Welcome to this episode of Women Powering e-Commerce. Join me every Tuesday as I take you behind the scenes of my journey as a female e-commerce entrepreneur. Together we'll explore the highs, the lows, inspiring you to take action and achieve your own business goals. So let's get started.
So what are we talking about today? I want to talk about the NPS score. What's that? I'm sure maybe you know what it is, and if not, then great. It's a great place to stop by, because if you're like me, you came across this metric one day and you were just like, did I miss the boat? What happened? What is this NPS score? And then you start hearing about it more and more. So I'm here to share my journey into understanding what this metric is and just give you a little bit of some insight on it. So today what I want to cover is, just understanding the net... NPS score stands for net promoter score, but usually we'll see NPS for short. So I want to talk about is it relevant, is it a relevant metric? If you want to use it, how do you calculate it and what's the impact on your e-commerce?
And personally, this metric has served as food for thought for quite some time because after many years in e-commerce, I came across, like I said, this one metric one day, and many were talking about it. Honestly, I had no clue what it was, and then all of a sudden I just kept seeing it everywhere. I don't know, my filters were set that way at that time. But so I started doing more research and trying to understand how it works. Why is it, is it relevant first of all? So, yeah, I just want to talk about that.
So I first came across this metric online while I was Googling what would be some other good metrics to follow up on regularly for e-commerce. And then I found several articles and they all came back with this metric, the NPS score. So I'm going to share with you what I learned and also, and I hope maybe it'll enlighten you to know if you want to use it in your e-commerce or not. So what is the net promoter score, the NPS?
Well, simply put, the NPS is a number that tells you how many of your customers like your product or your service enough to suggest it to their friends or maybe family. And the higher the number, the more people like what you offer. And as I was doing my research, I realized it's something I actually knew about and it's just because companies, a lot of companies are doing it. If you subscribe to a newsletter or you bought a product somewhere, you'll receive that email which asks something like, on a scale of one to 10, how likely would you recommend our business to a friend or family? And then you have in an email, a place you can rate from zero to 10. So that's it, that's your NPS score. That it's really simple. It's only one question. It's a really easy one click survey. So now you know what it is. But next question, how do you calculate it?
NPS is calculated based on responses to, like I said, a single question, that question being, how likely are you to recommend our product service to a friend and colleague? And customers are asked to rate their answer on a scale of zero to 10 and 10 being extremely likely and zero being not at all likely. And then based on their ratings, customers are, what you do is you categorize them into three groups. So you have the promoters, the passives, and the detractors. So promoters are the ones that rated a nine or a 10. So these will lightly be your loyal customers who will keep buying and refer others. They're the ones that will fuel your growth. Okay? So those are your promoters, the ones that rate you nine or 10. Then you have that second category, which are passives. Those are the ones that rate seven or eight.
So these are your satisfied customers, but they're kind of warm, which makes them vulnerable to other competitors. They're open to seeing what your competitors will offer as well. So those are our passives, the one that rate seven or eight. And then we have our last category detractors, the one that give you a rating from zero to six. They are the unhappy customers who can damage your brand and really slow down your growth through negative word of mouth. So you really want to pay attention to those as well. You want to pay attention, especially to the detractors and to the promoters. Okay? The ones in between, I mean, of course you want to pay attention to everyone, but usually we pay attention to those two extremes in the when using the NPS score. So once you have your results, the NPS is then calculated using a formula, which is the percentage of promoters, minus the percentage of detractors.
So this will usually give you a score, can give you a score of between minus 100. That's if everyone is a detractor and 100, and that's if everyone would be a promoter. It's rarely a hundred percent on both sides, but theoretically that's what it is. All right, so that's a theory. Now, what do I find are some upsides and downsides of this NPS score, after having done it for a while now. While some of the upsides is that it definitely serves you as a quick overlook as to how you're serving your customers. It's easy to track over time as well. So I love it for its simplicity. And it's very powerful. I mean, the beauty of the NPS lies in its simplicity. It offers deep insights into customer loyalty through just one number. So that's great. And beyond the score, NPS isn't just a number. I feel like it's a treasure trove of feedback that can really drive business improvements.
So it's really something you can use, but of course, it's one thing to measure, but then you have to make sure that you go and check out those results and see how you can use them to improve your business. And one last upside is it's a real growth indicator. So a high NPS score often correlates with your business growth. Your repeat purchases, your referrals, which are definitely gold in e-commerce. Okay, so now those are the upsides. And now I'd like to share some of the reasons why I was skeptical at first before actually doing the NPS, which are somewhat the downsides. Is number one, it's not very intuitive. You have to learn how to calculate the NPS score and read the score. It's not just the a one glance thing. You need to understand what I explained earlier. But once you do, I mean, it's straightforward, right? But it's not intuitive. It's not something you'll understand right away at first.
And the other downside is that there are always going to be people who click on any number in your email when they complete this one click survey. So I guess that's the other side of having something so simple, just you open up your email, one click and you rate. So sometimes it makes me question how truthful is the information. On our side, what we've implemented is that if you've rated from zero to six, we'll ask you, how can we improve our product? How can we improve our service, our website, whatever? So it will encourage the customers to actually put in writing why they're not satisfied. So that really helps. And it kind of removes the people that might've clicked just for no reason and quickly, or it removes those results. And we did the same with the promoters. So we asked them, oh great, what did you like? And can we share your review? Or something like that. So we kind of went that step further. You don't have to, but we thought it would've been more useful that way.
So what's my conclusion? Do I like the NPS score? Do I not like it? Well, of course we're using it, so we do like it to a certain extent. But I have to see that there's never a perfect metric. A one metric alone never tells the whole story, but I think it's a good metric to have and follow, and that is why I have implemented it in both my companies. So that's it about the NPS score. I hope it really helped you somehow. Maybe it'll convince you to actually implement it. If so, great. It does offer some valuable insights. So if you like this episode, take a moment to rate, share, or subscribe if you like what you heard today. Again, I value your support, so I'll invite you also to join me in my upcoming episodes. We always highlight the unique experiences and challenges faced by women entrepreneurs in this e-commerce space. So see you next time.
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