What is NPS?
Initially created in 2003 by Bain & Company, NPS has become a standard metric to measure customer loyalty. NPS gained popularity due to its simplicity. You can calculate loyalty by asking one simple question:
How likely is it that you would recommend [Organization X/Product Y/Service Z] to a friend or colleague?
LEARN MORE: What is Net Promoter Score
Based on their responses you can categorize your respondents into three categories:
- Respondents who respond with a 9 or 10 and are typically loyal customers.
- Respondents who respond with a 7 or 8 and are happy or indifferent about your product, service, or company
- Respondents with a score of 0 to 6 who are generally disgruntled.
To calculate your NPS score, subtract the percentage of detractors from the percentage of promoters.
FIND OUT MORE: How to Measure NPS
The graphic below simulates what happens when you turn your detractors into promoters, and the effect it has on your NPS score. The more green there is, the stronger brand loyalty and the more positive the effect is on your business.
What is Relational NPS?
Relational NPS is determined simply by asking your customers how they feel about your organization overall. Relational NPS gives you a high-level view of customer satisfaction and loyalty. This metric is a good health check of your brand and provides valuable data to compare year-over-year improvement and industry NPS standards.
When to use relational NPS
Relational NPS is ideal when you want to:
- Know the overall perception of your organization
- Benchmark against internal or external NPS data
- Understand overall customer loyalty
What is Transactional NPS?
While transactional NPS leverages the same survey methodology, transactional NPS aims to address customer satisfaction at a more granular level. Unlike relational, transactional NPS gives feedback after a specific interaction like a support call or after installation. Transactional feedback provides very direct feedback about a particular issue, allowing your organization to optimize different touchpoints across the customer lifecycle and giving each department a metric to rally around.
When to use transactional NPS
Transactional NPS is ideal when you want to:
- Identify strengths or weaknesses for customer interactions
- Create an individual metric for different teams
- Find actionable insights at the transactional level
Get the right combination to boost your customer experience
Good customer experience programs often use a combination of relational and transactional metrics to better understand customer satisfaction at the macro and micro levels. Relational and transactional NPS each have their place. Due to its simplicity, NPS is a great place to start for an initial customer program.