentage total of Promoters—this is your NPS score