The Net Promoter Score – why is it important and how to calculate it?
“How likely are you to recommend this product to your friends/family?”
How many times have you seen this question? One way or another it is very commonly asked after you buy something or use a service. Well, no wonder, it is the Ultimate Question.
The Ultimate Question is a book written by Fred Reichheld, it explains the science behind the approach called the Net Promoter System. In a few words, it’s a scientifically proven method to measure customers’ satisfaction. You can measure pretty much anything: how good is your product, how well is your service performing and even how loyal your customers are and if they will come back to you in the future.
It is THE question and is a very handy metric if you are curious to know the answers.
We’ve been using the Net Promoters Score (or NPS) metric for a couple of years here at Mindvalley. We found that it’s a very effective yet simple way to get and measure our customers’ feedback and satisfaction with our products.
Let me explain how it works.
The idea is – all your customers can be divided into three groups:
- people who love what you’re doing
- those who are neutral about you/your products
- the negatively minded/angry customers who not only will complain, but they also will tell their friends to never trust your company.
The NPS system calls these groups promoters, neutrals and detractors.
Your goal, ultimately, as a successful business, is to have more promoters than detractors.
Here is a good explanation from the NPS Site: “The average firm sputters along at an NPS efficiency of only 5 percent to 10 percent. In other words, promoters barely outnumber detractors. Many firms—and some entire industries—have negative Net Promoter Scores, which means that they are creating more detractors than promoters day in and day out. These abysmal Net Promoter Scores explain why so many companies can’t deliver profitable, sustainable growth, no matter how aggressively they spend to acquire new business. Companies with the most efficient growth engines—companies such as Amazon, Harley-Davidson, Zappos, Costco, Vanguard, and Dell—operate at NPS efficiency ratings of 50 percent to 80 percent. So even they have room for improvement.”
Here are the Quick Steps to follow to Evaluate and use the NPS metric:
- Establish a survey during or after your product’s consumption. We chose 25 days after delivery for most of our products. (you can use surveymonkey.com or even google forms to do this)
- The 2 questions of the survey should be:
- How likely are you to recommend this product to your friends/family? Give your clients a scale from 0 to 10 to answer (0 is Never, 10 is Definitely Yes)
- Do you have any additional comments you would like to share?
- Input the absolute number of responses for each value into this spreadsheet.
- Compare your NPS between months, promotions or products. Negative Values will identify the products you need to work on the most.
The NPS can also be used to measure your employees loyalty towards you as an employer. (Make it an anonymous survey of course)
You can always visit the NPS site for more info: www.netpromotersystem.com.
After doing this simple exercise , you will know if your products create more detractors than promoters. The ones with big negative scores are to be addressed – they might be hurting your business in the long run even if they generate a lot of profit.
You can expand this concept in many ways but this method is the best and easiest way we found to test our products. We use this exact same process here at Mindvalley. We make sure that we start fixing the products with negative scores by addressing the issues brought up in the comments section of the survey. It’s a really straight forward way to prioritise your work on enhancing your products.
Please comment below and share how you use the Net Promoter Score or other important metrics in your business to help you make important decisions.
[UPDATE: Read Part 2 of this article, where we answer “How To Set Up NPS For Your Business“.]