NPS 101
A Net Promoter Score (NPS) is the touchstone for all customer experience metrics.
NPS measures customer satisfaction and loyalty based on the likelihood of them recommending your product to someone else.
Customer experience professionals use this data to help inform product development and customer onboarding processes. When combined with other metrics, NPS can guide you to improved decision-making and help you maintain a competitive spot in the marketplace.
In this article, we’ll cover industry benchmarks, benefits, and limitations of the NPS score so you can evaluate where you stand and adjust accordingly. While some might question the relevancy of NPS, it’s still as useful today as it was in 2003 when introduced to the business world by Bain & Company.
What is NPS benchmarking?
To make the most of your metrics, you need to have a standard to compare your results to. NPS benchmarking involves identifying the ideal score for your industry because what’s considered good or bad will vary depending on your niche. The best way to do this is to check out others in your industry.
When you ask customers how likely they are to recommend your product to a family member, friend, or colleague, they’ll respond with a number from 0 to 10 — extremely unlikely to very likely.
Here’s a general breakdown of how you come up with NPS scores from a customer experience survey:
· 0 to 6: Customers with this score are considered generally unhappy and are known as detractors. These scores contribute to negative word of mouth and should be a top priority for your company to address.
· 7 to 8: This response indicates that customers were satisfied with their experience, but perhaps not enough to go around recommending it to their friends.
· 9 to 10: Customers that are highly satisfied with your product are known as promoters and are likely to spread the good word about your company to friends and colleagues.
To calculate your NPS score, you need to subtract your percentage of detractors from your percentage of promoters.
For example, let’s say you survey a group of 100 people–if 80 people answered in the promoter range and 20 answered in the detractor range, you’d be left with an NPS score of 60, which is above average, if you’re going by the absolute NPS scale.
Absolute vs relative NPS
Absolute NPS doesn’t take your industry into consideration; instead, it just provides a basic framework to give you a general idea of where you stand with your customers.
The standards for absolute NPS (on a scale of -100 to 100) are as follows:
· -100-0: most of your customers are having a negative experience.
· 1-30: acceptable but leaves significant room for improvement.
· 31-50: common range for most companies.
· 50-70: above average.
· 71-100: companies in this range are outperforming their competitors.
Relative NPS differs from absolute because it considers other companies in your industry. It provides a much more accurate reflection of your performance because you’re being compared to other people in your space, rather than a scale with no context. And when it comes to CX metrics like this, context is extremely important.
How to benchmark your score?
To get more specific insight from your metrics, you can benchmark your score according to different criteria, just be sure to take all relevant factors into consideration. To get started, you'll need to first calculate your NPS score, though.
By industry
Since your NPS score will vary from industry to industry, there’s no use in comparing scores from companies that have nothing in common. For example, if you work in the food industry, there’s no use in comparing your NPS average to a phone company.
What’s considered excellent for a phone company might be considered subpar for the food & beverage industry, so make sure you always benchmark your NPS against the average for your specific industry.
By geography
The region and culture where you operate often have a lot to do with consumer behavior. For instance, a report by Qualtrics shows that customers in India and Mexico are the most generous when they like a company. Alternatively, South Korea and Japan are more reserved with their scores when they like a company.
So, keep that in mind when evaluating your scores, because consumer responses might be due to cultural differences.
By channel
Pay attention to where your survey results are coming from. You can’t compare your NPS from SMS surveys to email surveys because they don’t typically have the same response rate.
Surveys can be sent to customers through various channels, such as email, SMS, in-app surveys, social media, and direct mail. Despite the rise of social media and change in technology over the years, e-mail is still one of the most effective methods for reaching customers.
According to market research, email provides over 140% ROI when compared to other channels mentioned above. People tend to gravitate towards personalized promotions, so a survey that comes along with a reward is much more likely to be opened and responded to.
By company size
Startups will often begin with an excellent NPS, but it doesn’t always last. Once your company is in the phase of scaling up, it’s normal to see a drop in NPS score. Early adopters are likely to be supportive and recommend your product, but as you expand your offerings and enter a larger market, the more potential there is for a variety of feedback.
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Factors that affect NPS scores
Once you have your industry benchmarks in mind, it’s important to be cognizant of the different factors that can affect your NPS score. The more you know, the better prepared you’ll be to react and adjust accordingly.
Your market
According to a study by Satmetrix, your NPS score is a direct reflection of your market share, so it’s crucial to understand where you stand with your competitors. If you have a very high score, you’re going to have a larger market share. On the other hand, if your score is low, it’s an indication that you have a lower market share. Understanding your customer demographic is an essential component of improving your NPS score.
Customer expectations
Expectations from your customers will vary depending on the nature of your business. Professional service industries like accounting rely heavily on expertise, whereas retail businesses are very customer service-focused. Expectations matter because they will affect how lenient a customer will be with their feedback. In terms of accounting professionals compared to retail services, customers are likely to be more forgiving towards a retail store employee compared to someone who is preparing their taxes.
Your competitors
Your NPS score will also change depending on how competitive your industry is. If competition is at an all-time high, companies need to be innovative and quick to improve upon customer service. If you’re up against organizations that are constantly making improvements, you’ll have to do your best to keep up even for an average score.For example, when Oldsmobile went out of business, they still had plenty of loyal costumers, but they didn’t necessarily account for the loss in market share when non-loyal customers moved to other brands.
