NPS(Net Promoter Score) is a common metric which almost all internet users come across. It is a metric to predict customer purchase and referral behavior. This metric is designed to measure user’s loyalty towards a brand. In addition to the standard repertoire of acquisition, engagement, and monetization KPIs, has become a great additional measure for understanding customer loyalty and ultimately an actionable metric for enhancing your product experience to deliver delight.
The concept of NPS was conceived by Fred Reichheld at Bain & Company in 2003. Fred found NPS to be a strong alternative to long customer satisfaction surveys as it was such a simple single question to administer and was able to show correlation between NPS and long-term company growth. NPS always based on a scale of 1-10. Below I have breakdown the NPS.
NPS score= (% promoters) minus (%detractors)
How NPS is calculated
It is calculated by surveying your customers and asking the simple question, “How likely is it that you would recommend our company to a friend or colleague?”. Based on this on a scale of 10 you can group your customers to Promoters (9-10 score), Passives (7-8 score), and Detractors (0-6 score). The score ranges from -100 (all detractors) to +100 (all promoters). Furthermore, NPS score that is greater than 0 is considered good and a score of +50 is excellent.
How NPS is collected?
NPS scores for online products are typically collected by sending the survey via email to your customers or through an in-product prompt to answer the survey. To maximize response rates, it’s important to offer the survey across both your desktop & mobile. We can leverage use of the tool called Survey Monkey.
A challenge with both email and in-product based survey methodologies is they tend to bias responses to more engaged customers, and less engaged users are likely not coming back to the product nor answering your company’s emails as frequently.
How frequently you should Survey?
When thinking about how frequently to administer an NPS survey, there are several key factors to consider. The first is the size of your customer base. The smaller your customer base, the larger sample you need to survey each time or even wait longer for more responses to achieve a higher response rate, which limits how frequently you can administer future surveys. The second consideration is associated with your product enhancements, it ends up being one way to drive increases in scores and therefore the frequency of score changes depend on how quickly you are iterating on your product to drive such increases.
NPS tends to be a lagging indicator so it takes time even after you’ve implemented changes to the customer’s experience for them to internalize the changes and then reflect such changes in their scores.
How NPS changes according to Season?
We found that there may be some seasonality at play in certain quarters that effect NPS results, correlating with engagement seasonality. We’ve heard that this is even truer for other businesses. So, it may end up being more important to compare year-over-year changes as opposed to quarter-over-quarter changes to ensure the effects of seasonality are minimized. While this may not be possible, it’s at least important to realize how this could be affecting your scores.
Yes, there are certain limitations for NPS
- The not so permanent nature of NPS make it difficult metric for day to day business.
- Sometimes sampling of NPS affects the product iterations in a negative way.
NPS is simply a tool for understanding how your customers are perceiving your execution against your product strategy as well as provides concrete optimizations you can make to better achieve your already defined strategy. The ordering of the questions matters. The list of competitors that you include in the survey matters. The sampling approach matters. Change the methodology as infrequently as possible.