Net Promoter Score® (NPS) – what it is and why it matters
Why is everybody so obsessed with the Net Promoter® Score? Well, mainly because the NPS is a great indicator for growth and loyalty. A high NPS score suggests that your customers are satisfied with your product or service. Actually, it suggests that they are so satisfied they would ask their friends and colleagues to use your product as well.
The NPS is a management tool which delivers a deeper understanding of the customer and measures customer loyalty.
How to calculate the Net Promoter Score
Ask a simple question
"How likely is it that you would recommend our company/product/service to a friend or colleague?" and include a 0-10 numerical rating.
Allow the respondent to give open-ended feedback
Include an option for additional comments. This will allow the respondents to expand on the reasons that drove their score.
Group the responses
After submitting feedback the respondents are divided into three groups according to the numerical evaluation they gave.
Score of 9 or 10: Promoters
Score of 7 or 8: Passive
Score of 6 or below: Detractors
The NPS score ranges from -100 to 100 and is calculated based on the following formula:
NPS score = Percentage of Promoters – Percentage of Detractors
Why you should be tracking the Net Promoter Score
The NPS is an important metric to track for a number of reasons. First of all, it is easy to calculate and understand, and it provides a quick overview on customer satisfaction which can be communicated on all company levels.
The greatest advantage of the NPS is, however, its correlation to business and revenue growth. As research suggests, a high NPS score is one of the best predictors of future growth and customer loyalty. Additionally, closer and more in depth analysis of the NPS allows companies to track down individual detractors and act upon negative or constructive feedback. This is the reason behind the complimentary open-ended question to the numeric scale question. The open-ended feedback delivers actionable insights on how to improve the score in the future and that is why many companies are measuring the NPS on a monthly basis.
Want some more detailed literature? Check out this article about the Net Promoter Score by Lumoa.