Success formula: Measure customer satisfaction with the Net Promoter Score (NPS)

Anyone who takes responsibility in a business wants to know how they’re performing. Many things indicate this alongside turnover and profit. These key performance indicators (KPIs) differ depending on the areas they are used in. The Net Promoter Score, or NPS, is a new, important indicator of success.

The NPS method is used by companies to measure how satisfied customers are with their products, services and business. High customer satisfaction correlates with successful business in most industries. Whoever has happy customers will succeed.

How is Net Promoter Score measured?

The definition of NPS is simple. Firstly, a business measures customer satisfaction. This feedback is quickest to obtain straight after shopping, delivery or service. It doesn’t require long questionnaires – it needs just one question. It can be something like: Would you recommend our product to others? Or: How likely are you to recommend our service to colleagues?

The answer can be on a scale of 1 to 10. 1 means unlikely, 10 stands for very likely. Any respondent who answers 9 or 10 is considered a promoter. If you answer 7 or 8 you are among the passives and you don’t count. Anyone who answers 6 or below is a detractor.

The Net Promoter Score is determined using the following formula.

NPS = promoters (in % of everyone asked) – detractors (in % of everyone asked).

The highest score you can get is 100, the lowest is -100. In an ideal world in which everyone loves what you’re offering, your NPS is 100%.

 

Infographic on how to calculate the net promoter score

NPS makes customer satisfaction everyone’s business

Until now, surveying customers has cost a lot of time and money. In agile businesses, the customer is the focus of employees every day. Anyone taking digital transformation seriously will use the NPS score to let everyone in the business know what customers want, what they’re getting and how satisfied they are. Businesses use customer satisfaction analysis to invest in customer loyalty.

US business strategist Fred Reichheld developed this way of measuring customer satisfaction as a partner to management consultancy Bain & Company in collaboration with customer loyalty specialists at Satmetrix System. Reichheld researched customer satisfaction for years. He introduced the Net Promoter Score for the first time in 2003.

Businesses in eCommerce are especially keen on the NPS survey. Their customer contact is usually digital from start to finish, and the marketing department will automatically send out the survey for feedback. Staff can follow how the NPS is developing over the course of the day in real time, sitting at their workstations. They can respond immediately to a decreasing score, find out what has caused it, and solve problems to restore a great customer experience.

Get going quickly with the Net Promoter Score

As with many indicators, what matters with the NPS is how it progresses over time. The first measurement may be interesting as a snapshot, but it doesn’t say very much. The quality of findings comes with time – and lots of respondents.

If you want to work with a customer experience (CX) partner to introduce and work with NPS, there are several large software providers and consultancies that do CX. Working with them has the advantage that you can compare your own NPS with that of your rivals.

If you go it alone, you’ll have to think about where you want to set your NPS target. At what point are my customers more than satisfied? With an NPS of at least 1? Or an NPS of 12, which is harder to achieve? The frontrunners in various industries achieved scores of over 30 in the UK in 2017.

Benefits of the Net Promoter Score

As is so often the case in digital transformation, one of the biggest benefits of using the NPS score is how simple it is. It’s easy to introduce:

• Easy to conduct using one question
• Easy to evaluate
• Focus on customers
• Sensitises all staff

NPS customer satisfaction analysis criticisms

Critics of the Net Promoter Score take issue with precisely what makes it strong: it’s too simple.

• The NPS survey delivers no customer insights
• The scale is arbitrary
• Industries are not comparable
• Doesn’t take account of cultural differences
• The feedback question itself can put customers off if they’re confronted with it frequently

There have also been studies that have not been able to empirically confirm a correlation between NPS and business success.

In practice, the NPS score has evolved into a Net Promoter System. This employs, alongside the simple NPS survey, focus groups and other processes to generate insights and learn more about customer satisfaction.

Measure customer satisfaction and improve

People, as usual, are the key to success – both the staff in a business and the customers outside. Dissatisfied customers talk much more often and with more people about bad experiences than satisfied customers do about good ones. That’s why systematically surveying and evaluating individual feedback is important.

German sports equipment manufacturer Adidas has been using the NPS score since 2017. Just one year later, the company came first in customer satisfaction among big German companies. And in 2019, Adidas once again topped German businesses in customer satisfaction in a study by analyst and consultant company Servicevalue.

At Adidas, the entire workforce, including the executive board, sees the feedback customers are giving in real time – and they respond to it. Adidas even uses the Net Promoter Score to survey and promote staff satisfaction.