You’ve heard about the NPS® – but might not understand what the big deal is. We simplified it for you. Take 2 minutes and find out why so many companies are using the NPS and how it could help you.
What is it?
The Net Promoter Score (NPS) is an assessment of the amount of loyalty a client (or client base) has toward a company or organization. With loyalty being the desire to refer, be retained, and/or make repeat purchases.
The NPS survey is a single-question inquiry used to gauge the NPS for individual clients.
How likely is it that you would recommend [x business] to a friend or colleague?
Not Likely 0 1 2 3 4 5 6 7 8 9 10 Very Likely
Respondents are grouped into three categories based on their score:
- Promoters (9-10)
- Passives (7-8)
- Detractors (0-6)
In 2003 business strategist Fred Reichheld developed the NPS as a metric to determine the overall loyalty of a company’s client base. Fred found that – unlike client sentiment measured by traditional satisfaction surveys – client loyalty was directly linked to referrals, retention, and repeat business.
Because of its simplicity, the NPS survey yields a higher-than-average response rate. At Rocket Referrals, for example, 40% of surveyed clients give a score rating – with the majority expounding on their response with additional feedback
Hundreds of the nation’s most customer-focused companies have since adopted the NPS including Southwest Airlines, Apple, Enterprise rent-a-car, and more – using the NPS as a metric to set company wide benchmarks aimed at improving the overall client experience.
Rocket Referrals has expanded on the NPS – using it not only as a yardstick to measure client loyalty – but also as a vehicle to uncover promoters and directly influence positive behavior. High response rates provide useful data allowing for tailored communication that drives client feedback, testimonials, online reviews, and word-of-mouth referrals.
How is the NPS calculated?
The overall NPS for a company is calculated by subtracting the percentage of detractors from the percentage of promoters. This provides a score ranging from -100 to +100.
NPS = % of Promoters – % of Detractors
Why use the NPS?
The NPS is a direct measurement of client loyalty and is therefore:
- Used to set company-wide goals to exceed client expectations
- Effective at predicting future behavior of a client (or client base)
- Used to tailor effective communication and influence behavior
- Indicative of likely referral and review sources
- An easy way to discover and remedy disgruntled clients
What is a good NPS?
It depends on your industry. Internet providers, for example, average near the bottom with a score of 0. Within the insurance industry the direct carriers (Geico, Progressive, etc.) are averaging an NPS around 30. Independent insurance agents tend to have a closer relationship with their client, better service, and implement more consistent communication strategies. Therefore, the average NPS for independent insurance agents is closer to 60-75, which indicates very high client loyalty. Some agencies score above 75, which is indicative of superior client loyalty.