Net Promoter Score (NPS) is a customer loyalty and satisfaction metric derived from asking customers a single question: "On a scale of 0-10, how likely are you to recommend [Company/Product/Service] to a friend or colleague?"
Calculating NPS
Based on their response, customers are categorized into three groups:
- Promoters (9-10): Loyal enthusiasts who will keep buying and refer others, fueling growth.
- Passives (7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (0-6): Unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
The NPS score is calculated by subtracting the percentage of Detractors from the percentage of Promoters:
NPS = % Promoters - % Detractors
The score ranges from -100 (everyone is a Detractor) to +100 (everyone is a Promoter).
Importance of NPS
- Measures Loyalty: Provides a simple gauge of overall customer sentiment and loyalty.
- Predicts Growth: High NPS scores are often correlated with business growth through referrals and retention.
- Benchmarking: Allows comparison against competitors or industry standards.
- Identifies Areas for Improvement: Follow-up questions (e.g., "What is the primary reason for your score?") provide qualitative feedback to understand the drivers behind the scores.
Using NPS effectively
- Track Trends: Monitor NPS over time to see the impact of changes.
- Segment Results: Analyze scores by customer segment, region, or product usage.
- Close the Loop: Follow up with Detractors to address concerns and with Promoters to leverage their enthusiasm.
While simple, NPS is a powerful tool when used consistently and combined with qualitative feedback to drive customer-centric improvements.
