An in-depth guide to NPS and measuring loyalty in manufacturing

What is the Net Promoter Score?

Put simply, Net Promoter Score (NPS) measures how loyal a customer is to your brand and how willing they are to recommend your products or services to others. The NPS survey itself is deliberately kept simple and usually asks one question – ‘On a scale of 0-10, how likely is it that you would recommend [insert company name] to your friends, family or business associates?

In order to calculate NPS, you just subtract the number of Detractor responses (those that scored between 0-6 and therefore unlikely to recommend your company) from the number of Promoter responses (those that scored either 9 or 10 and are likely to recommend your company) divide this figure by the total number of responses you had back and then multiply the figure up by 100. Any customers that score a 6 or a 7 are classed as ‘Neutrals’ and their scores don’t count when it comes to the NPS formula.

The end result is an NPS score ranging anywhere between -100 to +100. As a guide, anything over zero is considered ‘good’ and a score of +50 is deemed ‘excellent’.

Unlike many ‘satisfaction’ surveys - which tend to focus on historical transactions - NPS looks to the future and explores customer ‘loyalty’. Some may argue customer satisfaction and loyalty are the same thing but I think there’s a subtle difference between the two and here’s why.

Are you satisfied or loyal?

If you’ve visited a service station or airport in the UK, recently you will have probably seen one of those ‘virtual’ customer service assistants. They usually ask you how satisfied you were with the service (toilet cleanliness/airport security process etc.) and then give you the option to press a green (happy face), yellow (not sure face) or red (sad face) button. This is a quick and simple way of capturing feedback, but there’s not much depth to the answer.

Now compare this to when one of your friends or family members asks you to recommend a local garage or tradesperson. As a previous customer, you may have been ‘satisfied’ with the last transaction you had with them (they might have replaced your tyre when it was flat or fixed a dripping tap in the kitchen) but are you now prepared to give out their name and contact details to someone else? Makes you stop and think when you are asked, doesn’t it? That’s because in the back of your mind you know that if the experience your friend or a family member has is a negative one, it’s going to come back to you for recommending them in the first place.

NPS neatly combines elements from both of these examples. The initial question makes the recipient stop and think (because their reputation is potentially at stake) and they then have an easy to understand scoring system to provide the response. It’s still a quick and simple way of capturing your feedback but the overall score provides much more depth.

Agreeing on your data set

First things first, you must agree who the NPS survey will be sent to. Are you going to send it to all of the companies on your database? Or just the ones that you have dealt with over the past 6 to 12 months? Once you have decided this, you then need to determine how many individual contacts within that company you are going to send the survey to. Will you just send it to the key decision maker or send it to two or three people that you deal with on a regular basis to gain a more rounded view?

There’s no right or wrong answer here. You do, however, need to make sure that you send enough surveys out to make the analysis meaningful, while ensuring you have a fair reflection of your customer base. The more responses you gain, the more representative the figure will be of your overall customer loyalty.

Gathering the data

The next decision you need to make relates to how you will send the survey out. E-mail is a popular choice, and this process can be automated further using software solutions like SurveyMonkey which can send/record and also analyse the results.

To help improve the open rate of your e-mails it’s essential to consider who the NPS survey is coming from. If the recipient doesn’t recognise the name of the sender they could assume that it is spam and delete it.

Social media could also be an option. It’s relatively easy on a number of platforms like Twitter, Facebook and Instagram to set up ‘polls’ - although these can be limited in the number of response options you can set up so they need careful consideration when they are being created. Social media can also be used to promote the NPS surveys in advance of them going out and as a way of sharing feedback received from previous surveys to help drive customer engagement.

And finally, you could always ask your customers the question over the phone. The only downside here is unlike e-mail you won’t have a hard copy record of their response. There’s also a risk that they could tell you what they think you want to hear rather than the truth. So, if you are planning to conduct the NPS survey over the phone it might make sense to have a third party supplier conduct it on your behalf to keep the process impartial.

According to the first annual NPS Benchmark Study by Ask Nicely/CANAM Research, when a company only uses one method of sending the survey out, the most common response rate back from their customers is 11-20%. If, however, this increases to two (e-mail and phone for example) the response rate increases to 31-50%.