NPS benchmarks
In this section, we'll break down:
- The average response rate for NPS surveys by channel
- The average NPS score by industry
- The median NPS score by industry
- The top quartile NPS score by industry
- The bottom quartile NPS score by industry
- A little note on sources
NPS survey response rates benchmarks by channel
Here's a breakdown of response rates by channel for NPS surveys:
- 15-25% for email surveys
- 20-30% for pop-up web surveys
- 3-5% for the tab web surveys
- 40-50% for SMS surveys
- 85-95% for event surveys
Average NPS industry benchmarks (2019 - 2023)
- Banking: +34 (2022)
- SaaS/Computer Software: +41 (2022)
- Consumer Brands: from +24 to +57, depending on the vertical (2023)
- Computer Hardware: +64 (2019)
- Telecommunications: +31 (2022; the telecommunications industry holds the unfortunate distinction of having one of the lowest NPS scores out of any industry).
- Healthcare: +58 (2022; In contrast to telecommunications, healthcare has some of the highest NPS scores).
Median NPS industry benchmarks (2023)
- Professional services (legal, financial, consulting, etc): +50
- Technology (telecommunications, computer manufacturers, SaaS, etc): +40
- Consumer goods: +50
Top quartile NPS industry benchmarks (2023)
- Professional services (legal, financial, consulting, etc): +73 (or higher)
- Technology (telecommunications, computer manufacturers, SaaS, etc): +64 (or higher)
- Consumer goods: +72 (or higher)
Bottom quartile NPS industry benchmarks (2023)
- Professional services (legal, financial, consulting, etc): +19 (or lower)
- Technology (telecommunications, computer manufacturers, SaaS, etc): +11 (or lower)
- Consumer goods: +21 (or lower)
Sources:
Most of the NPS industry benchmarks above span the period from 2019 - 2023. We've indicated which year each is from in brackets. We will update this post with 2024 figures as soon as they become available.
Is NPS still relevant in 2024?
Customer experience professionals are always looking for the most up-to-date and effective ways to measure customer satisfaction. That’s why it’s important to acknowledge that although useful, NPS still has some limitations.
NPS scores indicate that something is wrong, but they don’t tell you what is wrong
Your NPS results will tell you if customers are dissatisfied with your product, but they won’t tell you how or why the customer came to a negative conclusion. This is typical of any metric that is solely based on a numerical scale.
NPS scores may not actually give you an accurate understanding of how your customers feel
Since, depending on the channel, survey response rates are typically very low (between 20-30%), it’s difficult to determine if the results are a true reflection of how your customers feel. It’s imperative that you keep in mind how many customers don’t respond to your surveys because a lot of the time people are motivated to fill out a survey as a means of airing grievances.
NPS scores should only be one part of the picture
Data is always valuable, but you can’t depend only on NPS scores to evaluate your customer satisfaction. You need to incorporate as many other metrics as you can to create an all-encompassing customer satisfaction evaluation, like CSAT and CES.
NPS provides no competitive data
NPS benchmarks provide comparative data, but not competitive data. You might be able to see that a company has a higher score than you, but there’s no indication as to how or why they reached that score. NPS also doesn’t tell you why you’re losing customers to competitors.
Let’s look again at the Oldsmobile example. The company went out of business in 2004, but still had a large loyal customer base according to NPS metrics. The data didn’t account for the increase in loyal customers being a direct result of losing a large amount of disloyal customers. So the numbers make sense, but cannot be accurately described by NPS alone.
The NPS classification system includes passives
It’s hard to argue that “passive” customers really exist, but the NPS scale allows for a neutral result, which can make it difficult to get an accurate reading of how your customers feel. Market research experts argue that it’s essentially impossible to have a passive customer, simply because someone who feels indifferently towards a product will still be open to something of greater value.
NPS is not directly tied to revenue
You might have high sales, but that doesn’t mean you’re going to be flooded with positive reviews. Similarly, you might have positive feedback while struggling to hit sales goals. There are many other factors at play when it comes to revenue—it doesn’t solely depend on customer satisfaction. Pricing, inventory, sales channels, and marketing all have an impact on your revenue.
Why NPS is still an important metric to track
When used in conjunction with other customer metrics, NPS is still incredibly useful for measuring customer satisfaction and becoming aware of areas for improvement.
Tracking NPS keeps you honest
If you suddenly experience a downturn in your NPS scores, it’s difficult to deny that there’s something wrong.
It can be effective on a relative basis
Speak to other executives in your space to get an idea of what their benchmarks might be to gain insight to improve your own position.
Can help predict retention
Many people claim that NPS can’t predict the future, but research shows that this customer satisfaction metric is actually useful in predicting customer retention.
In fact, CSAT is the most reliable CX metric at predicting retention and NPS comes in close after. Surprisingly, CES is not a great indicator of which customers will remain and which will churn.
Based on the data, NPS score is more effective for predicting retention in traditional utility industries like insurance and telecom companies.
Wrapping things up
At the end of the day, you should never rely on one particular metric to base your business decisions on. However, finding your NPS industry benchmark is a necessary step to ensuring your organization stays on track, and it helps provide a quick overview of where you stand in your specific market.
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