In the December 2003 Harvard Business Review, Frederick F. Reichheld introduced the corporate world to his Net Promoter Score (NPS) in the article The One Number You Need to Grow. The inspiration for the NPS came from the CEO of Enterprise who had shared the company’s new, useful customer satisfaction analysis using ratings from only the customers who raved about their car rental experience.
Before the NPS, companies used lengthy customer satisfaction surveys that were difficult to verify, provided low response rates, and had results that didn’t correlate with revenue. The NPS changed all that. Reichheld wrote, “By substituting a single question for the complex black box of the typical customer satisfaction survey, companies can actually put customer survey results to use and focus employees on the task of stimulating growth.”
According to Fortune’s reporting in May 2020, “At least two-thirds of the Fortune 1000 use the net promoter score” and many CEOs check their company’s NPS first thing every morning.
How NPS is Calculated
Revuze gives a good overview of the NPS:
- Customers are asked this question: “On a scale of 0 to 10, how likely are you to recommend this product or service to a friend or colleague?”
- ‘Detractors’ score between 0 and 6
- ‘Passives’ score 7 or 8
- ‘Promoters’ score 9 or 10
- The percentage of detractors are subtracted from the percentage of promoters giving a score between -100 and 100
As an example, let’s say your company surveyed 500 customers, using the NPS question. Of the 500, 72 scored a 9 or 10 (promoters), 291 scored between 0 and 6 (detractors), and the remaining 137 scored a 7 or 8 (passives). Your net promoter score is calculated like this:
14 (percentage of promoters) – 58 (percentage of detractors) = -44 (NPS)
You can click here to see the NPS of the top 100 brands.
It’s important to remember that the calculation simplifies customers into detractors vs promoters; it can’t identify fake reviews (especially online), gives no context or explanations for why customers gave the score they did, and narrows the customer experience to the end of the journey when they’re surveyed. However, the NPS still provides a correlation between results and profit. If your CPG brand has a poor net promoter score, you’re losing business and revenue.
NPS doesn’t measure repeat purchases, what motivated the customer to make a purchase decision, or any of the metrics usually found on a customer satisfaction survey. It only measures a customer’s willingness to recommend a product. This is important. As Reichheld wrote for HBR, a repeat purchaser may be constrained by inertia, accessibility, or finances, and their purchasing habits may change without influencing anyone else’s habits. But when a customer puts their reputation on the line to recommend a product, they are stating their loyalty and willingness to influence others. That’s where the power of an NPS lies.
What is a Good Net Promoter Score (NPS) for CPGs?
NPS has limited value as a stand-alone number. To understand its impact, you need to know what the average NPS for your industry is. Retently looks at current NPS across industries and is a good resource. In general, they’ve determined that while every company should aim to keep their score about 0, a score between 0 and 30 is good, and a score over 70 “means your customers love you and your company is generating a lot of positive word-of-mouth from their referrals.”
Keeping a good NPS is a challenge. Retently found that scores in 75% of industries decreased over time. This reiterates the importance of knowing what’s happening to NPS scores across your industry, not just within your company so you can see where your company stands relative to your competitors. You may see a smaller/larger deterioration than the average.
This chart gives an interesting overview of NPS for start-up brands—the time when scores are generally highest as new customers rave about their most recent purchase or experience.
Easy Tips to Improve Your Net Promoter Score (NPS)
Vidya Venugopalan wrote an easy-to-follow series of steps to improve your NPS for CloudCherry. The very first thing to do is make sure your team knows what the NPS is, why it’s important, and what your goal is for your CPG brand. As Venugopalan says, “Converting unenthusiastic customers into loyal promoters will require a group effort and the best ideas often come from the unlikeliest of sources” so make sure you’ve engaged everyone on your team.
The next step is much easier to implement, thanks to social media: Make it easy for customers to promote your brand. Once your brand is on the relevant platforms, you can create opportunities for customers to rave about your products. Be sure to engage with every comment (including complaints), and let your customers know that you appreciate the time they took to share their experience.
