There are many numbers in the world of customer service – key performance indicators (KPIs) that individually or together provide companies with a measure of customer experience (CX). There is no question that today, CX is the most critical component of the customer journey. Organizations track KPIs to learn what they need to improve, what interactions or touchpoints are problematic, and to gain insights that help decision-makers develop strategic plans.
And what’s the best way to learn how the customer feels? Simple – just ask them.
As expectations soar and competition becomes an increasing challenge, businesses have become more customer-centric, recognizing the need to know where they stand with their customers, to focus on identifying customer needs to keep them happy and loyal. Customer feedback is a necessary and easy way to gain insights and make meaningful improvements that impact a company’s performance, and bottom line.
What is Net Promoter Score (NPS)
Net promoter score (NPS) is a customer service metric that helps companies understand and track how customers perceive them. As described in the section below, respondents are segmented into three customer types: promoters, passives and detractors. Unlike other key performance indicators, NPS measures general customer sentiment, providing deeper insight with a broader view of customer satisfaction. NPS is a standard benchmark used worldwide that speaks to overall customer loyalty rather than satisfaction regarding a particular service, brand, or interaction with a company, but any single touchpoint can affect a company’s NPS.
As reported by Bain & Company to Bloomberg, more than two-thirds of Fortune 1000 companies use Net Promoter Score to evaluate the likelihood of customers churning. The evaluation determines the need for proactive activities to prevent customer churn by targeting the unhappy customer and addressing any negative issues before they abandon ship or worse, damage your brand with negative word-of-mouth. According to consultant Estaban Kolsky, 11% of customer churn can be avoided if the business simply reached out to the customer.
Calculating Net Promoter Score
Net promoter score is calculated based on a simple survey question, asking customers to rate how likely they are to recommend a product, service, or brand to a friend or colleague, on a scale of 1-10. The responses are divided into three categories:
A rating of 9-10. These customers are typically loyal and most likely to recommend the brand or organization, fueling growth by their referrals.
A rating of 7-8. These customers are moderately satisfied or indifferent. They could become promoters but could also easily switch to the competition.
A rating of 0-6. These are typically unhappy customers who are not likely to recommend a product or service. In fact, they could share negative experiences with others, potentially damaging a company’s reputation.
To calculate your net promoter score, first determine the percentage value of each category out of the total number of responses, including the passives. Then, subtract the percentage of detractors from the percentage of promoters.
For example, if out of 100 customers in your survey 20% are detractors and 60% are promoters, your NPS would be 40 (60%-20%).
Why is NPS Important?
Customer loyalty is a determining factor for repeat business and customer referrals. People tend to trust the recommendations of family and friends, and word-of-mouth advertising drives volume. The NPS metric tracks just how willing people are to recommend or promote what you’re offering.
Measuring the net promoter score and understanding the drivers behind customer rating provide a clear and direct response to how a customer feels about a product or service, helping a company to solve issues and improve customer satisfaction. Tracking customer loyalty provides insights on actions a company should prioritize to improve.
Some companies expand the survey to incorporate open-ended questions for qualitative feedback and more insight on a customer’s experience, to gain a better understanding of the reason behind the rating. The net promoter score can help organizations identify positive and negative trends in customer relations, and to align business strategy with customer expectations.
What Is a Good NPS?
The average net promoter score core may vary from industry to industry, but in general, above 30 is considered good. In some sectors, a score in the 40s may be the gold standard. For example, the average NPS in 2022 is 61 for technology and services, 40 for B2B software and SaaS, and 29 for communications and media. But really, the most important thing is how you measure against the competition within your own industry.
Here are some examples of NPS benchmarks by industry:
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The Correlation of NPS to Customer Service Channels
There is a strong correlation between NPS and a company’s customer service channels, as the adoption of digital technology has led to even higher expectations from customers. Using technology and digital solutions is key to providing a personalized and consistent customer experience across all channels and at every touchpoint and with that, improving your net promoter score. A Bond Brand Loyalty study found that brands that personalize the customer experience benefit from a 6.4% lift in member satisfaction.
For example, Tesla is leading automotive manufacturers in brand loyalty with a sky-high NPS rating. They’ve achieved this feat by focusing on building their customer experience. Software-related issues can be fixed remotely, customers get a free factory tour when they pick up their cars, and they are very visible about taking their customer feedback seriously. With a highly engaged CEO, customer ideas are regularly implemented.
