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What is NPS and how does it work?

Net Promoter Score (NPS) is a customer loyalty metric that measures how likely a customer is to recommend a company, product, or service to others. It was introduced by Fred Reichheld in 2003, and it has become a popular tool for businesses to assess customer satisfaction and loyalty.

How does it work?

The NPS survey consists of a single question that asks customers to rate the likelihood of recommending a company, product, or service on a scale of 0 to 10. Customers who rate 9 or 10 are considered promoters, those who rate 7 or 8 are considered passive, and those who rate 0 to 6 are considered detractors. The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.

For example, if 50% of customers are promoters and 20% are detractors, the NPS would be 30 (50% - 20% = 30).

WHy is it important?

NPS is important because it provides a simple, easy-to-understand measure of customer loyalty. By asking a single question, businesses can quickly assess how likely their customers are to recommend them to others. This information can be used to identify areas for improvement, track changes over time, and compare performance against industry benchmarks.

Moreover, NPS can help companies to identify their most loyal customers, who are often the ones who make repeat purchases and advocate for the company to others. By understanding what drives customer loyalty, businesses can improve customer retention and increase revenue.

How to use it?

To use NPS effectively, businesses should follow these steps:

  1. Determine the appropriate time to send the survey. This will vary depending on the nature of the business and the customer experience. For example, it could be sent after a purchase, a customer service interaction, or at regular intervals throughout the year.
  2. Send the survey to a representative sample of customers. It's important to ensure that the sample is representative of the customer base to get an accurate picture of customer loyalty.
  3. Analyze the results and identify trends. Look for patterns in the data and identify areas where the company is performing well and where it needs to improve.
  4. Analyze the results and identify trends. Look for patterns in the data and identify areas where the company is performing well and where it needs to improve.
  5. Take action based on the results. Use the insights gained from the survey to make improvements to the customer experience, such as addressing common complaints, providing additional training to customer service representatives, or offering incentives to loyal customers.
  6. In conclusion, NPS is a simple and effective way for businesses to measure customer loyalty and identify areas for improvement. By focusing on improving the customer experience, companies can increase customer retention, revenue, and profitability.

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