Whether on social media or through other communication channels, work to engage with your promoters and learn from them. What is it about your brand/product that makes them loyal? How can you make this better? What can you do differently? And when you take their advice, let both them and the broader community know how valuable their feedback is and how you use feedback to improve the customer experience and your brand.
Of course, an NPS isn’t just about your promoters, it’s about your detractors, and it would be a mistake to ignore them. Again, engage with them, find out exactly why they don’t like your product or wouldn’t recommend it, and take action. While there is an aspect of weeding out vague/unhelpful complaints, many detractors comments can lead to important changes. Here’s an example of Tesla using customer feedback for everyone to see:
Ask for feedback, and then respond. It’s so important to remember that failing to engage with customers, especially after they took time to provide feedback, is a surefire way to diminish/eliminate their willingness to support your CPG brand. Responding to promoters increases loyalty, and responding to detractors can convert them to loyal customers. Acknowledge their praise or concerns, and give tangible feedback that reinforces the fact that they have been heard and they matter to your brand.
In every interaction, be consistent. Venugopalan describes it as being “delightful”. “Offer fast and transparent service, treat customers like they matter and always do a little extra and you’ll cement their loyalty before you know it.”
One area that’s likely to come up in comments from customers is packaging—and it can have a big impact on your NPS score. Rob Kaszubowski for Packing Digest shares five ways packaging affects your NPS. The first is how easy it is to open your package. It’s not hard to see how the ease/frustration involved in opening something will impact how customers feel about their purchase.
Next is whether the package arrives undamaged—we’ve all seen one-star reviews that have nothing to do with the actual product, but people are angry because the packaging is damaged. Recyclability and waste in packaging also impact your NPS, so these are important issues to address. For a double whammy, use social media to announce changes that lead to less waste and more recyclable packing and encourage people to like and share the things you’re doing to become more sustainably minded.
Regardless of how many things you do to improve your NPS, you must continue to monitor it. Your score has no value if you only use it to occasionally check where your company is at. The CEOs of Fortune 1000 companies who check their NPS scores every morning are doing it because the score’s movement is just as important as the actual number. Either you’re turning passives and detractors into promoters and growing your brand, or you’re losing promoters, profits, and praise.
Going Beyond the NPS
After all the discussion about NPS, CPG brands cannot use it as the be all and end all of customer satisfaction. Using additional information will help you contextualize your NPS and fill in some blanks about the customer experience. Swati Sahai writing for Pointillist has some good advice on how to go beyond NPS. Understanding the customer journey is a key part of this. Sahai uses the example of asking a customer whether they’d recommend your product when they call to check on a delayed delivery. It’s a totally inappropriate time in the customer journey for that question!
A good customer journey map will show which platform(s) customers prefer to use to provide feedback at specific points. “Using customer journey analytics, you can discover the most important points for interaction and only prompt customers for their opinion at that point.”
Customers behave differently from each other, and their behaviors have different impacts on revenue. You can use analytics to identify which customer behaviors are connected to profitability and growth and focus resources on this important segment.
Sahai suggests using six customer experience metrics that focus on profitability, loyalty, reducing churn, and increasing customer lifetime value:
- Net Promoter Score (NPS)
- Customer Satisfaction (CSAT)
- Customer Churn Rate
- Customer Effort Score (CES)
- Average Resolution Time
- First Contact Resolution (FCR)
Just like NPS, all customer experience monitoring needs to occur consistently. A one-off report or score has almost no value, and certainly won’t show where you’re doing well, and where the problems are. Be flexible. As you learn about your customer’s journeys, look for places where you need to conduct further investigation, and add metrics for key outcomes. Customers change, their behaviors change, and the market changes. The only way to continue to grow your brand (and the customer experience and your NPS) is to keep a finger on the pulse of your customer, to take action when things are not working, and to double down on things that are working.