Last updated on August 25, 2022
Net Promoter Scores are always an interesting topic of conversation, and industry NPS benchmarks even more so. The NPS system was created by Fred Reichheld and his team at Bain & Company and Satmetrix Systems in 2003 to help companies improve their marketing strategies to better serve customers’ needs with real, verifiable data that they could analyze and act on.
A Net Promoter Score (NPS) is a metric used to measure customer loyalty and satisfaction. An NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. This number gives you an idea of how likely your customers are to recommend your company to others.
We wrote a step-by-step guide that explains what NPS is and exactly how you can work your NPS out. Or, if you need more guidance, our helpful team is always on hand to answer any of your questions.
This blog post will discuss NPS benchmarks and look at why NPS is so essential to overall customer success. We will also explore what factors influence NPS scores and how you can improve your NPS score and be more competitive.
So, without further ado…
An NPS score is a valuable metric to track customer sentiment, and it can help businesses improve customer loyalty, boost sales, and improve customer satisfaction. This makes it an essential consideration for any customer success manager in almost any industry. However, it’s important to remember that the score should not be used in isolation and should be part of a broader customer success strategy.
Measuring NPS can help your company identify customers at risk of churning and defecting to competitors. This valuable metric allows you to keep track of the loyalty and satisfaction of your current customer base and empowers you to take corrective action before they leave. It’s well-known that getting new business is more challenging than retaining it, so focusing on offering the best possible customer experience (backed up by opinions of actual, paying customers) is an efficient way of running a business and ensuring that you have more promoters than detractors.
Measuring changes in your NPS over time is also an insightful way to assess your company’s progress and determine whether or not you are on the right track. It’s essential to look at how the score is broken down between promoters, passives, and detractors, plus analyze any comments. The significance and importance of reading text answers and comments from your customers can’t be underestimated. Not only does this give you an excellent insight into their true opinion of your product or service, but these comments will clearly show areas needing improvement and where your team should focus its energy.
What’s more, looking at it from a purely positive standpoint, your customer NPS score can help you identify which customers are likely to refer you to their friends and thus boost word-of-mouth marketing. You can use this information to reach out to those promoter customers to find out what they did and didn’t like about your service so that you can continuously improve.
With all of this in mind, it’s clear that measuring and tracking customer NPS is essential for any business wanting to keep tabs on the health of its customer relationships (and improve them over time) and utilizing a customer insights platform such as Lumoa makes this a significantly more manageable task.
There’s several frameworks, metrics, and other tools to measure and manage customer satisfaction and customer loyalty, but Net Promoter Systems stands out among them with its comprehensiveness and universality.Bill Macaitis, Advisor & Board Member, former CMO of Slack and Zendesk
NPS scores can vary significantly from industry to industry. For example, the average NPS score in 2021 for the retail sector is 32.9, while the average NPS score for the banking industry is 23.6, and IT services is 42. While on the face of it, it may appear that the IT services industry is “better” than the banking industry, that’s not necessarily true. This is why benchmarking is so important, which we will discuss later.
There are several factors that can influence NPS. These include customer satisfaction, customer loyalty, and customer engagement. NPS scores are also affected by company size, industry, and country. All of these differentials need to be taken into account when comparing your NPS score to see how you stack up against other companies to see if you have a “good” score.
There are two ways to assess your NPS; one is by looking at your score relative to your industry (the relative method), the other is to measure your score against an average across all industries (the absolute method):
If you’re looking to assess your NPS against all industries, the following is a good guideline:
However, benchmarking—the relative method—gives a more accurate picture of how you compare on a “like for like” basis. An excellent example of benchmarking would be Starbucks comparing their NPS to Costa Coffee – similar companies, similar products, similar customers, and similar reach.
Some markets never reach high NPS scores for one reason or another, and it’s particularly relevant for companies in these markets to consider using the benchmarking method to assess their NPS score if they want to get an accurate and informative picture of how they compare to competitors.
