How to Calculate and Improve Your Net Promoter Score

Last week I talked about how to generate more customer love (Note: if you missed that video post, click on the following link >> so you can watch it and then return to this post when you’re finished).

But the question is, how do you know if you’re succeeding at generating more customer love? How do you know if your efforts at surprising your customers are actually generating more love, loyalty, referrals and purchases?

Going by your gut or trusting anecdotal stories is rarely your best option. You need to discover a metric, something tangible and quantifiable (and easy to measure), that can help you assess how you’re actually doing. The solution: the Net Promoter Score (NPS®).

Now, if you’re unfamiliar with the Net Promoter Score, the NPS was created by a Bain consultant, Fred Reichheld and became well-known after the release of his 2003 HBR (Harvard Business Review) article, entitled, “One Number You Need to Grow,” along with his 2006 book, “The Ultimate Question.”

He was trying to answer the question of how can companies with products that people seem to like not grow very fast. In addition, he was also trying to find a simple one sentence question that could easily be used to evaluate both customer loyalty and growth potential.

While Fred’s research was primarily targeted at the large enterprise client level, it works equally well for small businesses (especially because it’s one question). So, what was/is that simple question? To find out, you’ll have to keep on reading.

I. How to Calculate Your Net Promoter Score (NPS)

Your NPS® is calculated based on the answer your customers give to one question. While simple in form, it’s far from simple in its application. And the power of this question is that it will let you know how likely it is that your customers will

  1. Repurchase from you again and again and
  2. Refer you and your products and/or services to others.

The question that Fred discovered to answer all these questions was …

On a scale of 0-10 with 10 being highly likely, how likely is it that you would recommend our [company/product/service] to a friend or colleague?

Like I said, simple but not simplistic.

Once you receive your responses, in order to calculate your NPS you need to break your customers’ responses into three different groups and assign a percentage of the total to them. Here are the three groups.

  1. Promoters (those who gave you a score of 9 or 10) – these are the people who love you and your company. They are highly likely to repurchase from you again and again and tell more and more people about you. What’s not to like about promoters. They’re your fans!
  2. Passives (score of 7 or 8) – these are the people who are indifferent. They’re not thrilled or angry, they just are. They won’t spread the word about you and your company but then again, they won’t be spreading bad news about you or your company either. They’re neutral (hence the term, passives).
  3. Detractors (score of 6 or lower) – these are the problem people for your business. Not only will they not repurchase from you, they’ll actually go out of their way to spread bad news about you and your company.

Once you’ve figured out your percentages in each of those three categories, to get your Net Promoter Score, you simply subtract your Detractors from your Promoters (hence, the phrase NET promoter score). For example, let’s say your responses break down in the following percentages

  1. Promoters – 25%
  2. Passives – 65%
  3. Detractors – 10%

Using the above numbers, your NPS would be 15% (25%-10%).

Now I’m guessing that you’re wondering, “Is that good?” Or, “How will I know if my NPS is good?”

The answer to that question is tricky. There are so many factors that influence how you collect your data, from whom, how it was asked, when it was asked, etc. Plus, the averages from industry to industry are different (for ex. specialty department stores have much higher average NPS scores than do, let’s say …  cable and internet service providers :-).

What I can say is that what matters most is that you’re measuring it and then working to increase it quarter by quarter using whatever collection method you’re using. As long as your NPS is moving north, you’re good!

So that’s how you calculate your NPS. Ask the question, break their responses into the three categories, assign a percentage to each category and then subtract the detractors from the promoters to get your Net Promoter Score.

Note: in addition to the one NPS question, you’ll probably want to ask a second question, “Why did you give us the score you did?” And then a third question, “What can we do to earn a 10?” While most of us love hearing the positive responses, it’s actually the difficult ones to hear that are the most helpful.

Now, that you have your score, the question is, how can you improve it?

II. Three Quick Ideas on How to Raise Your NPS

Obviously, your goal isn’t to simply know how to calculate your NPS, your goal is to raise it and ensure that you’re actually generating lots of customer love because customers who love you buy more, buy more frequently and tell other people about you. So, what can you do to raise your NPS? Well here are three quick ideas.

1. Make Your Product and/or Service More Remarkable

I just talked about this last week in 4 Keys to Surprising Your Customers, but this is the number one way to raise your NPS—build something that people absolutely love. And to do that, you have to keep changing things up so that you don’t get caught up in the remarkability trap (“Everything in life moves from remarkable to ordinary to death”). Every time a customer encounters your product and/or service, it’s a little less remarkable because their expectations change. To get WOM (word of mouth) marketing, you need to surprise people so they want to remark to others about you and your products and/or services.

Earlier today (as of when I’m writing this), Apple just had a product announcement. As part of that announcement they talked about the Care Kit that hospitals and physicians are using to diagnosis issues like seizures or using to monitor post-operative recovery with patients (i.e your Apple watch would be monitoring you (let’s say you’re already at home) and it would be sending data to your doctor in real-time so that he/she could adjust your recovery protocol based on that real-time data). Both of those things were pretty cool, which is why I walked downstairs and told my wife about them.

New. Unique. Different. Surprising. WOW. These are the words that drive companies that get high NPSs.

2. Fix the Low Hanging Fruit First

As you tally up your customers’ answers to the “Why?” question (and “What can we do to earn a 10?”), you’ll begin to notice some patterns of responses. And what you’ll probably notice is that there are a lot of simple little things you can address quickly that can make a big difference. For example, you might find items like these appearing on your list.

  • When I call to talk with someone during office hours, I always get stuck in voice mail hell.
  • When I log in, your system keeps bumping me out (or doesn’t remember me)
  • I’ve called and left a message three times with Joe and I still haven’t received a call back.
  • Why can’t your system remember me and my content. When I use XYZ website, they remember. How come yours can’t?
  • Every time I go to use your bathroom, it’s messy and the toilet paper is either out or very low
  • Etc.

These are all relatively easy things to correct. All it takes is making a list (I call it your annoyance list), making it public to your team, prioritizing the issues and then knocking off as many as you can as fast at you can. You can even make it a game and/or award prizes.

Eliminating unWOW is critical to enhancing your NPS.

3. Talk with More Customers

There’s simply no good short cut to getting real data from your customers than actually talking with them. Engaging them. Asking them questions. Asking follow-up questions. Discerning their pain points and frustrations. Understanding their dreams and desires. Getting to know them better than they know themselves.

As I’ve shared before, “Executives talking to other executives about what customers want is ridiculous.” You actually have to talk with them. When Gerstner took over IBM back in the 90’s one of the things he required from each of his direct reports was for them to talk with their customers and that began the revitalization of IBM.

Surveys can pick up some data, but the real data comes when a customer feels like you really want a conversation—and more importantly, want the truth. That’s when you get the real story. And what you discover in those real conversations are the ideas and frustrations that can turn something from ordinary to extraordinary, from a nice-to-have to a must-have and from a commodity to a viral sensation.

So, how are you doing? If you want to raise your NPS (and customer love), make sure you utilize the following three ideas (i.e. if you’re not getting a lot of customer love it’s probably because of the opposite of one of these three ideas)

  1. Make your product and/or service more remarkable
  2. Fix the low hanging fruit first (i.e. eliminate all unWOW first)
  3. Talk with more customers (so you can get the real “truth” from them).

If you do those three things on a regular basis, you’ll not only get a lot of customer love, you’ll see your NPS skyrocket and your growth will take off.

To your accelerated success!

P.S. If you have some additional ideas to contribute make sure you add them in the comments section below (or if you’re reading this by RSS or email, click here >> to add them).

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