The Net Promoter Score (NPS) is commonly used by companies to measure customer loyalty and while many businesses have successfully implemented NPS score collation, there is often some confusion regarding what is actually considered to be a ‘good’ NPS score.
The reason it is difficult to determine this is because the absolute value is not always reflective of how the company is scoring in terms of customer satisfaction.
Let’s start with looking at the calculation of NPS…
Net Promoter Score is calculated by asking the following question:
“On a scale of zero to ten, how likely are you to recommend our business to a friend or colleague?”.
Customers are then segmented into categories based on the score they provide:
9-10: Promoters. These are the customers who will give you repeat business and will tell others about your business, helping you attract more customers and grow.
7-8: Passives. This category of customers is not unsatisfied with your company, but they could easily be persuaded to take their business to a competitor.
0-6: Detractors. These customers can significantly harm your brand by sharing negative opinions about your business.
NPS is then calculated as follows:
NPS = Percentage of Promoters - Percentage of Detractors
An NPS score can therefore be anything from -100 to 100.
Factors to consider
Industry: What would be classed as a good NPS in one industry is often regarded as a very poor score in a different industry, so the most important aspect of measuring the NPS is to compare against the right competitors.
Local Culture: Customers in different countries tend to give different responses. In the US for example, it is quite common for high scores such as 10/10 to be provided, while customers in Europe and Japan can be more conservative with their scoring. So, that is another big factor to take into account when discussing what a good NPS score looks like.
When you consider that NPS scores sit between -100 and 100, that leaves a lot of room for debate over what a good score should be. If you are not familiar with how much NPS scores vary, you might conclude that a negative score is very poor, but it could be a much better negative score than your industry competitor’s scores.
NPS is one of the hardest customer experience methods to use for benchmarking. In some cases, there may not be many competitors that you are able to benchmark against. In this situation, the way to use NPS is to benchmark purely against your previous scores. Comparing to another industry or another company that is not offering the same services will not give you an accurate picture.
What is a good NPS score?
Although we have explained that it’s trickier than ‘good’ or ‘bad’,, there are some general assumptions that we can make regarding the scores:
Less than 0
If you are scoring less than 0, this indicates that there are a lot of issues that are making your customers unhappy with your product or service. Even if every other competitor is scoring similarly, it is clear that your industry needs some improvements to bring NPS up to a reasonable score.
If you are scoring in this range, then this is definitely not a bad starting point to work from. But this score also shows that there are areas that you need to work on to improve the customer experience.
If you are achieving a NPS score between 30 and 70 then the good news is that you have more happy customers than unhappy customers and your company is on the right track. There is still room for some improvement, but these are more likely to be moderate tweaks to your business model, as opposed to a complete overhaul.
A score of over 70 means that your customers are very likely to recommend and advocate your business to their friends, family and acquaintances. When you are getting these kinds of scores, your company is most likely growing quite rapidly, and gaining many new leads from customer referrals.
How NPS changes over time
The average NPS scores for most industries have declined over time, with industries such as Internet services, Software, and Banking having all experienced significant changes. One of the reasons for this could be that customers have higher expectations than they used to, especially in terms of technology.
For example, ten years ago, the idea of having a reliable internet connection was considered by most users to be sufficient. Today, customers are looking for the fastest, most reliable internet service because this determines the quality of their working, gaming and streaming experience. The customer simply wants more from their internet service provider than they did in the past.
So, even a declining NPS score might not suggest that your company is in decline; it could be that your customers are just more difficult to please across your industry today than they were in the past.
How to effectively benchmark your NPS score
If you want to know how to benchmark your NPS score most effectively, here are the steps you need to take:
Compare it to the industry average
Your first step in being able to benchmark your NPS score is to compare it with the average scores for your direct competitors in your industry. This method is called the ‘relative’ method, which essentially means you are looking at the score in relation to other companies. This is as opposed to an ‘absolute’ score.
When you start looking at your industry average NPS scores, you will quickly see whether your industry tends to have a good or bad reputation with customers. Certain types of industries, like hospitality, exist to bring enjoyment to customers. They are more likely to be seen in a positive light, but also to be measured more harshly, than an industry where experience isn’t central.
Making comparisons across industries is completely pointless, so concentrate on your industry, and on competitors of the same size who provide the same services or products.
We mentioned earlier that the country your customers are in will also influence the NPS score. If you are a global company, you cannot compare what score your customers in Japan give, for example, to a competitor’s US-based customers.
You might also find that there is a difference in NPS for your industry on a more localised level. Comparing a UK company based in London, providing services to London-based customers, against a Manchester-based rival, might not be as valuable as comparing against other local companies.
Think about how to deliver your survey
The channel that you choose for your NPS survey will also have a significant impact on the scores you receive and the number of responses that you get. Many companies conduct their survey at the end of a telephone conversation with an advisor. Because the customer has spoken to a person, they are likely to worry about how their feedback affects the advisor personally, rather than the company as a whole. This means that a positive bias can creep into their scores when compared to channels with less personal interaction.
As another example, online surveys are easier for companies to collate and analyse, but they might not be a good channel to encourage customers to provide more details, due to factors like survey fatigue
Before you decide on the channel you will use to measure NPS, you should do some research to find out what method your competitors are using. This will make any benchmarking accurate.
Benchmarking against your own company
The most important use of your NPS score is to follow its trend regularly. Analyse any decline to see if there are specific problems that need addressing. After all, the key purpose of conducting an NPS survey is to keep your reputation growing by reacting to customer experience feedback.
As well as using an NPS score, many companies use a combination of other customer satisfaction metrics to build a deeper understanding of customer experience. This helps to highlight why satisfaction is dipping. Going beyond NPS will help to obtain qualitative feedback, which is key to understanding the reasons for poor levels of satisfaction.
OMBEA is an experience management company. Our OMBEA Insights feedback platform continuously finds your weaknesses so you can fix them, faster than ever before. It works by continuously gathering in-the-moment feedback, and automatically analysing and prioritising what it sees.
The feedback comes from a mixture of customers and employees through any combination of real-time ‘feedback collectors’, each designed to drive much higher response rates than traditional surveys. The most popular options are our touchless smiley pods (like the ones you see in airports), QR code surveys, and website widgets.