NPS is the short form for Net Promoter Score. The Net Promoter Score is the measurement of customer experience, loyalty and satisfaction. It depends on how likely customers are to recommend the product or service to others on a scale of 0-10. Using the NPS formula to calculate customer’s satisfaction is important, as it helps build a base for NPS customer care.

The Net Promoter Score (NPS) is a customer loyalty score; it ranges from -100 to 100 and is calculated by asking customers one important question. The question is “what is the likelihood of you recommending our product/service/company to a friend or colleague, on a scale of 1-10?” NPS is a good business metric that helps businesses gather data on how well they are doing and the perception they have created for themselves.

It helps companies of all shapes and sizes to develop a mission-critical goal by getting feedback from customers and try to increase their NPS score by earning more satisfied and enthusiastic customers that can easily be tracked and quantified over time.

NPS was first developed in 2003 by Bain and Company, and it is now used by millions of companies and businesses in the world to measure and track how they are perceived by their customers. NPS has been held up as the number one standard for customer experience metric.

The Importance of NPS

NPS is important for companies and businesses, as it is a strong predictor the growth of a business. When a company measures its NPS and gets a high result, most times higher than the industry average, it shows that the company has an excellent relationship with its customers. These customers are likely to act as a publicist for the brand through word of mouth and help generate a positive growth cycle.

Although NPS is a valuable metric on a strategic level, on its own the score is not enough to paint a complete picture. However, why it is very useful and important is because it allows companies to ask follow-up questions as to why the customers gave a specific score; also it can help business to track and quantify a score over time, creating internal benchmarks along the way. Lastly, it can help rally all employees on the critical mission of earning more enthusiastic customers.

How to calculate NPS

It is quite easy to calculate your final NPS score. It is calculated by subtracting the percentage of customers who’s answers to the NPS question are with 6 or lower (the detractors) from the percentage of customers who’s answers to the NPS question are with a 9 or 10 (the promoters).

NPS formula = % promoters – % detractors

In the NPS system, customers fall into three groups, which are the promoters, the detractors, and the passives depending on how they answer the question asked.

Promoters – are the customers that give a 9 or 10, they represent the business’s most enthusiastic customers. They are the set of customers that are likely to increase referral flows, enhance a company’s reputation, and act as brand ambassadors that contribute to the growth of the company.

Detractors – are the customers that give a score of 0 to 6. They are unlikely to bring referrals, rather are they likely to recommend the company or product to others. They are not likely to patronize the business in a repeat purchase, and will likely discourage potential customers from patronizing.

Passives – they are customers that give a score of 7 or 8. They are in between, as they are unlikely to a brand through word of mouth, but will not actively recommend it to others. They are not included in the NPS calculation. However, they are usually close to being promoters, especially when they give a score of 8. So, companies usually spend time to investigate what to do to win them over completely.

Interpretation of NPS score

As stated earlier, the NPS score is always expressed as numbers between – 100 to 100. For the numbers to be negative the company will have more detractors than promoters, and for it to be positive, it is vice versa.

Knowing the NPS averages for industries is important, as it varies with each industry. The NPS average of your industry will help you understand how key competitors in your industry are faring. It helps set the context of how well or bad your company/business NPS score has gotten.

A good NPS score is any score from 0 above; as it indicates that the business has more promoters than detractors. Usually, top companies with the best NPS scores have 70 and above. A perfect score of 100 indicates that every customer that responded to the survey would recommend the company to someone else (something no company has ever achieved).

On the other hand, any score below 0 indicates a negative trend of having more detractors than promoters. However, here is where it is important to take note of industry benchmarks. If an industry NPS average is -6 and a company gets a -2, it suddenly looks not as bad as it seems.

However, it is not a good thing when the bar is too low. It shows that the entire industry has a lot of work to do to improve the situation. There should be more promoters than unhappy customers.

Ways to run NPS surveys and get feedback

1. Email survey: You can collect NPS by emailing customers and prompting to fill a survey after purchase or interaction.
2. Website survey: website pop-up surveys help you capture customer feedback while they are still on your website. You can set up the survey on your main conversion pages working with your developers.
3. Product survey: You can add a QR code to product packaging or a card with your product packages. The QR code brings customers to a reviews site.

Ways to read your NPS results

1. Track performance over time: the real power of an NPS score is clear when you look into trends and notice fluctuations.
2. By looking at segments: your NPS score may vary by age group, gender, spending level, etc. You can further break it down into segments a more in-depth view.
3. Close the loop: by asking follow-up questions, it helps you understand of the context behind the scores you get. This enables you to focus more on areas to address.

NPS is useful in a lot of ways. To grow your business, you need promoters than detractors. They are the ones that can bring referrals that grow your customer base, and also come back as repeat customers. Follow-up questions are essential during survey as they help you tackle the real issues and improve on the areas you are lagging.

Explore our Reallyview NPS platform demo today to stay ahead.