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Net Promoter Score – Benchmarking
The Net Promoter Score (NPS for short) is a common indicator for measuring customer loyalty to a brand or service. For the measurement, the NPS system asks customers to give a score from 0 to 10 and the decisive reasons for this.
More and more companies record their Net Promoter Score with NPS platforms such as zenloop and contribute to existing benchmark lists that allow a direct comparison with competitors. However, not all NPS can be compared with each other without further ado: Depending on the industry, region and the analysed touchpoint, there are differences that should be informed about before creating an NPS survey and that should be taken into account during benchmarking and analysis.
- NPS Benchmarking: Assessments in Context
- NPS Benchmarking: It's all about Industry
- How NPS Benchmarks are Influenced
- Interpreting NPS Benchmarks Correctly
- Advantages and Disadvantages of Internal and External Benchmarking
- The Importance of Touchpoints in the NPS Analysis
- NPS Benchmarking: Closing the Loop
- NPS Benchmarking: Guide to Success - An Example
- Conclusion on NPS Benchmarking
NPS Benchmarking: Assessment in Context
The NPS is easy to calculate and can provide important insights for a company, especially when comparative figures are available. In order to be able to use the results of a Net Promoter Score survey and interpret them in a forward-looking manner, industry averages or the key figures of market leaders must be used.
These comparative figures, or benchmarks, are particularly valuable for companies that first have to position themselves on the market. Certain online platforms offer not only NPS software and guides, but also freely accessible benchmark registers subdivided according to industries.
It can be tempting for a company to compare itself with the most successful companies and products worldwide. However, such an approach can create a false self-image. Net Promoter Scores vary considerably, depending on industry, cultural area and product.
One example: While the lowest NPS for software companies is about 12, the worst score in the category "Computers and Tablets" is 21. The explanation: Questions about specific products or services are usually rated much more positively than a brand in general.
NPS Benchmarks: It all Depends on the Industry
When comparing benchmarks of individual industries with each other, large differences become apparent. The reason is that customers have a certain attitude towards different industries from the outset. Material goods, for example, generate more enthusiasm and a greater willingness to recommend. Non-tangible services, on the other hand, generate a decisive degree of scepticism and reluctance among customers.
In practice, a colleague or acquaintance will therefore prefer to recommend their new smartphone to others rather than their health insurance company. However, if he has bad experiences with the latter, he will most likely make them known. In addition to insurance companies, telecommunications providers or banks also score lower NPS scores.
How NPS Benchmarks Are Influenced
It is not only the benchmarks of different industries and product categories that are extremely different. For example, if one examines the scores of the same product of a company in different countries with the Net Promoter System, discrepancies can also occur here.
Depending on social and cultural influences, respondents may generally have a more optimistic or critical attitude. In international comparisons this can become a real challenge. Well-known examples are the USA, Germany and Japan.
North Americans have the habit of evaluating things more positively. Many Germans, on the other hand, are reluctant to give full marks , even when there is nothing to criticize. Japan is in the midfield: regardless of the quality of the performance, it is part of good etiquette to evaluate rather neutrally. Comparing one's own company with a competitor from another region is therefore only of limited use.
The timing of the survey also affects the results of the NPS analysis. Even if a uniform survey format is chosen, it is important when customers are asked about their satisfaction and thus their probability of recommendation.
If you ask for the brand evaluation directly at the time of purchase, evaluations often turn out to be more neutral. This is because the customer's customer journey is not yet complete, which is why he is reluctant to evaluate the brand and thus the overall result. Here it is advisable to rephrase questions appropriately. For example, instead of asking about the brand, customers can be asked to evaluate the online shop or even the ordering process. In our article "How to improve the NPS with the right touchpoints" we provide further information on how to best query the NPS at which points of the customer journey.
NPS benchmarks are therefore highly dependent...
- by the respective industry
- the country and culture of the respondents,
- from the time of the survey (e.g. shortly after purchase or after receipt of the product).