So while personalized experiences have long proven to increase NPS, the following case shows that there is an outlier to this trend: automation. Interestingly, automating processes – the exact opposite of a personalized experience – also leads to a higher NPS and customers appreciate the convenience and ease that automation delivers. When automation is used correctly to facilitate routine interactions, the company can be transformed into a customer-centric organization.
Automation in telecom has proven to increase NPS. Urs Reinhard, Chief Digital & Customer Officer at UPC Schweiz GmbH, is responsible for tracking NPS across all touchpoints at the Swiss telecom. He notes that in general:
“the more personal the channel, the higher the NPS, like in a shop. Second best to the shop is the call center. 3rd is an app or a website; 4th is a bot. However, after increasing deployment of digital customer service channels from 15% to over 50% at UPC, our NPS went up 15 points. The technology and deployment strategy of your digital customer journeys need to be faster, more reliable, less troublesome, and easy to deal with, from the consumer’s perspective. This will lead to a higher NPS even with a less personal contact with your customer.“
The Benefits of NPS
Tracking customer loyalty provides insights on actions a company should prioritize. The goal is to build strong customer relationships and drive growth. A growing number of promoters means that your customer service strategy is on the right track. A decrease is a red flag indicating potential customer churn.
Drive Business Growth
Adopting NPS as a key metric to improve business strategy helps drive growth with the increased focus on improving the score and seeing results.
A higher net promoter score means a company has more promoters to provide positive feedback and recommend your product or services.
Improve Employee Performance
NPS can provide insight on agent performance, on the personal level of service as well as the type of service they provide. Positive interaction with a customer service agent has a significant impact on NPS and loyalty; in fact, according to the Nice Satmetrix B2C NPS Benchmark , 90% of consumers said that their interaction with a customer service agent influenced their net promoter score. This metric can serve as a significant motivator for employees.
Reduce Customer Churn
Analyzing NPS together with other customer satisfaction data can help identify customers who are likely to leave your brand or cancel your service. Understanding where the problems are and what needs to be improved, companies can implement the right strategies to manage and reduce customer churn.
Best Practices to Improve NPS
There’s no magic formula for improving NPS – but the general guideline is to improve customer experience and interactions. For that, you need to get everyone on board – customers and employees, and always ask for feedback. It’s easy to collect. Responses and analysis of the net promoter score provides valuable data that can be translated into effective follow-up actions.
Communicate NPS Results
Share the result of the NPS survey at all levels of the company. It’s more than a measure of customer loyalty – it’s also a reflection of employee performance. Low NPS can stem from problems with agents or from other interactions with the company.
Address Pain Points
Listen to the customer to understand expectations and identify needs. People want rapid response and resolution, they want easy transactions – for the system to work for them, and not the other way around. Add technology-based tools and accessible resources to empower agents and improve customer engagement, to enhance the journey and overall experience.
Convince and convert detractors into promoters, and act on negative feedback. Ask detractors how you can improve and align solutions with specific complaints. Provide personalized support and sophisticated self-service channels that enhance the customer journey, to turn detractors into promoters and reduce churn.
Follow up with promoters and provide incentives for referrals. Seek testimonials and encourage them to share positive experiences on social media and word-of-mouth, for more happy customers.
Improve NPS Through Technology
As the overarching goal is to improve the customer experience and interactions, the right technology can deliver a shortcut toward higher NOS scores.
Self service channels: Automation has been proven to lead to a higher NPS – but only if executed properly. Deploying sophisticated self-service channels that can support warm transfers or continuity along the customer service journey boosts NPS, as customers appreciate when agents are prepped with relevant details and ready to assist.
Visual support: Visual support technology enables agents to use the power of still or video images to help customers resolve issues. By adding a layer of Augmented Reality to those images, they show – rather than tell – the customer exactly what they need to do, right there on their smartphone screen. Powered by Computer Vision AI, these systems can now recognize devices, identify issues, suggest resolutions and provide step-by-step visual guidance to the customer, ultimately enabling virtual assistants to offer customers the option of full self service.
Opinions matter: Bring Out Your Customers’ Voice with NPS
Customers want their voice to be heard, they want to feel appreciated. It’s important to listen, analyze, and implement. NPS is a key customer experience metric that will enable your clients to s provide feedback that helps them get better service and provides you with valuable information to take action, to develop better strategies that improve CX, drive customer loyalty, increase customer lifetime value and as a result, your revenue.