Once you have analyzed the data from your surveys and found out your NPS, there are then several steps you need to take to ensure you’re benchmarking this correctly.
Firstly, look at your industry only; if you include data from other industries, you won’t be able to get a like for like comparison as each industry has different levels of “good,” as we discussed previously. To explain this further, we can look at the banking and eCommerce markets. In 2022 the highest-ranking bank was First Republic Bank, with an NPS score of 72; one of the lowest was Goldman Sachs, which had a ranking of 5.
If you compare these figures to the wearables market, Fitbit has an NPS score of 12 and Garmin a score of -2. However, the market is much narrower, so while the difference in comparison to First Republic Bank appears substantial, in reality, a score of 12 is relatively good compared to the rest of the wearables market.
Secondly, location and cultural differences can significantly impact NPS scores depending on the levels of enthusiasm of participants in each geographical location relative to numerical-based scoring systems. For example, Europeans tend to err on the conservative side while scoring on a numerical basis and are less likely to give scores of 9 or 10. In contrast, customers state-side are more likely to give the coveted 9 or 10 scores needed to class customers as “promoters.”
Further evidence of cultural bias is that customers in Japan tend to rate their satisfaction levels lower due to high customer service standards. And interestingly, those surveyed in Latin America tend to rate higher than all other areas.
Suppose you ask a willing customer a set of questions over the phone or face to face. You’re more likely to get deeper, more meaningful answers than if you asked the same person the same questions via another survey channel, such as a web form, email, or SMS survey service. It’s therefore essential to consider this when you’re looking at other companies’ NPS scores and choose a comparable, or the same, survey channel to compare your data to. This will give you the most accurate snapshot of their position relative to your own.
Once you’ve benchmarked your NPS against similar companies, it certainly gives you a good indication of how you compare at this moment. However, tracking your NPS over several months along with that of your relative market is a much more helpful metric that will show how your business is improving or, on the flip side, if standards are slipping.
There are numerous approaches you can take to improve your NPS score. Firstly, it’s essential to focus on cultivating customer satisfaction. This can be done by ensuring that your products or services meet customer needs and exceed expectations. And it’s worth remembering that improving NPS shouldn’t be the sole responsibility of the customer success team; ultimately, it needs to be a companywide consideration.
Second, focus on increasing customer loyalty. This can be done by creating a solid brand identity and developing long-term relationships with customers. Finally, focus on improving customer engagement. This can be done by providing relevant and targeted content, offering personalized experiences, and making it easy for customers to provide feedback.
Sharing your NPS is excellent for building brand reputation and trust with customers; it’s even better if you see your score improving year on year and share that information.
However, even a mid-tier score could be worth making public when combined with the option for feedback and suggestions.
This is also a beneficial way of utilizing a digital touchpoint because it offers interaction. It gives customers a way to vent their frustration or provide constructive criticism that you can use to improve. Not only that, but if you listen to and act on customers’ suggestions, you can discuss this in your content and marketing materials – further strengthening your brand’s reputation.
NPS is an important metric to consider when looking at an overall customer success strategy and even more critical when you use that score to benchmark against your industry. With over two-thirds of Fortune 500 companies using NPS to understand better the experience their customers have, it’s clear that this formula is helping companies improve their services and customer satisfaction levels.
Using a tool such as Lumoa is a fast and efficient way to analyze large volumes of data continuously. Combining the benefits of AI and human intelligence to find the most important and relevant information from customer feedback, Lumoa users can quickly act on these valuable insights and improve their NPS and customer satisfaction levels.
Improving your CEM system is an ongoing process and having an accurate benchmarking mechanism will help ensure that you stay on the right track. The general tips above can help ensure that you benchmark the right types of surveys and zero in on metrics that provide actionable insights.
If you want to learn more about Lumoa and how it can help you assess the data you collect through all of your surveys, contact us today or start a free trial.
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