What is Considered a Good NPS Score for Banks and Credit Unions?
Table of Contents
Key Takeaways:
- For banks and credit unions, an NPS from 30 to 50 is conventionally considered “Good,” and a score from 50 to 80 is considered “Excellent.” Scores above 80 are “World-Class.”
- The absolute NPS method compares scores as they change over time so an organization can track changes in its performance; the relative NPS method compares an organization’s NPS with competitors in its industry.
- Improving an NPS involves getting to the WHY behind the score so that effective, targeted action can be taken to resolve the issues that erode customers’ satisfaction and loyalty.
A good Net Promoter Score (NPS) for banks and credit unions typically falls between 30 and 50, while scores above 50 are considered excellent, indicating strong customer satisfaction and loyalty.
What is a Good NPS Score
A good Net Promoter Score, or NPS, is sought by many banks and credit unions because it demonstrates their commitment to customer satisfaction, loyalty, and service excellence. Continuously monitoring and improving NPS scores helps financial institutions identify areas for enhancement and maintain a competitive edge in their industry.
According to Bain & Company, co-developers of the Net Promoter System, a good Net Promoter Score (NPS) generally falls between 30 and 50, with scores from 50 to 80 considered excellent. Scores over 80 are “world class,” indicating exceptional customer satisfaction and loyalty.
However, what is “good” can vary by industry due to different customer expectations and competitive environments. For example, in retail an NPS of 50 or above is considered good due to the competitive nature of the industry.
For financial services like banks and credit unions, a score between 30 and 50 is seen as good, with 50+ being excellent.
In an industry like telecommunications with often lower customer satisfaction, scores around 20-30 are common, and anything above 30 is good. On the other hand, for tech and software companies NPS above 40 is good, and 50+ is excellent, as this industry tends to have high satisfaction levels.
The Absolute NPS Method
The Absolute Net Promoter Score (NPS) method is used by businesses to measure customer loyalty and satisfaction based on a simple survey question: “How likely are you to recommend our product/service to a friend or colleague?” Customers respond on a scale of 0 to 10, and their responses are categorized into three groups: Promoters, Passives, and Detractors.
Promoters, those who gives scores of 9 or 10 are loyal and enthusiastic customers who are likely to recommend the company, driving growth through word-of-mouth and repeat business.
Passives or Neutrals, giving scores of 7 or 8, are customers who are satisfied but not particularly enthusiastic. They may switch to competitors and are not counted in the NPS calculation.
Detractors, those who respond with scored of 0 to 6, are dissatisfied customers who are unlikely to recommend the business and may actively discourage others from using its products or services.
The Absolute NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. It gives a single, absolute score that businesses can track over time to gauge customer sentiment.
The NPS Calculation, expressed as an equation, is as follows:
Absolute NPS = (% of Promoters) – (% of Detractors)
The result is a score between -100 (every customer is a Detractor) and +100 (every customer is a Promoter).
Advantages of the Absolute NPS Method include its simplicity and clarity, its ability to provide opportunities for targeted action, and its use as a benchmarking tool to measure progress over time and compare against industry standards.
On the downside, NPS lacks depth in that it provides only a broad view of customer sentiment. It doesn’t in itself explain why customers feel the way they do.
Also, the method doesn’t account for Passives, who may still be at risk of leaving or switching to competitors.
The Relative NPS Method
The Relative NPS Method involves comparing a company’s NPS score against industry averages or competitors’ scores. Instead of focusing solely on the absolute value of the score, it emphasizes a company’s performance relative to others in the same industry, like banking.
A company may have a low absolute NPS score, but if it outperforms competitors, it is considered relatively strong within its industry. Conversely, a high score may not be considered good if it is below industry standards.
The Relative NPS method is more valuable for companies that want to benchmark their performance against competitors or industry leaders, and want to understand how their customer satisfaction ranks in a competitive context.
By focusing on tracking a company’s own score over time, absolute NPS emphasizes internal improvement. This encourages companies to concentrate on enhancing customer experience rather than simply outperforming competitors.
Relative NPS can shift the focus toward competing with external benchmarks, which might encourage complacency if the company is outperforming peers, even though there may still be areas for improvement.
Absolute NPS is also easier to act on. Companies can set specific targets and goals, such as increasing NPS by 10 points over a given period. This provides a clear indicator of whether customer satisfaction is improving or declining, making it easier to implement specific actions.
Relative NPS is more reactive to market conditions and how competitors are performing. A company’s relative score might drop even if its own performance is improving, simply because competitors improved at a faster rate. This can cause confusion when it comes to taking actionable steps to improve customer satisfaction.
Finally, Absolute NPS is a metric that is consistent over time. It provides a static measure of promoter and detractor ratios without fluctuations caused by external conditions like industry trends or competitor performance.
Relative NPS can fluctuate due to factors outside of the company’s control, making it harder to track genuine customer sentiment changes and long-term performance trends.
How Best to Determine if You Have a Good Score
To determine if your bank or credit union has a good Net Promoter Score, ask this question: are you measuring up to your customers’ expectations?
