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A Comprehensive Guide to Understanding the Net Promoter Score

Madhuri Gourav
December 18, 2023
8
 mins read

Last modified on

The Net Promoter Score (NPS) continues to be an essential metric for measuring customer satisfaction and loyalty in the dynamic world of customer service. In 2023, call center managers will find it more crucial than ever to comprehend what is nps and compute NPS accurately. 

With a focus on customer service, this blog post seeks to demystify NPS by defining it and outlining its operation.

 Utilize AI-powered tools to enhance Net Promoter Score (NPS) to Create Notable Customer Interactions

What is Net Promoter Score (NPS)?

NPS is a widely used metric in customer service to measure the likelihood of customers recommending a company's products or services to others. It is a direct reflection of customer loyalty and satisfaction and is simple yet powerful in its approach.

NPS surveys demonstrate customer satisfaction
NPS surveys demonstrate customer satisfaction

What is NPS Score, and How Does It Work?

The NPS score is calculated based on responses to a single question: "On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?" Based on their ratings, customers are categorized into three groups:

  • Promoters (Score 9-10): These are loyal enthusiasts who will keep buying and referring others, fueling growth.
  • Passives (Score 7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
  • Detractors (Score 0-6): Unhappy customers who can damage your brand through negative word-of-mouth.

Calculating the NPS

To calculate the NPS, subtract the percentage of Detractors from the percentage of Promoters. 

The formula is as follows:

{NPS} = {% of Promoters} - {% of Detractors}

The resulting score can range from -100 (if every customer is a Detractor) to 100 (if every customer is a Promoter).

 Formula to find NPS
Formula to find NPS

Who are NPS Promoters, NPS Passives, NPS Detractors?

PS (Net Promoter Score) categorizes customers into three groups based on their likelihood to recommend a product or service:

  • Promoters: Customers who rate the product or service with a score of 9 or 10 on the NPS scale. These customers are highly satisfied and loyal, likely to recommend the product/service to others, contributing positively to business growth.
  • Passives: Customers who rate the product or service with a score of 7 or 8. They are somewhat satisfied but not particularly enthusiastic. Passives may not actively promote the product/service but are also less likely to detract from the business.
  • Detractors: Customers who rate the product or service with a score from 0 to 6. Detractors are dissatisfied customers who might spread negative opinions about the product/service, potentially impacting the company's reputation and growth.

NPS analysis focuses on calculating the difference between the percentage of Promoters and Detractors to derive the Net Promoter Score, providing insights into customer loyalty and overall satisfaction.

Sample CSAT weekly report
Sample CSAT weekly report
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What is a Desirable Net Promoter Score? NPS Benchmarks Outlined

A "good" Net Promoter Score (NPS) can vary significantly depending on the industry, market, and geographical location. However, as a general guideline, an NPS can be interpreted as follows:

  • -100 to 0: Poor. Indicates more Detractors than Promoters.
  • 0 to 30: Good. A positive score, but with room for improvement.
  • 30 to 70: Great. Indicates a healthy number of Promoters and strong customer loyalty.
  • 70 and above: Excellent. Reflects exceptional customer loyalty and satisfaction.

NPS Benchmarks by Industry

NPS benchmarks can differ widely across industries.

For instance:

  • Retail: A score of around 30-40 is often considered good.
  • Banking and Financial Services: Scores typically range from 20-40.
  • Technology and Software: Can see higher scores, often between 30-60.
  • Telecommunications: Due to the competitive nature, scores might be lower, around 10-30.

Factors Influencing NPS

  • Customer Expectations: Vary by industry; luxury brands often have higher expectations and potentially higher NPS.
  • Cultural Differences: In some cultures, scoring extremes (like 9 or 10) are less common, which can affect NPS.
  • Market Competition: Highly competitive markets might have a lower NPS due to more options for customers.

Importance of Context

It's crucial to interpret NPS within the context of your specific industry and market. Comparing your score to relevant industry benchmarks provides a more accurate picture of where your company stands in terms of customer loyalty and satisfaction. 

While NPS is a valuable metric, it should be used alongside other customer feedback and performance indicators for a comprehensive view of the customer experience.

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Why Is Net Promoter Score Important?