Interpreting NPS Benchmarks Correctly
Calculating the NPS is an easy task. But interpreting it correctly in relation to other benchmarks is a complex matter. There are countless examples of how benchmarks can be misread.
A false self-image not only robs a company of unnecessary time in advance, but can also harm it in the long run. If a small company sets unrealistic goals and compares its NPS score with a market leader like Apple, this only leads to demotivation of the employees.
Especially with certain luxury goods, customer orientation is an integral part of the business model and is part of the buying incentive. Such companies therefore operate in a completely different context. In order to avoid comparing "apples with pears", it makes sense to compare oneself with competitors that have great similarities to one's own business model.
It would also be a mistake to look at the Net Promoter Score and the benchmarks only from the outside. A company's internal benchmarks are just as important as external benchmarks. If you observe the attitude of your customers over a long period of time, you can draw valuable conclusions about your own performance and adjust strategies. If you only look outwards, such opportunities are missed.
Comparing one's own performance with that of a competitor is only worthwhile if the reasons for losing customers are unknown. For example, if you are in an industry that is in decline anyway (such as book, record or DVD rental stores), benchmarks are of little importance because the entire industry is suffering.
- Realistic goals promote employee motivation
- Use only benchmarks of very similar companies
- Internal benchmarks are just as important as external ones and provide information on performance development
- Taking into account the situation of industry as a whole
Advantages and Disadvantages of Internal and External Benchmarking
NPS benchmarking can pursue different objectives. Basically, a distinction is made between internal and external benchmarking:
- Internal Benchmarking examines certain processes over a longer period of time in your own company
- External Benchmarking compares one's own performance with the performance of competitors or the average values of one's own industry.
Both methods have their advantages and disadvantages.
- Cost-effective and fast implementation
- Easy entry into benchmarking processes
- Smooth exchange of information and experience
- Good starting point for future analyses
- Publication of key figures not necessary
- Promotion of mediocrity
- Limited growth opportunities
- Internal bias
- Competitive atmosphere
- better market positioning
- Expanding industry and sector knowledge
- Motivation through comparison with "Best in Class
- High innovation potential
- Possible partnership with other companies
- Competition could exploit weaknesses
- Information limited by trade secrets
- Deviating measurement methods of the competition
- Difficult international comparison due to cultural differences
The Importance of Touchpoints in the NPS Analysis
Touchpoints play a central role in NPS benchmarking. Touchpoints (in German: Markenkontaktpunkt) include all interactions that take place between a company and its customers. These interactions are either one-sided (e.g. in the form of a newsletter) or involve both parties equally (e.g. in the form of a customer call to the call center or customer service).
In e-commerce, the NPS analysis focuses on five essential touchpoints: the home page, the catalog or product page, the order confirmation page, the delivery, and the customer service.
When performing the NPS analysis of different touch points it must be ensured that only similar contact points are compared with each other. The question of delivery generates different benchmarks than the question of product selection. Since these are separate events, a comparison would not be appropriate here.
But why are touchpoints generally so important in the Net Promoter Score System? Collectively, touchpoints form the basis on which customers base their purchasing decisions. The overall impression of a brand is also made up of all existing touchpoints. It is therefore important that a company is aware of all touchpoints and that it investigates them individually with NPS platforms like zenloop and exploits them accordingly.
Touchpoints can be used at every intermediate step of the purchase decision. The goal is to persuade even potential, still undecided customers to buy the product.
Even more important, however, is to offer existing customers a consistently pleasant consulting and purchasing experience. After all, in the end, it is they who decide whether a recommendation is made. If one concentrates initially on the satisfaction of the regular customers, the increase in customers usually occurs all by itself.
NPS Benchmarking: Closing the Loop
The most important aspect of benchmarking is not the Net Promoter Score itself. Only the exact analysis of customer comments can provide information about what actually needs to be changed to increase customer satisfaction.
