For those working in the service industry, you may have wondered how customer satisfaction and experience is measured. This art is not actually guesswork, but a finely tuned formula, and one that is a globally recognised system called the Net Promoter System (NPS), designed by Fred Reichheld, a Bain Fellow and founder of Bain & Company’s Loyalty Practice.
Essentially, the NPS shifts customer experience questioning from ‘are you satisfied?’ to ‘would you recommend this service or product? This has proved to be a more useful way to look at feedback and dig a little deeper about a person’s experience, rather than a passive response that doesn’t take into account the responder’s reputation.
The answers are divided into three parts. First are promoters. A promoter will tell their friends and family about your offering without any prompting – they are extremely valuable for your business. Then there are passives, who are unlikely to promote your business, but won’t bad-mouth it either, and are ripe to be swayed by competitors with a better offer. Thirdly, there are clients who are detractors, who may be sharing their negative experiences with your business.
To find your business’s NPS score, you simply take the percentage of promoters you have and subtract the percentage of detractors. Say for example, you have 60% promoters, 30% passives and 10% detractors, you end up with a 50% NPS score.
% Promoters - % Detractors = NPS
Interestingly, there are different industries that often have high NPS scores and those which are almost always on the lower end of the scale. Insurance is one such industry that struggles to score highly, namely because insurance is a grudge purchase, generally associated with negative life events such as accidents and death. No matter how perky the friendly claims person is on the end of the line, overall, the industry has general low NPS ratings. Industries traditionally doing well across the NPS board are petrol service stations (quick, easy turn-around and service), pharmacy (often an environment of intimacy, rapport being built with customers and staff) and service-based businesses (as they are able to build relationships with their customers effectively).
Some businesses report their NPS scores. In 2021, Google had an NPS of 11%. In the same year, Facebook had -21%, and American Express had a NPS of 29%. Businesses should be compared and contrasted across the same categories, for example, American Express was the leader in credit card NPS scores with a mere 29%, indicating the industry doesn’t perform wonderfully overall.
Unsurprisingly, businesses people associate with pleasurable experiences have higher NPS ratings overall. For example, Starbucks reported an NPS of 77% for 2021, while entertainment technology firms Samsung and Sony scored 67% and 61% respectively. Banks were the only category to outperform Facebook in terms of negative NPS, with Santander and Bank of America posting -25% and -24%. Even McDonald’s couldn’t escape customers’ ire with an NPS of -8% in 2021.
In New Zealand, Customer Radar is used by many businesses as their key NPS metric tool. As of the end of October 2021, Customer Radar clients had collected more than 112,000 pieces of feedback in the year to date, averaging an NPS of 81% between them.
Our clients can compare their NPS to others in the same industry, giving critical insight as to what they are doing that is exceptional, and what could be improved. To learn more download our e-book, Collecting the Right Kind of Feedback.