Net Promoter Score (NPS) represents the proportion of your client base who classify themselves as \"promoters\" of your company and can be used as a proxy for the number of satisfied, loyal customers you are serving. It can also be used to indicate your company's potential for virality and word-of-mouth growth.
The reason NPS is important is that it is one of the best indicators of churn. In addition, it's a quick and easy survey to implement. It can be used to inspect several layers of users in complicated enterprise products beyond just the economic decision maker.
And, if tracked over a long period of time, can inform strategic goal making and show potential buyers a history of customer-responsiveness which improves exit multiples.
The impact: It is clearly an important metric to follow and quantifies a typically intuitive hunch for how satisfied your customers truly are. NPS becomes even more useful when tracked regularly over time. It provides feedback on any refinements your company
makes to its development or customer success processes. You can also analyze NPS in relation to customer demographic or product use data to gain insights on whether any cohorts are feeling particularly satisfied or dissatisfied. Drilling down into the \"whys\" can help refine your customer strategy and product offerings.
The goal: Create a process for calculating and tracking a monthly Net Promoter Score. [The goal is to have two years of NPS data at the time of acquisition].
How can Golden Section Assist?
Background
Your NPS is calculated from the survey responses you receive from your customers. The survey asks a customer one question: \"On a scale of 1-5, how likely are you to recommend \[your company\] to a friend or colleague?\"
A person who responds with a likelihood between 1-3 is classified as a \"Detractor.\" This is a person who could potentially hurt your company's reputation when they talk with others about your company.
A person who responds with a likelihood of 4 is classified as \"Passive.\" Their account to colleagues will not be negative enough to detract from your company or positive enough to promote it.
A person who responds with a likelihood of 5 is classified as a \"Promoter.\" These are the people who will generate word-of-mouth referrals and whose enthusiasm for your product might lead to virality.
The individual scores are used to calculate NPS:
NPS = (Number of Promoters -- Number of Detractors) / (Total Number of Respondents) 100
A score can range from --100 (100% of respondents are Detractors) to +100 (100% of respondents are Promoters). You are calculating a percentage but NPS is always expressed as an integer (i.e. 60).
Steps
- Set up a process for sending regular NPS surveys. Questions for your team to consider:
- Should our NPS survey be anonymous? We highly suggest that your survey results are NOT anonymous. You will lose much of the power of your NPS results if you cannot segment your responses to uncover underlying trends. Moreover, you will lose the ability to follow up with promoters and detractors. However, if they are anonymous (for small customer bases) you should request demographic data so that you can segment (new customer, modules used, etc.)
- Who should we send our survey to? Your aim is to create a randomized, statistically significant survey result. Using the equation for sample size n, with a 95% confidence level and 10% margin of error, you would need a sample size of roughly 250 respondents to reach statistical significance. Of course, not all of your survey recipients will respond; in fact, the benchmark is a 15% response rate. This requires you to send a NPS survey to a minimum of 1,700 customers. If you have that many customers, use an online randomization tool to randomly choose the 1,700 survey recipients from your customer base. You may not have that many customers at this point. In that case, you will want to send a NPS survey to all of your customers.
- How often should we send it? When sending a NPS survey to your entire customer base, we recommend sending it no more than once every six months. No one customer should receive a survey request more frequently than once every six months. When deciding what time frame would be best for your company, consider that you need to allow your company the time to assimilate, respond and improve the processes that need improvement before sending a new survey. You want to be able to see the impact of your process improvements in your next survey. Finally, keep in mind events that may affect your customer when scheduling a survey so that your results are not biased by one-off occurrences like new product launches or website maintenance.
- Do we send out follow up questions? The primary NPS question, \"\...how likely are you to recommend us\...,\" cannot be changed; certain groups establish industry-specific NPS benchmarks which require the survey question to be identical. However, the NPS survey provider often allows your company to ask follow-up questions. Which follow-up questions would provide the most valuable information to your company? You could gear this opportunity for one or two open-ended questions towards questions that ask for feedback regarding product improvement, customer service, etc.
