It seems like a lot of small businesses ignore customer satisfaction. Don’t get me wrong. All companies want happy customers, but figuring out how to measure ‘customer happiness’ is difficult when you don’t have the budget or tools to do so. Thankfully there’s an easy way to start measuring customer satisfaction for your business. Let me explain how.
What is NPS?
NPS stands for Net Promoter Score. It’s a measurement of customer satisfaction. NPS is both simple and powerful at the same time. It’s something you need to understand before we go any further.
Before NPS, it was common for businesses to ask customers to fill out surveys filled with twenty or more questions. Those surveys were long, complicated, and annoying. Customers didn’t want to waste their time doing them. As a result, businesses would often bribe customers to take their customer satisfaction surveys. Bribing customers poisons CSAT scores.
NPS simplifies the customer journey. Customers are only asked to answer one or two questions. Customers don’t need to provide complex answers, either. An NPS prompt asks customers to respond in the form of a numbered rating.
Here’s an example:
On a scale of 1 to 10, how likely are you to recommend XYZ business to friends and family?
It’s that simple.
How do you calculate NPS?
NPS is a little weird to calculate a first, but it makes sense after you do it a few times. Most NPS systems use a scale of 1 through 10. So, we’ll stick to that scale for the moment. However, it’s not uncommon for customer satisfaction ratings to use a 1 to 5 scale instead. This will be important for later in the article.
Any customer that responds with a 9 or 10 is considered a promoter. Customers that respond with a seven or eight are considered passive or neutral. Customers responding with a six or lower are detractors (unhappy customers).
To calculate NPS, take the percentage of promoters minus the percentage of detractors to get the customer satisfaction score.
Here’s an example:
Let’s say that you have 100 customers respond to the customer satisfaction survey for your business.
Seventy of those customers are promoters (scored 9 or 10 on the survey), so that’s 70%.
Twenty customers are detractors (scored six or lower on the survey), so that’s 20%.
70% – 20% = 50%
In that example, your customer satisfaction for your business is 50%. It may be time to rethink your customer experience.
Let’s do another example with more complex numbers.
This time your customer satisfaction survey received 471 responses.
369 responses are promoters, and 57 responses are detractors. Here’s how you figure out the NPS score for those results.
( Promoters / Total Responses ) – ( Detractors / Total Responses )
( 369 – 471 ) – (57 / 471 ) = 66%
How do I figure out NPS scores for my business?
Most businesses already have a wealth of customer satisfaction data available to them. Lots of customers leave feedback on social media, Amazon, Google Maps, Yelp, and other platforms in the form of reviews.
We’ll need to switch things up a bit, however. The websites I mentioned above collect star ratings on a scale of 1 to 5.
Customers who respond with a 5 are promoters. Customers that respond with a three or less are detractors.
Let’s look at this listing on Amazon as an example. If you don’t want to click through that link, it’s a listing for a solar light with an average rating of 4.5, according to Amazon. We’re going to ignore that average rating and calculate NPS instead.
That listing has a total of 233 ratings. 172 are promoters (rated five stars). Twenty-five are detractors (rated three stars or lower). Calculating the NPS score for that product looks like this:
( 172 / 233 ) – ( 25 / 233 ) = 64%
It doesn’t seem like the customer satisfaction for that solar light is good, does it? Amazon gives that product a 4.5 out of 5-star rating, however. What’s the difference?
There are different theories for different things. We could be cynical and say that Amazon wants products on its website to look as good as possible. A 4.5 out of 5-star rating sounds much better than a customer satisfaction score of 64%.
The real answer is much less nefarious for this specific example, however. NPS is a measurement of customer satisfaction through customer sentiment. It’s an all-encompassing emotional measurement of the entire customer journey. It can be used for physical products but doesn’t translate the same. More on that below.
You’re not doing badly if your NPS score is above 80%. If it’s above 90%, your team is killing it, and customers love you. If it’s lower than 70%, you have a reputational problem. That’s not good.
How do I calculate customer satisfaction from different sources?
You’ll likely grab customer satisfaction data from websites like Google Maps, Facebook, or Yelp. So, let’s use those in the following example.
We’re going to look at a restaurant in my home town called Commonwealth Kitchen. You can find their Google Maps reviews here and Yelp reviews here.
The first step is to get the number of reviews from both websites. Combine both and separate them by their rating.
That part may require work. Google Maps doesn’t make it obvious how many of each star review there is. Yelp, however, can be sorted by star ranking like Amazon.
For the sake of this article, I’m going to make up Google Maps star ratings with an educated guess. I’ll use the actual Yelp reviews, however.
Yelp Total: 152
5 Star: 47
4 Star: 38
3 Star: 23
2 Star: 18
1 Star: 26
Google Maps Total: 193
5 Star: 104
4 Star: 38
3 Star: 19
2 Star: 9
1 Star: 23
Grand Total: 345
5 Star: 151
4 Star: 76
3 Star: 42
2 Star: 27
1 Star: 49
Here’s the NPS formula for those numbers:
( 151 / 345 ) – ( 118 / 345 ) = 43% – 34% = 9%
That’s not great…
What does NPS measure?
Looking at the numbers above, you wouldn’t think that customer satisfaction is so low for that restaurant. So, what’s going on?
NPS is a metric for customer satisfaction. Basically, it states whether someone will give your business word-of-mouth recommendations or if customers will tell everyone else to stay away.
Star ratings on Yelp, Google Maps, Facebook, Amazon, etc., are misleading. They are optimized for engagement. After all, if Google Maps or Yelp tells people that the customer satisfaction rating for your business is only 9%, there’s a good chance that you won’t buy ads for their platform.
While star ratings are important for customers, we must remember that these platforms want to sell you advertising spots for your business. It’s in their best interest to make your business look as good as possible.
You still need to pay attention to star ratings. That’s the first impression customers get. But star ratings should only ever be considered a hook for customers. Those star ratings convince customers to walk through your door. However, NPS takes over once those customers set foot in your business. NPS tells you how happy your customers are and, most importantly, whether that customer will recommend your company to friends and family.
Two final notes for this article.
First, most NPS surveys have a spot for customer notes. This is the area where customers will leave feedback. You’ll need to read through that feedback to identify trending pain points or areas where you are doing great. Reviews in Google Maps, Yelp, et al. can also be used for this specific purpose.
Second, you could argue that people only leave reviews when they’re upset with something. While I understand that sentiment, look at the numbers above. Yelp has a nice spread of reviews for Commonwealth Kitchen, while Google has mostly five-star ratings. The numbers don’t support that theory.
Do you need help figuring out your customer satisfaction rating or tech-related stuff? Give me a shout!