Understanding NPS and Its Impact on Your Business
“Performance” refers to the objective, measurable, and tangible display of a product, service, system, or organization. It is a concept that can be evaluated with concrete data and measurements. For example, concrete data like a car’s actual speed, a website’s loading time, or the number of tasks completed by an employee within a specific period represents performance.
“Perceived performance” refers to the performance of a product, service, system, or organization as perceived by users or customers. It is a more subjective concept, based on personal experiences, feelings, and perceptions. Perceived performance may differ from actual performance and reflects the feelings and emotions experienced by users or customers.
“Expectation” is the hope, prediction, or anticipation of a future event or situation. Before purchasing a product or service, customers generally have certain expectations. Expectations can be influenced by various factors, such as advertisements, brand image, product reviews, and past experiences.
“Satisfaction” expresses the level of contentment and happiness felt by customers or users regarding a product, service, system, or organization. Customers evaluate their satisfaction levels by comparing perceived performance to their actual expectations.
The relationship between actual performance, expectations, and perceived performance impacts customer satisfaction. If actual performance exceeds customer expectations and perceived performance is positive, customer satisfaction increases. In such cases, customers are satisfied with the product or service and may remain loyal to the brand.
On the other hand, if actual performance falls below customer expectations or perceived performance is negative, customer dissatisfaction may arise. In such situations, customers may not be satisfied with the product or service and may distance themselves from the brand.
To ensure good customer satisfaction, companies should strive to improve actual performance and enhance perceived performance to meet customer expectations.
So what is NPS(Net Promoter Score), one of the tools to measure customer perception?
Net Promoter Score is a customer loyalty metric that seeks to measure customer satisfaction and brand loyalty based on one simple question: “Would you recommend this product/service/brand to your friends or colleagues?” Customers are then asked to rate their likelihood of recommending on a scale from 0 to 10.
Based on their responses, customers are categorized into three distinct groups:
Detractors (Score 0–6): Customers who express low satisfaction levels and may have negative opinions about the brand or service. Detractors can potentially harm a company’s reputation by sharing their negative experiences with others.
Passives (Score 7–8): Customers who are moderately satisfied but lack strong enthusiasm or advocacy. Although they may not actively promote the brand, they are not likely to speak negatively about it either.
Promoters (Score 9–10): Customers who are highly satisfied and enthusiastic about the product or service. Promoters are loyal supporters who actively recommend the brand to others, contributing to positive word-of-mouth marketing.
To calculate the Net Promoter Score, companies determine the percentage of customers falling into each category and subtract the percentage of Detractors from the percentage of Promoters. The formula is as follows:
NPS = (% Promoters — % Detractors) x 100
Net Promoter Score is a valuable metric that empowers businesses to measure customer satisfaction, loyalty, and advocacy. By understanding NPS and its implications, companies can forge stronger customer relationships, drive growth, and continuously enhance their offerings to meet customer expectations. Embracing the voice of the customer through NPS feedback can lead to greater success in today’s competitive market where customer-centricity reigns supreme.
