What is Net Promoter Score (NPS): definition and formula
Nowadays, customers quickly share their recommendations and reviews (especially the negative ones) on different social networks. As a result, even a single client’s bad experience can damage your new business, revenue, and ROI.
This is why it’s crucial to collect customer feedback and identify headaches to make them happy. And this is where a Net Promoter Score comes in.
What is a Net Promoter Score?
Net Promoter Score (also known as NPS) is a measure of customer satisfaction and loyalty to a company. It can be measured with a single survey question, which is “How likely are you to recommend [business/product/service] to a friend or colleague?”
NPS index ranges from -100 to +100. Respondents have a 0-10 scale to pick from, 0 being “not at all likely” and 10 being “extremely likely”. Depending on the received information and numbers, you can divide your clients into three different categories:
- 9-10 are Promoters or people who are enthusiastic and loyal customers. They will repurchase your product or service and are most likely to recommend your company to others.
- 7-8 are Passives or people who are satisfied, but not loyal or happy enough to be considered Promoters. They may or may not recommend your business to others. They also may or may not buy from you again if given a competitive offer.
- 0-6 are Detractors or people who are unsatisfied and unlikely to purchase from you again. Such customers may even actively discourage others from buying from you.
How to calculate NPS?
Your Promoter and Detractor scores matter the most in Net Promoter Score calculation. The equation itself is simple: subtract the percentage of Detractors from the percentage of Promoters.
So, for example, if 10% of respondents are Detractors, 20% are Passives, and 70% are Promoters, your NPS score would be 70 – 10 = 60.
What is a good Net Promoter Score?
Anything that is above 0 would be considered a “good” NPS because it shows that the majority of your clients are loyal. If your score is more than 50 – then your NPS is considered “excellent.”
As you may see, it’s better to shoot for 9-10 responses to encourage growth and loyalty, especially via word of mouth, referrals, and reviews. The way you get into the negative digits is when your Detractors outnumber your Promoters, and you absolutely don’t want that to happen.
How to make an NPS survey?
Even though NPS surveys are relatively easy to create, you must think about the long-term data use when deciding what to put in them, such as buying history and potential interaction. Using programs specifically designed to calculate NPS is ideal for this.
It isn’t unusual for NPS surveys to first gather demographic information. But, when it comes to that, the shorter is the better, as you mostly want your customers’ rating, and you don’t want them to give up on the survey before they get there. You will have most of the demographic data in your CRM or customer database anyway. A common practice is to ask for demographics after asking the question.
To reiterate, the question you need to ask is, “How likely is it that you would recommend [business/product/service] to a friend or colleague? 0 (not at all likely) – 10 (extremely likely)”. Even just presenting this question is a complete NPS survey.
The big decision is what to ask about, whether it be a product, your company, or any other variety of business-related things. Make sure you ask what you want to know about the most.
What can be measured using NPS?
Practically any aspect of your company can be measured using an NPS. You can get feedback on not just your organization, but also websites, products, individual stores, and even employees or staff members. This is important because if you have a seemingly squeaky wheel, you can determine what needs to be improved and how from an NPS survey.
Context is important when taking NPS into consideration. A product may be popular with one demographic and disliked by another.
One employee may be dealing with customers canceling their subscriptions, thus getting a lower NPS score than an employee who is signing people up for their subscriptions. NPS is not so much an objective measure of success as it is a subjective way to measure your user base and use it as a tool to improve.
Turning 7s and 8s into 9s and 10s
Realistically, you can’t save face with Detractors who give you a low score in the survey. But you can make the experience better for the Passives in hopes that they can become Promoters. This is why you should consider adding a feedback/comments section to your NPS survey.
Ask every targeted customer why they gave you the score they marked. You can also ask them what you could do better. By doing so, you will find out directly from them where you are failing and succeeding. Questions like “What did you like and what did you dislike?” can lead to a lot of usable insights.
People who are almost satisfied can become completely satisfied if you take the time to implement any changes from the feedback you receive. If you get the same complaint over and over, you know what to do with it (the answer is to listen and change for the better!). This lack of guesswork pays off.
If you still have questions after reading their feedback, you can always add a section asking if it is ok to contact the customer with a follow-up and ask for their contact info, most commonly their email.
Churn rate and NPS
The cool thing about NPS is, when paired with churn rate data, you can predict when a customer is going to churn, cancel your service, stop buying from you, or stop using your product. There are many tools out there to help crunch the numbers for this exact purpose. Connecting the business dots by early identification can give you extra time to win customers back before they even leave you.