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What is the Net Promoter Score (NPS)?

August 19, 2021 by ClientCircle

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You’ve heard about the NPS® but might not understand what the big deal is. We simplified it for you. Here’s why so many companies are using the NPS and how it could help you.

What is it?

The Net Promoter Score (NPS) is an assessment of the amount of loyalty a client (or client base) has toward a company or organization. With loyalty being the desire to refer, be retained and/or make repeat purchases.

The NPS survey is a single-question inquiry used to gauge the NPS for individual clients.

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Respondents are grouped into three categories based on their score:

  • Promoters (9-10)
  • Passives (7-8)
  • Detractors (0-6)

History

In 2003, business strategist Fred Reichheld developed the NPS as a metric to determine the overall loyalty of a company’s client base. Fred found that, unlike client sentiment measured by traditional satisfaction surveys, client loyalty was directly linked to referrals, retention and repeat business.

Because of its simplicity, the NPS survey yields a higher-than-average response rate. At ClientCircle, for example, 40% of surveyed clients give a score rating, with the majority expounding on their response with additional feedback.

Hundreds of customer-focused companies have since adopted the NPS including Southwest Airlines, Apple, Enterprise Rent-A-Car, eBay, Zappos and many others. They are using the NPS as a metric to set company-wide benchmarks aimed at improving the overall client experience.

ClientCircle has expanded on the NPS—using it not only as a yardstick to measure client loyalty—but also to uncover promoters and directly influence positive behavior. High response rates provide useful data allowing for tailored communication that drives client feedback, testimonials, online reviews and word-of-mouth referrals.

How is the NPS calculated?

The overall NPS for a company is calculated by subtracting the percentage of detractors from the percentage of promoters. This provides a score ranging from -100 to +100.

Why use the NPS?

The NPS is a direct measurement of client loyalty and is:

  • Used to set company-wide goals to exceed client expectations
  • Effective at predicting future behavior of a client (or client base)
  • Used to tailor effective communication and influence behavior
  • Indicative of likely referral and review sources
  • An easy way to discover and remedy disgruntled clients

What is a good NPS?

It depends on your industry. Internet providers, for example, average near the bottom with a score of 0.

Within the insurance industry, the direct carriers (Geico, Progressive, etc.) are averaging an NPS around 30.

Independent insurance agents tend to have a closer relationship with their clients, better service and implement more consistent communication strategies.

The average NPS for independent insurance agents is closer to 60-75, which indicates very high client loyalty. Some agencies score above 75, which is indicative of even better client loyalty.

© 2022 ClientCircle

*Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.