Net Promoter Score (NPS) is a metric that gauges customer loyalty and satisfaction. To learn about the basics and how the score is calculated, refer to Making sense of Net Promoter Score (NPS).
This article introduces various factors that affect NPS and suggests actions that remedy the factors to drive valuable insights with NPS.
What does it mean to have a good Net Promoter Score?
- More loyal customers that are supportive and rooting for your company’s success.
- More loyal customers that are also willing to spend more time and money in your product.
- More promoters that are likely to recommend and vouch for your product.
- More likely to spread through word of mouth. Depending on the industry or type of customers you have, word of mouth plays a critical role in acquiring new customers.
With various factors in play, achieving a 100 NPS is extremely difficult. It is more important to:
- Understand how your score compares with key competitors
- Regularly check NPS and use it as as a health check of your company’s performance and customer satisfaction
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Segment the score by demographics and customer profile to discover additional insights
Factors affecting Net Promoter Score
Type of business (B2B vs. B2C):
Regardless of the type of business you’re in, the format and the essence of NPS metric are the same. However, the way it is measured could slightly differ by the type of business:
- NPS in B2C is transactional: NPS surveys are sent out following a certain touchpoint like subscription or purchase. Following up with NPS questions immediately after a specific touchpoint is helpful to collect contextual feedback while the customers’ experience is fresh. See how you can easily setup in-product NPS modules with Hubble.
- NPS in B2B is relational: NPS is used to gauge the overall product experience over time especially when retention and churn rate are critical for maintaining relation with other businesses.
Type of customers:
Just as it is important to segment target customers in businesses, it is noteworthy to differentiate these segments when making sense of the score because each customer profile will place different value and threshold for satisfaction. For example, buyers and end users in a B2B environment will have a somewhat different goal when adapting a new software for the company:
- Buyers or decision makers will place more value in cost savings and the ease of relevant teams to adapt to the new tool.
- End users will be the employees or the users interacting with the tool. Their value in satisfaction will be related to the actual features and usability of the tool.
Thus, buyers may rate a high NPS for significant cost saving from replacing an existing tool, but this will not necessarily translate to high satisfaction for the actual end users.
Industry:
Some industries generally score higher than the others by nature. For instance, shopping in a department store would be much delightful and less stressful than deciding which financial plans to choose from a bank or insurance company.
Retently’s 2023 NPS study below highlight NPS averages of different industries in B2B and B2C for reference. The data is based on 10,000+ survey data points.
Major event during a specific time period:
External factors and significant events can impact your industry, customers’ perception, and satisfaction. Qualtric’s 2020 study suggests that the overall industries observed a 15 point decrease in NPS from 2019 to 2020 during COVID-19. Companies specifically in travel and hospitality experienced a significant hit in NPS scores.
The study further suggests a major NPS decline rate difference between age groups, hinting that some age groups may be more sensitive or have varying degree of tolerance than other age groups depending on the industry sectors.
Culture and geography:
If your company serves a global population, it is worthwhile to segment the responses by demographics before making sense of the data. For example, Europeans tend to be more conservative in their ratings whereas people from East Asian culture will be more generous with their ratings to be polite.
Driving insights from Net Promoter Score
1. Understand how your company stands in the industry and against the competitors
As mentioned in article, the relative NPS approach is much insightful than a single absolute score. The true meaning of the score lies relative to the scores of your competitors or key players in your industry as the average score varies across each industry. For the most up-to-date NPS benchmarks by industry, search online to look for related publications, industry blog or reports from customer experience research firms that may regularly publish NPS data and benchmarks.
2. Segment the responses by demographics and customer profile
Once you have a broad sense of how your NPS looks like, delve into segmenting the score by demographics or specific customer profile because each profile will place different value and threshold for satisfaction. Consider isolating demographic factors, such as age and geography, as it might show new insights or trends in the score.
3. Benchmark your own NPS as baseline and compare to others
Collecting NPS shouldn’t be a one time thing but rather be approached as a regular health check up to gauge how customer satisfaction and loyalty change over time. Follow-up on qualitative data to make incremental improvements and observe how your NPS changes over time. If you have a new purchase flow implemented in the product, collecting NPS feedback on the overall purchase experience can yield how the new change is performing against the previous flow.
As you monitor your own NPS, it is important to see how the industry average and competitors change over time. Identify key players in the industry and reach for their scores. Also, there could be significant global events that affect the overall industry and customer perception, such as COVID, that might be more difficult to remedy.
4. Triangulate data with other research
While NPS is an easy yet effective metric to keep track of, it shouldn’t be the sole indicator to gauge customer satisfaction. Along with NPS and qualitative data collected from follow-up questions, combine the results with other research, such as competitive analysis and CSAT, to gain a broader understanding of the industry landscape and satisfaction.
At a more granular level, conduct follow-up studies, usability studies, and surveys, to understand how you can make improvements in the product.