The Net Promoter Score (NPS) is important for several reasons, making it a valuable metric for businesses across various industries:

  1. Measures Customer Loyalty and Satisfaction: NPS is a direct indicator of how customers feel about a company, product, or service. High scores typically reflect high levels of customer satisfaction and loyalty.
Comprehensive information on a client's level of satisfaction
Comprehensive information on a client's level of satisfaction
  1. Predicts Business Growth: A strong NPS suggests that customers are likely to return for repeat business and recommend the company to others, driving organic growth through word-of-mouth.
  2. Simple and Easy to Understand: NPS is straightforward to calculate and interpret, making it accessible for businesses of all sizes to track and understand their performance in terms of customer experience.
  3. Benchmarks Performance: NPS allows companies to benchmark their performance against competitors and industry standards, helping them understand where they stand in the market.
  4. Identifies Areas for Improvement: Analyzing NPS and the feedback associated with it can highlight areas needing improvement, whether in customer service, product quality, or overall customer experience.
  5. Facilitates Customer-Centric Culture: Regularly measuring NPS encourages a focus on customer satisfaction and experience, fostering a customer-centric culture within the organization.
  6. Enhances Customer Retention: By addressing the concerns of Detractors and nurturing the loyalty of Promoters, companies can improve customer retention rates.
 Formula for customer retention rate
Formula for customer retention rate
  1. Drives Strategic Decisions: NPS data can inform strategic decisions, guiding companies on where to allocate resources to maximize customer satisfaction and loyalty.

In short, NPS is a powerful tool for gauging customer sentiment, guiding business strategies, and driving growth through improved customer loyalty and satisfaction.

How to Collect Net Promoter Score (NPS) Data?

Collecting Net Promoter Score (NPS) data involves a few key steps:

  • Create a Simple Survey: Include the primary NPS question: "On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?" and an optional follow-up question for additional feedback.
  • Use an Efficient Survey Tool: Choose a survey platform that can distribute the survey through various channels like email, SMS, or directly on your website.
  • Time It Right: Send the survey at strategic times, such as after a purchase or a customer service interaction, to ensure relevant feedback.
  • Ensure Anonymity and Ease: Make sure the survey is anonymous and easy to complete to encourage honest and straightforward responses.
  • Analyze and Act: Regularly analyze the responses to identify trends and areas for improvement and take action to enhance customer satisfaction.

By following these steps, you can effectively gather NPS data, providing valuable insights into customer loyalty and areas for improvement in your service or product.

How Convin Transforms NPS and Delivers Unparalleled Satisfaction

Convin can significantly improve the Net Promoter Score (NPS) and enhance the overall customer experience by leveraging its advanced analytics and AI-driven insights. 

Here’s how:

  • Detailed Customer Interaction Analysis: Convin analyzes customer interactions across various channels to identify key factors influencing customer satisfaction and loyalty. This deep analysis helps pinpoint areas for improvement.
  • Identifying Trends and Patterns: By evaluating large volumes of customer data, Convin identifies trends and patterns in customer feedback, enabling businesses to address systemic issues that may be impacting NPS.
  • Personalized Customer Engagement: The insights gained from Convin's analysis can be used to tailor customer interactions, making them more personalized and effective, thereby enhancing customer satisfaction.
  • Real-Time Feedback: Convin provides real-time feedback to customer service agents, allowing them to adjust their approach during interactions to meet customer needs and expectations.
  • Training and Coaching: The platform identifies specific areas where customer service agents can improve, such as communication skills or product knowledge, leading to more effective customer interactions and a higher NPS.

By utilizing Convin, businesses can gain a comprehensive understanding of their customer interactions, leading to targeted strategies that improve customer satisfaction, loyalty, and, ultimately, a higher Net Promoter Score.

Improving NPS can be challenging, but not with Convin. With AI-enabled tools, you can set, track, and enhance critical customer experience KPIs. 

But what truly sets Convin apart is its ability to streamline support interactions, making them smoother and more efficient.

Ready to know how Convin also boosts agent performance, motivates agents for increased sales, and improves support? 

View a demo to discover how Convin can enhance NPS and the overall customer experience with a proactive approach.

FAQs

1. How is the Net Promoter Score (NPS) measured?

NPS is measured by asking customers a single question: "On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague?" Responses are then categorized into Promoters (9-10), Passives (7-8), and Detractors (0-6), with the NPS calculated by subtracting the percentage of Detractors from the percentage of Promoters.

2. What is the difference between NPS and eNPS?

NPS measures customer loyalty and satisfaction, while eNPS (Employee Net Promoter Score) measures employee loyalty and satisfaction. eNPS asks employees how likely they are to recommend their workplace to friends and family, reflecting internal organizational health.

3. How is eNPS calculated?

eNPS is calculated similarly to NPS, by asking employees to rate on a scale of 0-10 how likely they are to recommend the organization as a place to work. The score is then calculated by subtracting the percentage of Detractors (0-6) from the percentage of Promoters (9-10).

4. How do I collect data for my Net Promoter Score?

Collect NPS data by distributing surveys through email, SMS, or directly after customer interactions (like post-call surveys). Ensure the survey is concise, typically featuring the key NPS question and an optional open-ended follow-up for additional feedback.

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