Net Promoter Score (NPS) is a metric that is widely used to measure customer loyalty. It was developed by Fred Reichheld, a best selling author and business strategist, Bain and Company, a global management consultancy, along with Satmetrix. Introduced in 2003 it has now been extensively adopted by over two thirds of Fortune 1000 companies.
Net Promoter Score Calculation
One of the key reasons why NPS has gained such widespread popularity is its simplicity. The Net Promoter Score metric is calculated based upon answers received to just one simple question:
How likely is it that you would recommend our company/product/service to a friend or colleague?
Respondents are asked to select their answers on a scale from 0 to 10, where 10 means ‘extremely likely to recommend’ and 0 means ‘not likely to recommend’.
Those who selected either 9 or 10 are classified as promoters.
They are enthusiastic about the products or services provided and are most likely to tell others.
Those who select either 7 or 8 are classified as passives.
These are people who are not actually dissatisfied but are unlikely to either promote or criticise the product or service.
Those who select scores from 0 to 6 are classified as detractors.
These are people who will most likely not become repeat customers and are most likely to disseminate negative remarks about the product or service.
The Net Promoter Score is calculated by subtracting the percentage of respondents who were detractors from the percentage who were promoters.
NPS = Promoters% – Detractors%
Here are a few examples to illustrate this calculation.
If 50% of respondents scored 0 to 6 (detractors) and 50% scored 9 or 10 (promoters) NPS would be: 50% – 50% = 0.
If 20% were detractors, 30% were passives and 50% were promoters the NPS would be: 50% – 20% = 30.
If 0% were detractors, 50% were passives and 50% were promoters the NPS would be: 50% – 0% = 50.
If 100% were detractors then the NPS would be: 0% – 100% = -100.
If 100% of respondents were promoters then the NPS metric would be: 100% – 0% = 100.
It should be clear that the NPS scale from -100 to +100 provides a simple indication of the relative proportions of people who are happy with a business, product or service and those who are not. Higher, positive Net Promoter Scores tend to reflect a healthier business and lower, negative Net Promoter Scores can indicate the existence of customer happiness and loyalty issues which should be investigated and resolved.
How to Measure Net Promoter Score
As shown, Net Promoter Score is calculated based upon responses gathered from just one, ultimate question. This can be asked via a customer survey and the Customer Thermometer system is optimal for the task. You can use either an embedded thermometer or a simple email thermometer to connect with your customers and elicit their responses. The Customer Thermometer system does everything for you, including calculating your NPS score.
How to Use Net Promoter Score to Grow Your Business
In isolation your Net Promoter Score does nothing to drive business growth. Net Promoter Score assessment needs to be just one part of a broader overall strategy which is continuously striving for improvement and excellence in customer relations. You must close the loop with the customer who has had a bad experience in order to drive up NPS.
The key attribute of NPS which makes it so widely popular is its simplicity. But the data derived using NPS needs to be analysed properly in order to derive value. It is important for businesses to delve more deeply into the data in order to understand why customers are providing their surveyed responses.
A good example is the worldwide accommodation service AirBnB. Back in 2013 they started using Net Promoter Score in order to add value to their customer feedback program and to determine whether their NPS score correlated with the likelihood that a guest would become a genuine advocate and potentially return to book accommodation again in the future.
They surveyed around 600,000 guests and found that two thirds of those who responded were promoters and just 2% were detractors. It was determined that guests who were promoters were more likely to recommend the service to friends and family and would most likely book again in the future.
High Point Networks
Another great example of NPS providing real value is Customer Thermometer client: High Point Networks. They started using Customer Thermometer because their existing in-built survey tool simply wasn’t providing the response rate that they needed. From in excess of 1000 tickets raised in a month they were only receiving around 20 responses. Using the Customer Thermometer system boosted their response rates by a factor of x5!
It’s vital that High Point Networks consistently delivers exceptionally high standards of customer service. By using NPS they found that around 95% of their survey responses were either good or excellent. They have an NPS score that is consistently in the 90s, which is remarkable. They are monitoring their NPS score in order to ensure that their standards don’t diminish and to quickly identify where they may need to make changes in response to negative feedback patterns.
Want to improve your customer survey response rates? Customer Thermometer’s 1-click survey will up your feedback game. Send yourself an example: