Suppose you are preparing to make a big decision – on a new apartment or a new job – where do you go for advice when it comes to making the right choice? We’d say consulting the internet to conduct research and asking your friends and family for their recommendation are somewhere on the top of the list.

In this day and age, with the help of social media, consumers are able to quickly share recommendation and reviews with their entire network with just the press of a button. Reading these reviews are just as important - 91 percent of people regularly or occasionally read online reviews, and 84 percent trust online reviews as much as a personal recommendation.

These statistics further explain why collecting customer feedback has become such a popular practice among companies, not only to prevent bad customer experiences and negative reviews, but also to react immediately and improve their quality of service.

While there are numerous methods for interpreting customer satisfaction using various performance metrics, there is a simple metric that is increasingly replacing other complex and time-consuming surveys as it offers powerful insight which is easy to understand. This metric is called the Net Promoter Score (NPS) and is often referred to as ‘the gold standard of customer experience metrics’.

What is NPS and How Does it Work?

NPS is a method of estimating customer loyalty to a particular brand or organization.

This concept was introduced in 2003 by Bain and Company. Today, NPS is a common alternative that is used all over the world by companies who want to measure and understand how good or bad their customer relationships are and how their customers’ loyalty correlates with the growth of the company. By focusing on the word-of-mouth potential of a brand, it allows companies to gauge customer attitudes towards it more accurately than other surveying mechanisms.

All it takes is a one-question survey asking, ‘how likely are you to recommend us to a friend or colleague?’

The respondents get to answer this question on a scale that goes from 1 – 10. Depending on their response, customers fall into one of 3 categories to establish an NPS score:

Promoters respond with a score of 9 or 10 and are typically loyal and enthusiastic customers.
Passives respond with a score of 7 or 8. They are satisfied with the company’s service but not happy enough to be considered promoters.
Detractors respond with a score of 1 to 6. These are unhappy customers who are unlikely to buy from the business again and may even discourage others to do so.

To sum it up, the higher the score, the more individual consumers are loyalists for the brand. These are the people who advocate products and services and convince other people to become customers.

NPS surveys can provide more than just quantitative customer ratings to a business. Some companies may also include some follow-up questions after the rating has been provided. This could comprise of questions such as ‘What is the primary reason for your score?’ or ‘How can we improve your experience?’. This allows companies to dive deeper into the ‘why’ behind a customer's initial NPS rating and gain qualitative feedback.

How Do Companies Calculate NPS?

It’s simple to calculate the final NPS score – just subtract the percentage of Detractors from the percentage of Promoters.

For example, if 10% of respondents are Detractors, 20% are Passives and 70% are Promoters, your NPS score would be 70-10 = 60.

The score spans a range from -100 to 100, representing the respective extremes of every customer being a detractor, or every customer being a promoter.

Technically, any NPS score above 0 represents a positive overall average, but world-class companies tend to score in the 60s, 70s, and a select few even reach the 80s.

It is important to note that the average score varies between industries. Retail companies and luxury hospitality services tend to compete on higher ground than cable TV and telecommunications providers.

Why is NPS important?

The Net Promoter Score is a prime indicator of a company’s growth and gives you a glimpse of how satisfied other customers are with the service level and products of a company. Understanding what the scores translate to can be beneficial for consumers to be surer about their decision and executives to be able to identify areas of improvement and create the best customer experience that meets your expectations.

Let’s look at what you, as a consumer, can take away from a company’s NPS.

Reliable products and services – Companies holding a high NPS tend to have so many promoters because people love how easy their services/products are to use, and how reliable they are. Going into business with a company like this can help you feel more confident about your purchase since there are a large number of people who have validated their products already.

Great customer service – A common trait among companies with a high NPS is that they offer a personalized, convenient, and satisfaction-oriented customer experience. People would argue they are some of the companies with the best customer service in the world. On the other hand, a low NPS value would mean that customers were treated poorly. The rating gives potential customers, like you, proof of how they will treat you as well.

Unique, innovative products and offers - Most companies with high NPS scores stand out from their competition by offering consumers a unique value proposition. Choosing this type of company will give you the assurance that your feedback is valuable and will be used as ideas for product innovation.

Now, let’s look at what companies get out of measuring customer advocacy this way.

Increase customer satisfaction - One of the main benefits of the NPS is that companies can see directly how satisfied customers are with the service they offer. If they can see that satisfaction is not what they want it to be they can take steps to improve it. Meeting customers’ needs, solving their problems and nurturing them are major growth levers for companies.

Boosts referral marketing - Customer NPS gives companies an idea of how likely they are to earn recommendations from happy customers — which, as it turns out, carry a lot of weight. Referred customers have a 16% higher lifetime value and greater ROI than others.

Reduce customer churn – For businesses, it is important to create promoters, but even more important to focus on how to keep those customers. Promoters are understandably much less likely to churn but if companies know their NPS, they can invest more into creating an unforgettable customer experience, which encourages passives and detractors to move into the green.

What Does NPS Mean at Cabco?

At Cabco, we’re committed to customer satisfaction, and this is proven by our consistent surveying of customers after every service or installation call.

To ensure that our feedback is as accurate as possible, we use a third party to collect the surveys and calculate our NPS score. We are proud to state that our NPS score is 92.0.

Check out our testimonials page to find out more about what our clients have to say about us.

If you’ve made it to the bottom of this article and think you could benefit from our services, contact us today! Our team at Cabco is always happy to answer any questions you may have and help you manage your communication needs so you can continue to make connections that matter.

Ahona Saha
Marketing Assistant
Cabco

Understanding Net Promoter Score (NPS) with Cabco