The High’s and Low’s of Net Promoter Score
Net Promoter Score, better known as ‘NPS’, is a metric used to measure customer loyalty and advocacy towards a company, product or service. A common question metric used in market research, NPS asks customers how likely they are to recommend a company’s product or services to their friends, family or colleagues. NPS scores range from -100 to 100, and customers who respond with a score of 9 or 10 are considered ‘promoters’, while those who score between 0 to 6 are classed as ‘detractors’. Through subtracting the percentage of detractors from the percentages of promoters, a NPS score is calculated. A high NPS (generally seen to be 50+) indicates strong customer satisfaction and advocacy, while a low score (generally seen to be -50) may signal areas for improvement in a company’s product or service offerings.
But what does a good NPS look like? According to traditional wisdom, a score of +50 reflects strong advocacy on part of your customers, while +75 suggests an engaged customer base. These broad, general indications can create a sense of disheartenment for brands which receive a strong score, for example in the 20s or 30s. Part of the challenge in working with NPS lies in understanding what a high score looks like for any given industry and any given location.
A review of recent NPS data collected by Square Holes for a range of South Australian clients highlighted an overall NPS score of +20, a strong, positive figure.
To break this down by industry, the goods and services and retail industries both scored highly in terms of NPS (+26.6 and +24 respectively), showing relatively similar levels of customer loyalty and advocacy. Health and aged care, while still positive, displayed a slightly lower NPS score (+14.5), potentially due to the highly sensitive and emotionally charged nature of the industry. The outdoor and experience industry, which may be more closely linked to recreational and leisure activities, also showed a moderate positive score (+10.6). The education industry, however stood out as the only industry with a negative score, although of moderate strength (-14).
Comparing this against ’22 Australian NPS industry benchmarks reveals general consistency, valid at a local level.
What to watch out for when working with NPS
As market research professionals who deal with NPS on a daily basis, there are a few considerations we suggest when interpreting NPS.
While NPS is widely used and highly regarded, some argue that it can be a volatile metric. This is because NPS can be greatly influenced by factors such as external events, new services, or indeed one-off experiences, which together can affect customers’ perception and loyalty to the company. Additionally, NPS is based on a simple survey question and does not provide an exhaustive understanding of the reasons behind customers’ recommendations, let alone their personal willingness or interest in recommending things in the first place.
Similarly, while categorizing customers into Promoters, Passives and Detractors helps businesses to understand the overall sentiment of their customers, it may not provide a complete picture of the data. For example, if a company has 60% Promoters and 20% Detractors, the NPS score is +40, which is a good score.
However, if we only focus on the percentage of Promoters and Detractors, we miss the fact that around 20% of customers gave a score of 7 or 8, which indicates they are more positive than they are negative. Therefore, it is important to look beyond just the percentages of Promoters and Detractors and consider the entire distribution of scores.
Another insight from Square Holes’ data suggests that customers or attendees tend to give higher NPS scores immediately after the event than when time has passed. This is because their experience and emotions are still fresh in their minds, and they are more likely to recommend the brand or event to others. However, as time passes, their memory of the event fades, as does their likelihood of recommending the brand. While many brands choose to measure both a ‘recent’ (i.e., within last 3 months) and ‘distant’ (i.e., within last 12 months) NPS score, it is essential that brands use whatever timeframe is most appropriate for their service or offerings, and measure this consistently over time.
The regular tracking of NPS scores is an important business exercise to understand satisfaction and loyalty of customers as it helps to highlight where action should be taken to improve the customer experience. When interpreting NPS, it is important to consider the ways in which different industries and location, time frame of measurement, as well as how it is interpreted. With these aspects in mind, NPS can provide a powerful picture of customer engagement and advocacy.