- How do we send out NPS surveys? There are many NPS survey services available online. We recommend you outsource the implementation of your process to one of them.
- Analyze your survey results.
- Store your NPS data with any historical NPS data. Be sure to include raw data and responses to follow-up questions.
- Report a NPS dashboard to key players, including members of the Exec team. Elements to include in your NPS dashboard:
- Your overall NPS score
- Raw numbers of Promoters, Passives, and Detractors
- A chart showing your NPS score over time. On this chart, highlight key events that may have affected the NPS score (i.e. product improvements, new products, new processes, etc.)
- Break down raw data into different cohorts. You can:
- Track changes in scores from specific companies over time (i.e. how has Company ABC's score changed in the past two years? Did Company XY's score improve since their Detractor rating last survey?)
- Filter survey responses by customer support staff with whom the customer works to show the effectiveness of a team or employee.
- Track responses across specific demographics, products, services, or uses. Do clients who use your product for a specific purpose return a higher promoter rating than the average? Or clients in a particular industry? You can use information gleaned from this analysis to check your vertical and segmentation strategies and refine your sales and marketing approaches.
Possible segmentations to analyze:
- Company size or stage (i.e. start up, enterprise, etc.)
- Location
- Sector
- Product/service
- Pricing plan
- Account age
- Customer persona
- Product usage
- User activity
- Frequency of service calls
- Respond to customers in a timely fashion.
- Respond directly and with positivity to any Detractors. Before responding to them, look through their CRM account so that you can have an understanding of what issue(s) may have turned them into a Detractor. Be sure to listen, empathize, and not overpromise.
- Respond directly to any Promoters. Before responding to them, brainstorm with your team how you can best harness the potential value a Promoter could bring. Do you have an Advocacy Program?
- Look through those survey respondents who are on the edge of the next category, such as a Detractor who has given you a 6 or a Passive who gave you an 8. What can be done to improve their experience? These are marginal players who can provide benefit to your company for potentially minimal effort.
- As a team, consider how to react as a company to survey responses. Considerations include:
- What are the most valuable segments based on your analysis? Do you need to realign company strategy to take advantage of those segments?
- How can you improve your marketing, sales and service processes to improve customer identification and experience?
As stated at the beginning, the power of the Net Promoter Score is found in the insight and action that follows the survey.
Troubleshooting
If you're struggling to get enough survey responses,* there are a few tactics you can try to improve your response rate. First, make sure you are sending a survey request to the product user, not the product buyer; these may be different people. Second, reach out personally before the survey request is sent to let your customers know how important these responses are to you and how your company will be using them to improve the customer experience. If needed, you can follow up after the survey request is sent also, reminding recipients to respond. A response deadline might be helpful to motivate responses too.
Questions this play answers
How do I calculate Net Promoter Score?
Net Promoter Score (NPS) represents the proportion of your client base who classify themselves as \"promoters\" of your company and can be used as a proxy for the number of satisfied, loyal customers you are serving. It can also be used to indicate your company's potential for virality and word-of-mouth growth.
What's a healthy NPS for SaaS companies?
Implement a Net Promoter Score program to measure customer satisfaction, identify promoters, detractors, and passives, and drive continuous product and customer experience improvements.
How should I act on NPS feedback?
Implement a Net Promoter Score program to measure customer satisfaction, identify promoters, detractors, and passives, and drive continuous product and customer experience improvements.
How do I distinguish detractors from passives?
Implement a Net Promoter Score program to measure customer satisfaction, identify promoters, detractors, and passives, and drive continuous product and customer experience improvements.
How often should I survey for NPS?
How often should we send it? When sending a NPS survey to your entire customer base, we recommend sending it no more than once every six months. No one customer should receive a survey request more frequently than once every six months.