Ultimately, your customers care less about how well you do against your competitors than about how well you do for them. Don’t waste time chasing another organization’s score if you’re improving your own performance.
In customer experience measurement, the objective is to strengthen customer relationships as a catalyst of revenue growth and profitability. The ability to actually deepen relationships with customers through best-in-class frontline execution allows you to engage customers in such a way that they will not easily be lured away by the competition.
Use your NPS to help you analyze what your business is doing well and where you can improve customer experience and loyalty. When you do this, you’ll be able to improve the tangible benefits that keep customers coming back to you.
Factors That Affect Your NPS Score
Numerous factors influence the Net Promoter Score (NPS) of banks and credit unions, as these institutions rely heavily on customer trust, satisfaction, and service quality. Key factors include:
- Customer Service Quality: Fast, effective, and friendly customer service significantly affects NPS. Poor interactions or long wait times can drive Detractors, while positive experiences with staff increase Promoters.
- Trust and Transparency: Customers value transparency in fees, terms, and communication. Banks or credit unions that are perceived as trustworthy and upfront about their policies tend to score higher on NPS.
- Fees and Charges: High or unexpected fees can frustrate customers and lead to negative sentiment. Competitive, fair pricing of services, including low fees or fee waivers, positively impacts NPS.
- Digital Banking Experience: In today’s banking environment, the quality of online and mobile banking platforms is crucial. Easy-to-use apps, seamless transactions, and strong cybersecurity are key drivers of customer satisfaction.
- Branch Access and Convenience: While digital banking is critical as the primary channel for most financial consumers, having accessible and convenient physical branches is still important for those customers those who prefer face-to-face interactions, especially when major financial issues are being discussed.
- Product Offerings: Diverse and competitive financial products (loans, mortgages, savings accounts, etc.) tailored to customer needs can enhance satisfaction and loyalty. Being aware of, and responsive to, customer needs and wants is the hallmark of a good service provider.
- Personalization: Offering personalized financial advice or custom products based on a customer’s individual needs and history boosts loyalty and encourages recommendations. Personalization is a primary expectation of most financial consumers today.
- Problem Resolution: Effective and quick resolution of customer complaints or issues greatly affects NPS. Institutions that handle problems swiftly and fairly by “closing the loop” with upset customers ultimately retain more Promoters.
- Reputation and Brand Perception: A bank or credit union’s overall reputation, including how well it is perceived in areas like social responsibility, ethical practices, or community involvement, impacts NPS. The effect of a negative reputation can be multiplied rapidly via social media, and can have lasting consequences.
- Interest Rates and Financial Incentives: Competitive interest rates on savings, loans, and credit cards, as well as attractive promotions or rewards, can attract Promoters by enhancing the perceived value of the institution’s services.
- Security and Fraud Protection: Customer trust is the foundation of any banking institution. A strong track record in protecting customers from fraud, along with quick and efficient response when fraud occurs, is a key factor in customer trust and satisfaction.
- Ease of Account Management: Simple processes for opening and closing accounts, applying for loans, and updating personal information contribute to a more positive customer experience.
A combination of these factors influences how likely customers are to recommend their bank or credit union – thus, they directly impact the financial institution’s NPS.
How to Improve Your NPS Score
Banks and credit unions strive to improve their NPS scores to demonstrate their commitment to customer satisfaction, loyalty, and service excellence.
Continuously monitoring and improving NPS scores helps these institutions identify areas for enhancement and maintain a competitive edge in the financial services market.
A useful NPS measurement instrument is designed not only to ask the NPS question of “Would you recommend us?” but to get to the authentic WHY underlying the response – the motivation or driver of the respondent’s reaction to their experience with you.
The best analysis will even mine customer comments to uncover sentiments that might not be detectable based on the scored response. Qualitative feedback – the authentic Voice-of-Your-Customer – can provide a lot of insight from information that isn’t always reflected in the scores.
What can you do with a clear view of your customers? On one hand, customer feedback might trigger a response or alert to a specific issue, a “hot spot” where friction has caused a subpar experience.
Having a closed-loop system in place to alert you to that bad experience, in real time, enables you to act quickly to intercept that customer before they leave you for a competitor.
At the same time, patterns in customer feedback might reveal a larger, underlying systemic issue that requires a response across the entire organization. Data analysis of customer feedback and additional feedback from follow-up on issues can enable you to:
- Identify and validate root causes
- Prioritize based on severity and impact
- Formulate improvement strategies
- Implement change across functional areas
- Assess effectiveness of changes
Following these twin paths to where the data leads ensures that you get the most effectiveness out of your customer feedback. If one capability or the other is not available, serious problems could be getting overlooked.
In Summary
A good NPS score requires more than just a periodic survey. It requires ongoing objective measurement and the will to take action on what the data reveals. The Absolute NPS method is more practical for internal tracking and improving customer loyalty because it focuses on what the company can control to improve customer satisfaction, while Relative NPS can introduce misleading complexity and dependency on external factors.
If NPS is “just a number” to you, we can show you how it connects to your customers’ loyalty and your success. Reach out to our NPS experts today!
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Net Promoter®, NPS®, NPS Prism®, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.