What is Net Promoter Score (NPS), and Should Contact Centres Measure it?

CX Today Team

Learn the NPS question, formula, and reasonable benchmarks

Insights
What is Net Promoter Score (NPS), and Should Contact Centres Measure it?

Along with customer satisfaction (CSAT), the net promoter score (NPS) is among the most widely used KPIs to gauge customer experiences.

First introduced in 2003 by business strategist Fred Reichheld, it was revered as: “The one number you need to grow.” But is NPS still relevant for contact centers in 2021 and beyond?

How does NPS Work?

NPS classifies customers into promoters, detractors, and neutral consumers. It then calculates how many more promoters the company acquires as compared to detractors, arriving at the final NPS.

The KPI helps to predict:

  • The possibility of new business from referrals
  • Customer loyalty and the possibility of retention
  • Potential lifetime value to be accrued from customers

Calculating NPS

Businesses ask customers the following question to calculate NPS:

“On a scale between zero and ten, with zero being “not likely at all” and 10 being “very likely”, how likely are you to recommend our product/service to a friend?”

Depending on the customer’s response, they are classified into three groups. Companies consider those responding with a:

  • One to six rating to be detractors,
  • Seven or eight rating to be neutral,
  • Nine or ten rating to be promoters

Once these groups are in place, count the number of customers in each group and enter the data into the following formula:

Consider this equation in practice. Perhaps 1,000 customers answer an NPS survey. 250 people give a rating between one and six, 500 people give a nine or a ten, and the rest share a score of seven or eight.

Below is the NPS calculation for this scenario:

NPS = (500 – 250) / 1,000 = 25

As in this example, the final NPS is always an absolute numerical value, not a percentage.

What Is a Good NPS Score?

It is difficult to determine a target NPS score. After all, no large company can have 100% promoters and zero detractors.

Instead of aiming for a near-impossible ideal, consider how NPS varies across sectors and benchmark accordingly.

Research suggests that such cross-sector variance is high. A 2019 NICE Satmetrix report suggests that department/specialty stores can have an NPS as high as 52. Meanwhile, health insurance scores the lowest, at a mere 14.

Yet, the best benchmark is almost always internal, as companies can focus entirely on their own progress and goal achievement.

Why Is NPS Falling Out of Popularity?

A 2020 Call Centre Helper study – entitled: “What Contact Centres Are Doing Right Now” – shows that only 39.8% of contact centers consider NPS to be “very important”. Such a figure is higher than the percentage that views CX metrics such as CSAT, First Contact Resolution (FCR), Customer Effort Score (CES) in the same way.

Perhaps the rise of FCR and particularly CES has contributed to this status quo. Another possible explanation is that a large number of neutral respondents can skew results.

So, it seems best to complement NPS with additional KPIs to generate a more accurate picture of customer sentiment when optimizing contact center operations.

 


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