How long should the NPS survey run for?

Agreeing on the time the survey will run for is crucial to how many responses you will receive. You might be tempted to leave the survey open until all your customers reply but based on the typical response rates mentioned above, a 100% response rate is probably unrealistic.

The 69-page report by Ask Nicely/CANAM Research also highlighted that 42% of organisations respond to an NPS survey within the first week of receiving it. So, setting yourself an internal deadline of a couple of weeks probably makes sense. During the first week you should start to see the majority of the responses coming back in and then during the second week you can focus on following up with any customers that haven’t replied.

Again, each business will be different and the data sets will vary in size. The important factor here is to agree an initial ‘cut off’ date and then review how many responses you have received back halfway through, otherwise there is a danger the survey will drag on.

Analysing the data

Now you have collected the data, what do you do with it? And what does it mean?

Let’s look at an example below and work out the response rate and overall score.

  • Total number of NPS surveys sent out = 67
  • Total number of NPS responses received = 25
  • Response rate = 37% (25/67) x 100
  • 3 Neutrals (scored either a 7 or 8)
  • 2 Detractors (scored between 0 and 6)

Of the 25 responses received, let’s assume the following scores were given by the customer:-

  • 20 Promoters (scored either a 9 or 10)

Which gives an NPS score of +72 (Number of Promoters - Number of Detractors) / (Number of Respondents) x100

If you’ve not run a survey like this before then you won’t have any data to compare the scores to but clearly any ‘Detractors’ should be an immediate focus.

Ideally, you will want to get in contact with them quickly to try and find out why they have scored your company low as there could be a risk that they take their manufacturing business elsewhere when the opportunity to do so arises.

Dealing with ‘Neutrals’ is interesting. They will have scored a 7 or 8 and unless they understand the scoring breakdown behind the scenes (or read this blog!) they probably think that their score was a positive one even though it doesn’t count when it comes to the NPS formula.

In this instance, it might make sense to get in touch with them in a couple of weeks and ask them how you could turn them into a 10?

Your ‘Promoters’ are clearly on your side, and the suggestion therefore is that they are loyal. That doesn’t mean they should be ignored, in fact, it’s the opposite, you need to continue to provide exceptional customer service to them as they are the ones that are likely to recommend your company which is of significant value to you.

If you have run a survey before you should be able to compare the individual customer scores against previous ones to see if there are any changes. This also provides you with the opportunity to reflect on what actions you have taken as a manufacturer which may have impacted the result. For example, has your pricing structured changed dramatically? Have you employed new staff in key areas that could have impacted the scores? Have you invested in new production equipment? Which value added services have you recently launched?

Being realistic

Although NPS is a recognised way of measuring customer loyalty it’s important to make sure you have a realistic view of the results. This is particularly important if you plan to run the survey over a number of years and use NPS as one of your internal key performance indicators. Responses that are twelve months apart could be different for a magnitude of reasons and the actual NPS score is therefore likely to constantly fluctuate. For instance, what does it mean if you score +72 the first time and then +60 the second? Is 60 a ‘bad’ score? Has the company failed somewhere along the line? I thought anything over +50 was excellent?

Instead of fixating on a specific score as your target, my advice would be to settle on a range i.e. something between +50 and +80. If you then start to see scores outside of this range, it’s time to stop and review in more detail.

According to the Ask Nicely/CANAM Research study companies with an NPS of +60 or above, who also take action on customer feedback, reported a 100% growth rate in the last 12 months. Compare this to companies who do not take action on customer feedback and these reported more than 40% annual churn rate. It could, therefore, be argued that NPS is a critical function in understanding your customer base and growing your business.

I hope this blog post has provided you with some interesting background to NPS and how it can be used within the manufacturing sector to measure customer loyalty.

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Written by Neil Sharp

Neil has over 25 years’ experience in Electronics Manufacturing Services and Component Distribution. During his career, Neil has held a range of leadership positions in sales, marketing, and customer service. Neil is currently part of the ESCATEC Senior Management Team and is responsible for setting and delivering the overall Group Marketing strategy. Neil heads up the marketing department and is responsible for both the strategy and the implementation of innovative marketing campaigns designed to deliver high quality content to those seeking outsourcing solutions.