Net Promoter® Score
Net Promoter® Score, commonly referred to as NPS®, is a customer loyalty metric that gauges how willing a customer is to recommend a product or service.
The Net Promoter Score® concept was developed by Bain & Company's founder of Loyalty Practice to measure customer loyalty. Its adoption and popularity has grown over the past decade, and it’s now used in virtually every industry by organisations of all sizes around the world. In its most simple form, Net Promoter Score can be described with one simple question: "How likely is it that you would recommend [Organisation X/Product Y/Service Z] to a friend or colleague?"
Here are just a few things Net Promoter Score allows you to do:
- Segment customers by loyalty
- Identify unsatisfied and at-risk customers
- Optimise around a single customer metric
- Benchmark against industry and competitor scores
- Uncover customer loyalty drivers
Why is Net Promoter Score popular?
Many believe Net Promoter Score is a valuable metric for growing both revenue and profits. One of the main reasons organisations choose Net Promoter Score is its simplicity. NPS supporters claim that focusing on a single customer satisfaction metric—that is visible and easy to understand—makes it easier to motivate an entire organisation to be customer-focused. Although Net Promoter Score lacks detailed customer satisfaction levers, the sheer simplicity of the measurement helps organisations take action faster to improve customer experience.
Net Promoter Score has also proven valuable as a way to raise a flag for at-risk customers. Many organisations have implemented processes to respond to customers who respond negatively on the 0 to 10 scale. Organisations can close the loop with customers who are not promoters and work to remedy any issues.
How to measure Net Promoter Score effectively
Net Promoter Score places customers into one of three groups: Promoters, Passives and Detractors.
In answering the NPS question type, respondents are given a standard scale that ranges from 0 (not at all likely) to 10 (extremely likely). Organisations often ask the Net Promoter Score question via an online survey after customer service interactions, purchase transactions or as an ongoing customer pulse study. Based on how a customer responds to the question, you classify them into one of three groups:
- Detractors = 0 – 6
- Passives = 7-8
- Promoters = 9-10
Promoters are your customers who are loyal and enthusiastic about your organisation and will continue buying and referring others. Promoter referrals fuel viral growth that helps bring in new customers at a lower acquisition cost. The cutoff score for Promoters is intentionally set high at 9 to ensure that the customer is an exceptionally enthusiastic fan.
Passives are generally satisfied customers but lack the enthusiasm of Promoters. A ranking of 7 or 8 is no doubt impressive, but experience has shown that this group is still vulnerable to competitive offerings and not immune to defection.
Detractors are a potentially dangerous bunch that are often unhappy and can diminish your brand through negative word of mouth. A customer who rates your organisation between 0 and 6 requires outreach to resolve issues before they do any damage. The best organisations work to correct grievances of Detractors and work to convert them to Promoters.
Once you have classified your customers, you calculate your score by subtracting the percentage of Detractors from the percentage of Promoters.
NPS = % Promoters – % Detractors
NPS = (# Promoters / Total Respondents) – (# Detractors / Total Respondents)
The score is generally displayed as a whole number by dropping the percent sign for the final number and scores range from anywhere between –100 (all Detractors) to +100 (all Promoters).