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What is a Net Promoter Score® and Why Does My Small Business Need to Use it?

Learn what a Net Promoter Score® (NPS® ) is, how to calculate it and why you should use it, even if yours is a small business.

Hrachuhi Arakelyan

Feb 11, 2021 · 7 min read


What is the Net Promoter System®?

The Net Promoter System® (NPS®) (also known as Net Promoter Score®), was devised by analysts Bain & Company in 2003.
It is a framework to measure how it generates and fosters customer loyalty. Since then, many businesses have adopted the framework.
It has evolved into a complete system that can help businesses to identify the people who perform best within their business and how customers perceive companies.

While historically, it was a system used mostly by larger organisations, who had the frameworks and infrastructures in place to be able to effectively capture and analyze the data needed to use the system efficiently, today, even smaller businesses, in all kinds of industries are able to effectively track and monitor their own NPS.

While for some businesses, being driven by their NPS requires a complete shift in mindset, many businesses will find that they already track and monitor the same things that are required to utilize NPS, to help advance their business.

NPS is a way to discover what customers really feel about your business and links that to whether that results in them visiting your business more often, spreading the word about your company to others and how likely they are to use your business in the future.

What is the Process for Evaluating NPS ?

Essentially, the way NPS is calculated can be summarised as:

Customer loyalty » making improvements to a business » measuring the business outcome » making improvements based on feedback » measuring the outcome.
It becomes a continual feedback and improvement loop, that is calculated using a very simple metric: The number of promoters, minus the number of detractors. It can be measured by business outlet, by team or even right down to individuals who work for you, to show you the things that work when creating and maintaining loyal customers, versus the things that don’t.

All that is needed to put this tracking in place, is a good quality customer feedback program that can extrapolate customer feedback into meaningful metrics to help you to run your business more effectively.

How can Small Businesses Use the Net Promoter System?

Many small businesses have at least considered having a CRM program for their business, or even have one in place as part of another tool, such as a customer feedback program, but are failing to realise the ability to measure NPS exists, or they fail to get the most out of it.
If a customer feedback platform is set up that can ask customers open-ended questions (anything from a simple ‘how did we do today?’ to a ‘how was your server today?’) and use this information to share with your employees to help them learn and aspire to always provide the best possible service, based on that feedback, then you can effectively set up and manage your own NPS program.

The questions that sit at the core of an NPS program can be anything that you feel you can use to make your business better. Some good examples might be:

  • How was your experience today?
  • How was your server today?
  • Did you find what you wanted today?
  • How likely is it that you would recommend us?

The ideal number of questions would be between four and five in total. To simplify your feedback loop, ask questions that can be responded to on a scale of 1-10. A good customer feedback program will allow you to automatically send an SMS or email to customers after their visit, and can use tools like regular surveys which can be sent to all your customers, to generate more detailed feedback.

To keep NPS calculations as simple as possible, the easiest question to ask would be:

“How likely is it that you would recommend us?”

And give a scale of one to ten that they can score against.

What is a good net promoter score calculation?

A score between one and six out of ten, would be a detractor - someone who does not positively perceive your business or service.
A score between seven and eight out of ten would be a passive - someone who is neither a promoter or a detractor.
A score between nine or ten would be a promoter - these are the people who will love and advocate for your business and help it to grow most rapidly.

How do I calculate my Net Promoter Score?

It’s really easy. To work out what is a good Net Promoter Score, you subtract your percentage of detractors from your percentage of promoters. The percentage you are left with is your Net Promoter Score.

Anything above 20% is considered a ‘favourable’ NPS, while 50% is considered ‘excellent’ and above 80% or more is considered ‘world class.’

Taking this approach to rolling out an NPS survey and calculating the results gives all businesses a platform to grow from.

More Advanced Strategies for Working With Your Net Promoter Score

Once you have benchmarked your basic Net Promoter Score, if you have the CRM software that enables you to easily play around with your data, you can start to be a bit more clever with your Net Promoter Scoring.

For example, a very basic format, as described above doesn't take into account those customers who only visit a few times. Is their opinion as valuable as the opinions of those customers who regularly come back to visit you time and time again?

They aren’t, which is why to accurately drive your NPS data further, you may want to look at which customers have the greatest impact on your business. If you have a customer loyalty program in place, you should be able to identify your best (most valuable) customers very easily.
This is done by calculating the lifetime value of each of your customers. It sounds complicated, but a good customer loyalty program should easily be able to tell you who your best customers are, based on metrics such as how much they spend with you, the amount they spend per visit or even how many of their friends and family they have recommended you to.

Then you can weight your responses of your Net Promoter Score surveys towards your most loyal customers, to paint a clearer, more detailed picture, based on their feedback and their opinions and use this to shape your business to help find more customers of similar mindsets and interests of your very best customers.

Manual vs. Digital Approaches to Calculating NPS

This is where an online customer relationship management system really comes into its’ own, as it can help you not only track and measure this data really easily, so you can see your best customers, but it can also help automate your customer feedback loop and use different data sets and points to help you to get a clear sense of what your customers really feel about your company.

Of course, you can try and do this process manually, using sales records to try and track customer loyalty. You may have a sense of who your best customers are, but being able to track things such as referrals is much harder to do. You could have a short questionnaire at the checkout desk, but the problem with carrying out that kind of research in-store is that people may be less willing to be completely honest if they feel that they are being put on the spot. You could manually send out a weekly survey email asking questions, but then spend hours trying to reconcile the responses against your best customers.

Using a software program that can create, automate and measure your NPS makes doing this considerably more straightforward.
If you use CRM software that requests and tracks customer feedback, a system that is able to automate a feedback loop will be able to automatically share the positive feedback from your customers over your social channels, whilst diverting the negative to a helpdesk where it can be resolved directly with the customer. This helps best utilize your very best net promoters to promote your business further, to potential new customers of the future.
In Conclusion:

Net Promoter Scoring doesn't have to be complex. It can be anything from a single question to a group of four or five. The responses can not only tell you how you are doing, but give businesses a benchmark that they can build from to help grow and shape their business.

While you can attempt to run a basic Net Promoter Score evaluation using manual processes, a CRM system that tracks customer feedback and identifies your best customers can paint a far more accurate picture, to give more detailed feedback on areas of your business to focus on and develop.

The fundamental thing is to do something with the data you gather! We all gain focus from having goals and targets to work to, so if your NPS isn’t great, asking the right questions can provide clear signals of what you can do better and how you can improve and grow your business for the future.

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Written by

Hrachuhi Arakelyan

Co-Founder/Customer Happiness Manager at RetentionForce