In the NPS survey, it is therefore essential to ask an open-ended question about the reasons for the respective evaluation in order to gain true insights into the customer journey.
Another essential step is to close the feedback loop, for example by contacting dissatisfied customers, initiating internal improvements or defining further optimization needs of internal and external processes.
Recontacting the respondents again can prevent critics (also: detractors) from leaving completely and running into the arms of the competition. In addition, disgruntled customers feel taken seriously and understood.
When closing the feedback loop, speed is also of the utmost importance. It is important that dissatisfied customers are forwarded directly to the right contact point. In many NPS surveys, a score from 0 to 6 automatically results in an option where detractors can click on whether they want to be contacted by customer service afterwards.
Customer service in "real time" also plays a major role. Too long waiting times and delays make up a large part of customer complaints. Customer feedback should therefore be seen more as an ongoing dialogue and not based on a one-off reaction. With NPS platforms such as zenloop, customer feedback can be given directly and in real time to the responsible stakeholders in the company via slack or e-mail alerts, for example.
The final phase of the survey is also crucial to successfully close the feedback loop and to give customers sufficient appreciation. For example, the survey should always end with a thank you message directly in the same survey window or a simple thank you letter by e-mail after the evaluation has been sent.
But "Closing the loop" does not only mean to appease detractors. It also means that promoters (i.e. the supporters), who are to be seen as brand ambassadors, are kept active. Ultimately, the success of any company depends on them.
For example, when a service or product is recommended to a friend, promoters can be offered attractive customer loyalty programmes, such as special benefits (e.g. in the form of discounts or credits). In addition, birthday surprises or special offers for customer anniversaries are also suitable for maintaining promoters' satisfaction.
So when closing the feedback loop, the following is important:
- Reactions to negative customer reviews must be fast.
- Customer care is a dialogue and requires repeated "follow-up".
- Provide respondents with sufficient gratitude for the time invested.
- Reward promoters for their enthusiasm and willingness to recommend.
More information on how to successfully close the feedback loop can be found in our free white paper "Closing the Loop" - A NPS Guideline.
NPS Benchmarking: Guide to Success - An Example
The world-famous LEGO company shows how positive benchmarking can have on the growth of a company. More than ten years ago, the popular Danish toy manufacturer was on the verge of financial collapse as it moved further and further away from its core products and thus from its core customers. Although annual surveys showed a positive result, the company continued to make losses.
The implementation of an NPS system in 2005 helped the toy manufacturer to focus on its most important customer group. Through regular surveys, LEGO was able to find out exactly what its young target customers expected of it.
The company started with monthly benchmarking of each existing touchpoint (stores, online shops, customer service, etc.) and immediately responded to its detractors. To this day, negative feedback is passed directly to the store managers who contact dissatisfied customers within 24 hours. LEGO's Vice President of Marketing, Conny Kalcher, in an interview with Bain & Company:
"We had clear evidence that we were no longer well received by children. We had to adapt our innovations to what children wanted. [...] If you want to be one of the top brands, you have to be able to listen. Arrogance makes customers turn away."
Through regular benchmarking and exemplary follow-up communications following its NPS surveys, the company was able to win back customers, significantly increase sales and successfully avert closure.
Conclusion on NPS Benchmarking
Benchmarks are an essential part of the NPS analysis. The Net Promoter Score is particularly revealing when compared with the NPS Scores of other companies. It must be clear which benchmarks are suitable for comparison. The respective industry, the culturally determined habits of the respondents and other demographic factors that can have a significant influence on NPS benchmarks must be taken into account.
If internal touchpoint benchmarks are compared, they must also be from the same or a closely related category. Benchmarking in the right context can reveal weaknesses and promote customer focus. Provided you close feedback loops and immediately take care of dissatisfied customers, the NPS System and NPS Benchmarking prove to be unique and growth-promoting management tools.