Net Promoter Score (NPS) Definition and Meaning
Advantages and Disadvantages of the Net Promoter Score
As a marketing metric, the Net Promoter Score has both its advantages and disadvantages.
You can get a guideline value with relatively little effort and with the help of an online NPS calculator without difficult formulas.
Many hundreds of companies calculate the NPS. So you can easily determine the status of your company in the benchmark.
You and your management are able to determine the company’s performance with a simple metric.
The Net Promotor Score is the standard tool when it comes to measuring and improving customer satisfaction. Even large corporations like Apple or American Express use the NPS.
The NPS is a single value. However, it only gives you limited information about why customers are critics, for example. Is there a specific event behind it?
The samples are often not representative because there is often not enough time or money for larger samples.
Differences in the answers
Differences between gender and culture can lead to different views and responses.
Criticism of the Net Promoter Score
There is also quite a lot of criticism of the Net Promoter Score. Many doubt that this method can keep up with other instruments, such as the American Customer Satisfaction Index. These are structured much more detailed and complex. First and foremost, the criticism is limited to the following points:
- For the critics, the NPS as a single value is not sufficiently meaningful. An example illustrates this: You get a value of 10. This can result from 50% promoters and 40% critics. But you also get this value with 10% promoters and 0% critics.
- The willingness of customers to recommend something depends very much on the industry and of course on the product. Products from the fields of technology or fashion are recommended much more often than is the case with products such as shampoo or very private products.
Relation not demonstrable
- With the NPS it is very difficult to establish or prove a connection between the NPS and the growth of the company.
Readiness and action
- The NPS asks the customer whether he or she would recommend your products or services. You cannot judge whether he actually does this.
Arbitrary division of the scale
- Usually a value of 8 is actually a good value. But why is it assigned to a passive satisfied person when calculating the NPS?
- Practice shows that an NPS benchmark is primarily available for US or UK companies. As a German entrepreneur, you only have limited comparability.
The NPS in practice
As shown on abbreviationfinder, NPS stands for Net Promoter Score. Customer feedback is one of the most important sources of information for companies. This information is used to improve our own performance in the company and to increase customer satisfaction. This is the only way you can keep your company successful in the market. The simple but also very effective tool Net Promoter Score should therefore not be missing in practice. This is also shown by examples from well-known companies .
NPS example Apple
One of the best-known companies that regularly work with the Net Promoter Score is Apple. Apple’s current NPS in 2019 is 47. This is by no means a bad value if you take a look at other companies.
Possible questions for a customer survey
There are many instruments for market research . Perhaps you have also been interviewed before. It is almost certain that you too were quickly annoyed by the many questions. So the question is how many and which questions should you use? After all, the Net Promoter Score should be seen as an alternative that should save the respondents from endless questionnaires. For this reason, you should concentrate on a single question, a maximum of two questions:
How high is the probability that you will recommend our product / service to family, friends or acquaintances?
If you want, you can also add the following question:
What is the main reason for the given review?
No more questions are necessary for the NPS. Any further questions would then fall into the classic customer satisfaction survey.
What other NPS variants are there?
Of course, the NPS can also be used as a variant for other survey objectives . I would like to introduce two of these variants to you.
Employee Net Promoter Score (eNPS)
The Employee Net Promotor Score (eNPS) is a method for you to measure the satisfaction of your employees . With the eNPS you can determine how willing your employees are to recommend you as an employer to family members, friends or acquaintances. The structure of the eNPS is the same as the conventional NPS, i.e. it also has the same rating scale. The question in the eNPS is:
How likely are you to recommend your employer to a friend or acquaintance?
This variant of the NPS has the advantage for you that you can quickly and easily get an impression of how loyal the employees are to your company. In recent years it has been shown that more and more companies are using this method. For you, this means that you get a good benchmark opportunity.
DIM Fan Score
The DIM Fan Score is from the German Institute for Marketing. It is used there in a modified variant of the conventional NPS. In this case, too, the determined value is used as a benchmark. The value is valid for a certain period of time and serves as a comparison value to competitors on the market. However, the rating scale is different here. This ranges from 1 to 6 . The 1 stands for very likely and the 6 for very unlikely. Instead of promoters, there are fans here . All those who give a 1 as a rating are classified in this category. Anyone who rated 3 or worse comes into the non-fan category . If someone gives a 2, then he is one of the neutrals. This is the group that is referred to in classic NPS as the passive satisfied. The calculation formula is identical, but the result is called the fan score.
The NPS has its advantages and disadvantages. However, the method offers itself as a starting point for you when it comes to the topic of customer loyalty and research. However, it is not possible to carry out a subsequent research into the cause, such as the key figure in NPS. The NPS can therefore do little to improve customer loyalty.