What is the Net Promoter Score (NPS)?
Net Promoter Score (NPS) is a customer loyalty metric that measures how likely customers are to recommend a company or product to others. It is a simple yet effective way for businesses to track customer satisfaction and loyalty over time.
The NPS system is based on a single question: “On a scale of 0-10, how likely are you to recommend this company/product/service to a friend or colleague?” Customers can choose a number between 0 and 10, with 0 being “Not at all likely” and 10 being “Extremely likely”.
Based on the responses, customers are divided into three groups:
- Promoters (9-10): Customers who are highly satisfied and loyal and are likely to recommend the company/product/service to others.
- Passives (7-8): Customers who are satisfied but not necessarily loyal or enthusiastic.
- Detractors (0-6): Customers who are dissatisfied and unlikely to recommend the company/product/service to others.
How to Calculate Net Promoter Score (NPS)?
To calculate the Net Promoter Score, the percentage of detractors is subtracted from the percentage of promoters. The result is a score between -100 and +100. A higher score indicates a greater level of customer loyalty and satisfaction.
NPS is a useful tool for businesses to measure and track customer satisfaction and loyalty over time. By analyzing the customer feedback from promoters and detractors, businesses can identify areas for improvement and develop strategies to enhance the customer experience. NPS can also help businesses to benchmark their performance against their competitors and set goals for improvement.
What are the benefits of Net Promotor Score (NPS)?
Net Promoter Score (NPS) is a valuable tool for several reasons:
- Easy to understand
- Measures customer loyalty
- Actionable insights
- Benchmarking
- Predictive
Let’s examine each of these benefits more closely.
1. Easy to understand
NPS is a simple metric that can be easily understood by anyone, including senior management, frontline employees, and customers. The question is easy to answer and provides a clear indicator of customer loyalty and satisfaction.
2. Measures customer loyalty
NPS measures customer loyalty by identifying promoters, passives, and detractors. By focusing on promoters, businesses can identify the customers who are most likely to refer others to the company, which can lead to increased revenue and growth.
3. Actionable insights
NPS provides actionable insights that can be used to improve the customer experience. By analyzing the feedback from promoters and detractors, businesses can identify areas for improvement and develop strategies to enhance the customer experience.
4. Benchmarking
NPS allows businesses to benchmark their performance against their competitors and industry standards. This information can help businesses to set goals for improvement and identify areas where they need to focus their efforts.
5. Predictive
NPS is a predictive indicator of customer behavior, such as retention, churn, and future revenue growth. By tracking NPS over time, businesses can monitor changes in loyalty metrics and make data-driven decisions.
In summary, NPS is a valuable tool because it provides a simple, actionable, and predictive measure of customer loyalty and satisfaction. This can be a critical metric when performing market research. By tracking NPS over time and taking action on the feedback received, businesses can improve the customer experience and drive growth.