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Net Promoter Score (NPS)
What is Net Promoter Score?
Net Promoter Score (NPS) is a customer loyalty metric that is relatively easy to implement and measure using one question ‘On a scale of 0-10, how likely are you to recommend <insert company> to a family or friend?’.
The Net Promoter Score (NPS), developed by Fred Reichheld, is designed to measure the loyalty that exists between a provider and a consumer with the science behind it showing a clear commercial benefit to customers who are promoters of a brand spending more, staying longer etc.
The provider can be a company, employer or any other entity and is the one asking the questions on the NPS survey.
The consumer is the customer, employee, or respondent to an NPS survey.
How do you conduct an NPS Survey?
The good news it’s really simple.
It starts by just asking one question:
On a scale of 0-10, how likely are you to recommend <insert company> to a family or friend?
You can do that in person, via an automated message after a conversation with a call centre, an email survey, a check-out form etc.
No matter method you use, the question is always the same.
How do you calculate a Net Promoter Score?
Just like asking one simple question was easy, so is calculating your score.
NPS breaks respondents into three groups:
- Promoters – these people scored you a 9 or a 10
- Passives – the people who scored you a 7 or 8
- Detractors – the people who scored you a 0 to 6
Now to calculate your score, firstly we need to say goodbye to the Passives.
That’s right, they are considered irrelevant in calculating your NPS.
So all we have left now is our Promoters (the people who love us) and the Detractors (the ones who, well you get the drift…).
To get your score, simply detract the percentage of Detractors from the percentage of Promoters.
So if 50% of your respondents were Promoters and 10% were Detractors, your NPS score is +40.
Just to clarify, the NPS score is not expressed as a percentage, rather as an absolute number in the above example.
For another scenario to make sure you’ve got it all sorted, let’s assume 20% were Promoters and 50% were detractors.
Your NPS score would be -30 (20% Promoters – 50% Detractors)
So the two extremes you can have are -100 (everyone is a detractor) or +100 (everyone is a Promoter).
Wasn’t that hard now was it?
Why are the Passive Scores not included in NPS Scores?
You would think that if someone gives you a good score like 8/10 they would be a pretty good customer right?
But what NPS showed is that although the customer is overall happy with your service or product, there was no commercial link found – in others words just because they gave you an 8 there was no evidence those customers were loyal and stayed longer or spent more.
What is a good Net Promoter Score?
It’s natural for most businesses to want to benchmark performance against their competitors. But to determine what a good score is for your business can depend on multiple things including the type of industry you are in and even location (e.g Europeans are often quite conservative with their scores whereas in the US scores can often be higher).
Bain and Co who developed the NPS system suggest that anything above +50 is excellent, above +80 is world-class.
In basic terms, any NPS score above 0 is good as it means your customers are more loyal than not.
The most important NPS metric it can be argued is your previous one. NPS should be used as a way of understanding customer pain points in your business so you can take action(s) to improve it.
So it’s reasonable to assume that if you continue to listen to your customers and take actions to improve pain points, your NPS score will improve.
If you want to benchmark your performance against others, you should look to engage companies that conduct NPS surveys across multiple industries >
Is NPS a good metric to measure customer satisfaction?
Let’s just make it clear that anytime a business is focused on improving the customer experience is a good thing.
However, NPS is just one of many ways a business can tune into the customer’s perception of its brand and loyalty.
There are certainly some flaws though with the NPS metric and we’ll continue to share information both on the Net Promoter Score, and other metrics that can be used to measure customer experience, customer loyalty and more.